Q&A: Most common client questions lately:

Will I have to change my retirement goals or retirement income due to the down market?

• Short-term risk versus long-term risk, taxes, inflation, overspending
  • Sequence of return risk...
  • https://www.schwab.com/learn/story/timing-matters-understanding-sequence-returns-risk
•  Worst year ever for bonds?
  • https://www.advisorperspectives.com/articles/2022/10/17/six-good-things-to-tell-clients-about-this-horrible-market

 

Article: “Six Good Things to Tell Clients About This Horrible Market” by Allan Roth, 10/17/2022.

 

Four Options Plus Combo Option for Preparing for Potential Airline Disability

1. Be ready to live on your maximum disability payout.
   1. Takes careful budgeting and cash flow management.
   2. For example: Be ready to freeze your “core” budget at FO pay.   Or on one person’s salary if you are a dual-income family.
2. Create a (mega) Emergency Fund.  Work to self-insure.  Becoming your own insurance company!
   1. We believe the six-month emergency fund is the minimum for airline pilots.  One year is even better. 
   2. An emergency fund of cash or cash-like investments gives you great flexibility. 
   3. It can bridge the gap until you are able to get your FAA medical back.  
3. If appropriate and cost-effective, purchase additional disability insurance. 
   1. Consider how a long-term disability would affect your retirement savings.  For example, if you can live on the current disability insurance your airline offers, would you also be able to save for retirement? 
      1. Your retirement plan assumes annual savings into tax-advantaged retirement accounts. 
4.  Become financially independent!
   1. This most likely applies to the pilots that are nearer to retirement.  If they lost their FAA medical, then these folks could more easily transition into early retirement.
   2. On the other hand, this is a great goal for all pilots to shoot for as soon as possible.
   3. This step encompasses working on all the steps listed here as well as saving in your retirement accounts.
5. Combination of 2 or more options 1-4.
   1. Additionally, we suggest exploring other skill sets that may allow for additional income away from aviation in the case of long-term disability.
      1. What do you love to do outside of flying?
      2. Have fun with it and dream a little!
         1. For example, become a financial planner!
         2. Pilots are much more marketable than they think.