The Pilot Money Guys

With airlines finalizing new contracts and increased 401(k) contributions, the question of whether to invest in a Roth IRA has become a hot topic among pilots. In this episode, we aim to provide clarity on this complex decision and offer guidance tailored to various scenarios and limitations. From understanding who can contribute to a Roth IRA to delving into the concept of Roths, we explore considerations for first officers.

You can find show notes, resources and more at: https://tinyurl.com/38ywhkfd 

Did you know that you're leaving a legacy, whether you realize it or not? Join us for an eye-opening discussion on legacy planning with Jon Cremer, Financial Advisor. In this episode, we dive into the impact of intentional legacy planning and why it's crucial to start thinking about it sooner rather than later. 

You can find show notes, resources and more at: http://tinyurl.com/mryv6ysa 

Are you ready to explore the dynamic world of Real Estate Investment Trusts (REITs)? Dr. John Worth is an expert in economics and the Executive Vice President of Research and Investment Outreach in a REIT, and he joins us to share his deep understanding of REITs, their crucial role in a diversified portfolio, and how they perform in today's economic environment.

You can find show notes, resources and more at: http://tinyurl.com/mzw84wsh

Tune in as The PMG's discuss the following financial aspects of the SWA 2020 Contract:

Market-Based Cash Balance Plan, Tax withholdings for the Ratification Bonus Pay (RBP), New Life Insurance benefits, One-time SWA Profit Sharing rollover opportunity, and more!

Kevin Gormley, CFP, CPA, PFS, and Lead Financial Planner at Leading Edge Financial Planning LLC., joins the show to help us explain the seven critical lessons learned in the tumultuous financial landscape of the past year. Brace yourself for a journey through bank failures, crypto turmoil, and market fluctuations that led to the collapse of major financial institutions, sending shockwaves through the industry.

You can find show notes, resources and more at: http://tinyurl.com/5f9s9zux 

Unlock the secrets of successful investing as we pay tribute to the legendary Charlie Munger. A titan in the business world, Munger's principles for both investing and life are timeless lessons that can shape your journey to prosperity. Delve into the wisdom of a man who, alongside Warren Buffett, navigated the complex world of finance with hunger, humility and unmatched intellect.

You can find show notes, resources and more at: http://tinyurl.com/u4dzk9be 

Explore the world of bonds with Jim Jackson, Co-Chief Investment Officer at Victory Capital. In this episode, Jim delves into the role bonds play in a diverse portfolio and the predictability of their performance compared to stocks. He also simplifies the complexities of bonds, emphasizing their mathematical nature in contrast to stocks, and challenges the financial industry's predictive shortcomings by opting instead for planning.

You can find show notes, resources and more at: https://tinyurl.com/36upwv67 

When it comes to creating a positive environment for success, it's not just about investment returns—it's about your mental framework and decision-making. In today’s episode, we explore how to identify whether you have a wealthy mindset, as well as what it means to embrace the KISS principle. You’ll find out why being a lifelong learner is crucial and how treating all aspects of your life as investments can lead to both financial prosperity and happiness with a sense of abundance. 

You can find show notes, resources and more at: https://tinyurl.com/5n94n9vc 

What should you do with unexpected financial windfalls, such as a bonus check or unforeseen extra income? Today we answer this question and address the essential balance between celebrating your financial wins and planning for the future, sharing valuable tips to avoid financial pitfalls and the importance of building a robust emergency fund. Listen in to learn how to make the most of unexpected financial gains and more.

You can find show notes, resources and more at: https://bit.ly/3QGFghf 

Discover the secrets to a harmonious marriage and a prosperous financial life in this engaging panel discussion. Join us as we sit down with our team members at Leading Edge Planning, including Betsy Wheeler, Paraplanner, Kevin Gormley, Principal, Jon Cremer, Financial Advisor, and Nolan Clark, Paraplanner, to explore the intricate relationship between marriage and money. 

You can find show notes, resources and more at: https://tinyurl.com/mwjvtm5p 

In this episode, we have the privilege of hearing the remarkable aviation journey of Roger Lance, a retired Air Force officer and Vietnam War veteran. Roger takes us on a captivating flight through his experiences, from his early days in aviation to the intense moments in the war. He provides a glimpse into the different aircraft he piloted and shares his favorites, shedding light on the competitive yet camaraderie-filled world of flying.

You can find show notes, resources and more at: https://tinyurl.com/3hcuyejp 

Today we're joined by investment expert Andy Christopher, a Naval Academy graduate and F-35 Contract Instructor Pilot, and Sunil Wahal, a Professor at Arizona State University and Consultant to Avantis Investors. Together, they shed light on the intricacies of investing, emphasizing its profound connection to life itself, and the importance of self-awareness, helping you calibrate your risk tolerance and assess potential risks in your investment portfolio.

You can find show notes, resources and more at: https://tinyurl.com/nk7yz5sk 

Meat of the Mission – Five Ways to Avoid Getting Hacked with Cyber Hunter Akiva Clark 

1. Always use Multi Factor Authentication. (MFA) 

2. Use different emails for more or less security sensitive accounts.  

3. Password strength is critically important.    

4. Use password manager. 

5. Freeze your credit – Click here to see specific instructions from Nerd Wallet to freeze/lock your credit at all FOUR credit reporting agencies.   

Flight #63 - Dumb Things Smart People Do with Money

Questions from the flight deck:

·        Next year all 401k catch up contributions will be Roth.  How will this affect your taxes?

·        https://www.kiplinger.com/taxes/the-problem-with-401k-catch-up-contributions

o   Under SECURE 2.0, if you are at least 50 years old and earned $145,000 or more in the previous year, you can make catch-up contributions to your employer-sponsored 401(k) account.

o   But there’s a catch. You would have to make those extra contributions on a Roth basis, using after-tax money.

o   You wouldn’t be able to get tax deductions on those catch-up contributions as you would with typical 401(k) contributions, but you could withdraw the money tax-free when you retire.

Dumb Things Smart People Do with Money

·        Vanguard’s Advisor’s Alpha – They say most value is from behavioral coaching.

o   https://advisors.vanguard.com/advisors-alpha#overview

·        Buy High – Sell Low – why?

·        Example: Value investment premium – Part of premium could be from our human behavior that seems to persist and is not arbitraged away. 

o   “According to the behavioral school of thought, human tendencies are behind the existence of the value premium. Many investors are lured by the appeal of companies with exciting growth stories and prospect of strong short-term returns, while being deterred by those that receive little fanfare or are unloved by the masses.”

§  From article by Investment Firm Robeco.

·        “Human instincts drive the Value premium”

·        Recency bias – Recency bias is the tendency to put too much emphasis on recent events, such as a stock-market rout, the meteoric rise of bitcoin or a meme stock such as GameStop, for example.

o   The “Lost Decade” is mostly ignored due to lack of recency.     

o   “The term “Lost Decade for Stocks” refers to the ten-year period from 12/31/1999 through 12/31/2009, when the S&P 500® generated an annualized total return of -0.9% over the period. This was only the second time that the market actually had a negative total return over a decade period.”

·        Average investor performance vs. The investment’s performance – ARKK.

o   See Pilot Money Guys Podcast/Flight #30 “Chasing Hot Stocks – Investing in the Rearview Mirror”

·        Morningstar’s “Mind the Gap...”  https://www.morningstar.com/lp/mind-the-gap

·        Morningstar Article:  “Bad timing cost investors one fifth of their funds’ returns” 

Morningstar investor research firm recently published an article titled, “Bad Timing Cost Investors One Fifth of Their Funds’ Returns

Questions From the Flight Deck:

• What do we do with large retro/bonus checks?
• Is a cash balance plan any good?

Meat of the Mission:

1. Never spend more than they make.
   1. How?
      1. Habit Patterns...
      2. What type of spend
         1. Spend money on fun stuff; Leisure, fun, travel
         2. Don’t spend money on stuff that does not add value – cut it out.
         3. YNAB, EveryDollar, or other apps.
         4. https://www.iwillteachyoutoberich.com/
         5. Amelie Riendle Podcast (Flight #44 and Flight #27)
2. Prepare more, plan more...
   1. What do you want to do in retirement? You can only sit on the beach or play golf so much.
      1. The #1 thing people do in retirement is watch television! Michael Finke.
   2. Know your retirement needs...it’s expensive!
      1. Start a financial plan now to know your “number” for how much to save to meet your retirement financial goals. Don’t let it be a lingering question.
   3. Simulate (software), practice...take some time off and live on the retirement budget.
   4. Deliberation, Planning, and Intention in and of themselves make people happier in retirement: (Michael Finke)
      1. E.g., Those that retire in accordance with their plan vs. Forced retirement.
         1. Both experience happiness, but forced retirement is a delayed happiness (3- 4 years).
      2. E.g., Those that move after retirement...not b/c they move but because they had a deliberate plan with intentionality.
         1. Control vs. Out of Control???
         2. Michael Finke says “Invest in Imagination”
3. Never compromise their health: exercise and eat right.
   1. Exercise not only helps you feel better in retirement but also helps mental capacity and cognitive health.
      1. Flight #58
      2. Exercise and the Brain: The Neuroscience of Fitness Explored.
         1. “Exercise stimulates neurogenesis – the creation of new neurons – primarily in the hippocampus, influencing memory and learning while increasing key mood-regulating neurotransmitters. It also enhances brain plasticity, essential for recovery from injury and aging, and improves cognitive functions such as attention and memory.” 
      3. Estimated that average couple will need $315k to cover medical expenses in retirement, excluding LTC (https://institutional.fidelity.com/app/item/RD_13569_42402/retirement-planninghealth-care-costs.html)
4. Invest more in their relationships and always work to build new connections. (Michael Finke)
   1. “Dude...you’re not as good at retirement as the women are.”
   2. Invest in relationships outside of work.
   3. Strongest predictor of life satisfaction during retirement:
      1. Relationship with your spouse – huge impact, good and bad. Highest statistical significance.
         1. Marital counseling to prepare...? (Valuable investment) 
      2. Friends – Second highest statistical significance.
      3. Your kids – not as significant...statistically and FB comments online. 
   4. Takeaway – Invest in your marriage...invest in friendships outside of work. 
      
      
      
      
      
      
5. Plan, prepare for taxes...it is a large (frustrating) expense
   1. What are the financial AND emotional costs of paying too much taxes in retirement?
      1. RMDs – when not needed?
      2. Legacy planning: Roth, 529, Brokerage account.
      3. Practical side: HSA, Roth, Cash, Taxable Brokerage
6. The right mindset – what is money? It does not make you happy...
   1. Money is paper or numbers on a computer screen...E.g., bricks to build a house.
   2. Pre-Retirement:
      1. Don’t allow money to make you miserable...
      2. Examples of how money ALONE has made people miserable
         1. By chasing after it too much...like a trophy
            1. Airlines are great b/c fly more = more pay. BUT...
         2. Money is a tool to reduce stress and increase your enjoyment...there are other tools!
   3. Post-Retirement:
      1. It’s okay to spend your retirement money on frivolous stuff...
         1. Example, people spend from pensions but not on IRAs, 401ks. Defined Contributions versus Defined Benefit.
         2. Finke example: Mom has a pension and spends every dollar happily, but refuses/hates to draw from her IRA
      2. Understand what truly DOES make you happy in retirement – you must invest in these three things:
         1. Finances
         2. Health
         3. Relationships
7. Realize there are things that you cannot control – Realize that you have more control (of other areas) than you realize:
   1. Example – Short-term stock market gyrations versus your own personal inflation.
   2. Example – Our country's debt crisis – saving more to prepare.
   3. Example – Higher inflation and taxes in the future – save more to prepare.
   4. If things go really badly – you'll be glad you prepared, saved, etc.
   5. Example – MGP “bad timing” scenario – 2008-type retirement for airline pilots at age 60.
      
      
      
      
      
      
8. Be an Ant during working years and be a Grasshopper in retirement (up to a point). Though Aesop’s fable is regarded as a lesson in thriftiness, “grasshoppers” are likelier to smooth their spending over their lifespans. Don’t wear thriftiness as a badge of honor- you saved to consume later- hint, it is now later! (https://www.aaii.com/journal/article/grasshoppers-and-ants-in-retirement) 
9. Don’t compare (especially finances) – live someone else’s values.
   1. Comparison is the thief of joy!
      1. From this article:
      2. “Feelings of jealousy, frustration, and hopelessness emerge if comparisons continue. If left unaddressed, chronic anxiety and depression can stem from such behavior.”
      3. Avoid comparing other peoples' "outsides" to your own "insides" 
   2. When, if ever, is it okay to compare yourself to someone else?
   3. How to prevent comparison from limiting your success and peace of mind?
10. Even if we do not want to think about it, our mortality is real. Should we spend the money today or wait until tomorrow? How many pieces should I cut “the financial cake” into not knowing how many years we shall be here. Very few get to spend the last dollar at the last second of life. How do we create a good retirement under so much uncertainty?
    1. Consider your legacy not “at the end of life” but 50 years from now. Helps to consider mortality and legacy that you want to leave financially.

Questions From The Flight Deck:

Introducing: Andy Christopher – F18 Navy Fighter Pilot and Investment Advisor

• Background
  • How’d you get interested in flying?
  • Why the Navy?
  • Navy flight experience.
    • Ejection story – first flight!?!

Meat of the Mission – 529s

Common Questions:

• What if my kid gets a scholarship?
• Do I need to invest in my state’s 529? No!
• What if I overfund the 529?
• Can I give my 529 to my child?
• How does the 529 affect financial aid?
• Can I use the 529 for United, Delta, SWA feeder schools – aka career development programs.
  • United Aviate
  • Delta Propel Program 
  • SWA Destination 225
• Should I just use the Roth IRA? Roth 401k?
• The major difference between Roth IRA withdrawals and Roth 401k withdrawals:
  • There is one catch, though. Early withdrawals have to be prorated between (nontaxable) contributions and (taxable) earnings. To calculate the portion of the withdrawal attributable to earnings, simply multiply the withdrawal amount by the ratio of total account earnings to account balance. U.S. Department of Labor. “401(k) Plans for Small Businesses Supplement.”
• Why save for college?
  • College Tuition Inflation Statistics | BestColleges 
  • Tuition increases over time have traditionally outpaced inflation
  • Avoid student loan debt (for parents and children)
  • One of the most expensive “investments” in one’s life
• 529 basics 
  • Similar to Roth IRA: After-tax money in, tax-free money out when used for qualifying tuition expenses
  • FAFSA: Does a 529 plan affect financial aid? - Savingforcollege.com 
    • Any parental assets beyond that amount ($10,000) will reduce a student’s aid package by up to a maximum of 5.64% of the asset’s value.
    • So, if a parent’s 529 account exceeds the Asset Protection Allowance by $10,000, his child’s financial aid award could be reduced by as much as $564.
• Which plan to pick?
  • What Is a 529 Plan? - Savingforcollege.com
  • Don’t have to use your state’s plan, but may be reasons to use in-house plan
  • Unique plan rules for transfer of ownership, total account value limits for contributions
  • State tax benefits (OH)
    • E.g., Virginia residents – tax deduction PER ACCOUNT, age 70 rule and tax deductions carry forward...
  • Low-cost plans (Utah my529, W VA, etc.) 
• How much to save? 
  • Vanguard Savings Calculator
  • Rule of thumb:
    • Public vs. Private
    • Scholarship
    • Other sources of funding: grandparents, GI Bill, etc.
  • "Superfunding”: 10 Rules for Superfunding a 529 Plan - Savingforcollege.com
• How to invest the contributions?
  • Low-cost/index approach
  • Target-enrollment date (works like a 401(k) target-date fund)
• What if you don’t use the funds?
  • Estate Planning Considerations: Dynasty 529 Plan For Multigenerational College Expenses (kitces.com)
  • Secure Act 2.0 Changes: The SECURE Act 2.0: The Most Impactful Provisions #10 — Moving 529 Assets to a Roth IRA - Fred Reish
  • Withdrawal Options: Penalty-free (not tax free) for service academies, scholarship, death/disability
  • Changing beneficiaries
• Veteran Benefits
  • GI Bill Transfer
  • State Specific Benefits (CalVets, etc.)
    • Hazlewood Act - Through the state’s Hazlewood Act, originally approved in 1943, Texas promises its veterans or their survivors 150 free credit hours at any of the state’s public universities or community colleges, once their federal benefits have been exhausted. And vets may transfer hours they don't use to their children.
      • Hazlewood benefits are available to veterans who currently reside in Texas and who lived in Texas or had Texas as their home of record at the time of enlistment, or who simply enlisted in Texas.

1. Vanguard college funding calculators 

• https://vanguard.wealthmsi.com/csp.php

2. Leading Edge 529 video

• https://youtu.be/Br4ws8waxDQ

3. Morningstar College report, comparison.

• https://www.morningstar.com/personal-finance/best-529-plans-2023 

Airline News:

• American Airlines, FedEx Agreements in Principle: AIP... 

How To Think About Your Health And Improve Your Quality Of Life Now And In Retirement

Sources:  

1. Financial wellness can increase the quality of your physical health.
   1. High levels of financial stress manifest through physical symptoms like sleep loss, anxiety, headaches/migraines, compromised immune systems, digestive issues, high blood pressure, muscle tension, heart arrhythmia, depression and a feeling of being overwhelmed.
2. Can induce feelings of happiness.
3. Enhances the quality of your sleep.
4. Physical activity is often associated with reduced symptoms of depression and anxiety.
5. Exercising is critical for airline pilots due to the sedentary lifestyle of flying and traveling. 

How:  

1. You must be intentional. 
   1. What’s the best diet/eating habits? 
   2. What’s the best exercise routine? 
      1. The one that you’ll do!
      2. What you are able to make part of your lifestyle.   
   3. Without a plan, you will drift... to bad nutrition and exercise habits. 
2. Hire a fitness instructor. Also, develop an eating plan.
   1. Especially plan for days on the road. 
   2. It’s not your age that has you feeling the need to rest -- it’s that you’re not moving. Even older adults with serious health problems -- heart disease, diabetes, arthritis, and others -- can live better lives by getting up and moving. 

Resources: 

https://neurosciencenews.com/fitness-neuroscience-23228/ 

https://www.purdue.edu/hr/CHL/healthyboiler/news/newsletter/2020-01/finances-health.php