The Top Financial Planning Concerns Pilots Face
Having a career as an airline pilot is a great accomplishment. You worked hard to get where you are today and you devote much of your time and energy to serving your airline and your passengers. That often means that aspects of your personal life can be neglected. Every career brings its own set of challenges, and understanding those challenges is the first step to overcoming them. Here are six financial planning concerns you face as a pilot and some ideas on how to conquer them.
1. Mandatory Retirement Age
Airline pilots are required to retire at age 65. For many, they look forward to that day with excitement, but others worry about not having enough money saved. This is why creating a comprehensive financial plan sooner rather than later can give you peace of mind about your 65th birthday. Your high earnings and generous employer contribution allow you to save more than most people, but you need to start early and stay on track to truly benefit from these perks.
2. Maximizing Your Savings And Investments
Pilots often have lucrative contracts, especially if they work for a major carrier. Some companies contribute anywhere from 12-16% to their pilots’ retirement plans, and that’s usually just a straight-up contribution, not a match. The issue is that 401(k)s have a contribution limit of $19,500 ($26,000 for those over age 50) for the employee and a total limit of $57,000 for all employee and employer contributions in 2020. With pilots’ high income and generous employer contributions, it’s not difficult for pilots to max out their accounts every year.
Regardless of how and where you save, it’s important to be strategic. Don’t wait until you become a Captain or feel more settled in life to start saving. And be sure to work with a professional who can help you invest according to your risk tolerance, monitor your investments, and help you rebalance when necessary.
3. Managing Debt And Student Loans
While there are multiple paths to becoming a pilot, many pilots go the traditional route of completing a 4-year degree and amassing enough flight hours to earn their Airline Transport Pilot certificate, which is estimated to cost up to $300,000. Not to mention, an accelerated flight school program is often so intense that future pilots can’t work at the same time. That means they take on debt to cover living expenses as well.
No matter how much debt you graduate with or how much your starting pay is, you need a plan to eliminate your debt as soon as possible so you can maximize your savings while you are young. Whether that means consolidating your loans or making extra payments, pay off your high-interest debt first and be sure to balance the twin priorities of investing and debt reduction so you don’t get behind on your retirement savings.
4. High Earnings Potential
Earning a significant income may not seem like a challenge, but more money can create more problems if you don’t have a plan for that money. When you get your first job as a First Officer, you might be tempted to treat yourself and enjoy all the things you wanted when you were in school or in training. But lifestyle creep is a real thing and it won’t be long before you get used to living in a way that requires most of your resources to sustain. Not only is it not realistic to expect to continue that lifestyle in retirement, but it will also shift your priority from saving to spending. No one is saying you can’t enjoy the fruits of your labor, but create a sustainable plan where you can pursue your goals while also enjoying life.
While our economy is currently strong and stable and there’s never been a better time to be a pilot, it hasn’t always been this way. Anyone working in the airline industry knows the volatility of the industry firsthand. Between strikes, mergers, reduced benefits, bankruptcies, furloughs, and defined benefit pension plan termination, pilots’ jobs are anything but guaranteed. And while you often don’t have any control over these external threats, you can prepare so that your financial situation doesn’t suffer if there’s a hiccup in your career.
And then there’s the health question. One of the reasons pilots are required to retire at 65 is because airlines need their pilots to be in prime mental and physical condition to ensure the safety of their passengers, crew, and aircraft. Pilots have to undergo strenuous annual or semiannual physicals to ensure they can handle the job. Even if you are planning to work until you turn 65, what if injury or illness sidelines you sooner? Will you be able to take care of your family? Planning ahead, getting proper insurance coverage, and increasing your savings when you are earning an income could save you considerable headaches down the road.
6. Lack Of Desire To Manage Their Money
Pilots are educated, bright, practical problem-solvers. But just because you are a master in your particular field doesn’t mean you have the desire, time, or resources to manage your money with the same amount of skill as you fly your aircraft. But focusing solely on your career and neglecting to create a financial strategy could cause you undue stress in your golden years. In a demanding job with odd and varying hours, it’s tempting to put off financial planning for a rainy day. But no matter how busy you are, you need a team that is working as hard for your future as you are for your airline. You need a financial professional who knows your challenges and can work around your schedule to maximize your financial life and give you confidence in your financial future. You need a financial co-pilot who will focus on your money so you can focus on your career and your family.
Let us help you carry the burden of financial planning so you can do what you do best. You face unique financial planning challenges, but you don’t need to be overwhelmed and intimidated by them. At Aviation Wealth Solutions, we have the experience and expertise to walk you through each aspect of your retirement and help you thoroughly prepare for your future.