Preview:

People are often told not to worry about a market crash when they’re younger because time is on their side, but what happens when you no longer have the benefit of a long time horizon? Should you take the threat of a market correction or crash differently?

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More About This Episode:

In today’s episode, Ryan shares insights on the importance of understanding time horizons over age and highlights the common pitfalls pilots face, such as over-reliance on the S&P 500. Find out when the transition from a carefree investment strategy to a more cautious approach should occur, especially in the context of pensions and multiple income streams.

This conversation is extremely relevant in a time of sharp ups and downs in the market so let’s plan accordingly and be prepared for whatever happens.

Here’s what we cover in this episode:

0:00 – Intro

1:41 – At what age do you need to worry about a market crash?

3:45 – The average employee vs. pilots.

7:15 – Closing thoughts

Resources:

Retire Pilots – https://retirepilots.com

Get your FREE Retirement Toolkit – https://bit.ly/3ZmZsaX

Pilot Tax – https://pilot-tax.com/

The Pilot’s Advisor Podcast is also on video. Watch & Subscribe on YouTube: https://bit.ly/3EIEBW2

Connect with Pilot-Tax: https://pilot-tax.com/

Episode Transcription:

(Note, this is an automated transcription. Please forgive any errors.)

Walter Storholt: You know, people are often told not to worry about a market crash when they’re younger because, well, you have time on your side, but when is time no longer on someone’s side? And should you take the threat of a market volatility situation, uh, or crash or correction seriously, we’re going to talk about when that transition sort of happens. On today’s episode with Ryan Fleming back on the Pilot’s Advisor. Once again, Walter Storholt with Ryan Fleming. Ryan, I hope you’re doing well, my friend. Let’s just first a, uh, quick check in. How’s life treating you?

Ryan Fleming: Life is wonderful. It’s almost Halloween right now. The leaves are changing, things are cooling off. And of course, in my world, if there’s college football on tv, I’m happy you’re Walker.

Walter Storholt: Uh, that’s great to hear. And, uh, Air Force is, uh, they’re doing. Doing well. This. No, it’s. Army and Navy were doing well.

Ryan Fleming: Yeah, we don’t want to talk about Air Force this year.

Walter Storholt: Sorry. I got.

Ryan Fleming: They only had two returning starters. As a matter of fact, I was.

Walter Storholt: Trying to lump them into the success of the other branches. Yeah.

Ryan Fleming: As a matter of fact, uh, I was at Clemson’s football practice yesterday and. And coach, uh, Dabo Sweeney was giving me a little bit of hell about Air Force and wondering what’s going on and when are they going to show up. And I’m like, coach, we don’t want to talk about Air Force.

Walter Storholt: Yeah, Rough start to the season for Clemson, but they’ve looked good lately. So people must be happy down there in Clemson that the last several weeks.

Ryan Fleming: Yeah, they didn’t, they didn’t play too well against Georgia. That’s the only game they’ve lost. But they’re on, they’re on a run right now, and I think they’re number 10th in the country. Yeah, they’ve won every game since.

Walter Storholt: So I think we’re in the drive play off bound.

Ryan Fleming: Absolutely.

As pilots get closer to retirement, they need to take market volatility more seriously

Walter Storholt: All right, well, hey, let’s talk about volatility and get into some of this, uh, financial matters today for pilots. Ryan, I teased it, uh, a few moments ago, so. Yeah, when we’re younger, we’re told, I don’t worry about a market crash. You’ve got time on your side. But when you’re closer to retirement, people are like, oh, no, you need to take the threat of a market volatility or of, of, you know, a market crash very seriously. So when does that change happen? Like, is there a particular age or segment of life where that happens or is it gradual help us.

Ryan Fleming: I think, I think this is one of the most misunderstood things that is out there because it really depends on the situation. And especially for an airline pilot, where do you work and what’s the situation as far as a pension goes. So when I talk about this, most people think as they get closer to retirement, they really have to pull the throttles back. They can’t handle that, that volatility anymore. They uh, can’t have, have that big pullback in the market. And it really has nothing to do with your age. It has everything to do with your time horizon for that money. So for example, if you were a military pilot, you retired from the military and then you went off to UPS or FedEx and you did a whole career there and you have multiple sources of pension income. In a lot of cases you’re not really even tapping into your 401k at retirement. That money’s still long term and you’re growing. Well, guess what, you can leave the throttles up on that portfolio and let it grow. You have the ability to handle that volatility and to have that long term, you know, those higher gains and that in that portfolio because you’re not pulling from it. Now the other side of it, let’s say you’re not and you don’t have a pension. Well, yes, you have to pull all your income from that portfolio. You need to handle things quite a bit differently if you, if you don’t have any safe money. And uh, Walter, I’ll actually have a link to how to how you eliminate sequence of returns, risk of retirement. I’m sending a video that’s linked to this. Okay, so the pilots can watch for that because I think it’s pretty telling on how even in retirement, as long as you have safe money, safe income to pull from off to the side, you can still participate in markets and have not just that normal retirement, 60, 40 asset allocation, but something that’s a little bit more aggressive because I mean pilots are aggressive and they want all of the upside and none of the downside.

Pilots often have more income streams than the average person at retirement

Walter Storholt: Now would you say that’s the difference between like the average employee out there and pilots is that they’re often going to have more income streams than the average person or pensions in place where are not as common in the normal working world. And so an average person’s 401k they may be tapping into at retirement, but is it more common for pilots to be a longer time horizon?

Ryan Fleming: I would say in a lot of ways, yes. With pensions or a military pension, all the airlines Used to have a pension, which was a total game changer. Unfortunately, 9, 11, you know, caused a lot of issues and a lot of the legacy carriers lost their pension. So planning for retirement is much, much more complicated now than it used to be. Um, and then back to the time horizon or getting close to retirement if you have five or six years still left before you retire. Because I get a lot of guys that are reaching out to me and saying, hey, I’m getting close. Well, you could have multiple market cycles over a five to six year period. I think once you’re really getting into that within two years of retirement and depending on your baseline situation for income, pension or no pension, then yeah, we need to start making some moves. We need to start doing some things to alleviate risk.

Ryan Fleming: Many pilots put all their money in the S&P500

Now it

00:05:00

brings up something that I really want to talk about and I get all the time that I think pilots are really screwing up. I was at a financial advisor conference last week in Vegas and one of the big things that we keep talking about is pilots want to put all their money in the s and P500. The S&P500 has done great recently, but it is normally one of the lagging asset classes. And I’m not sure pilots really understand how risky it is to have all your money in the S and P. Um, number one, the S and P has been held up by the Magnificent Seven for a long, long time. And what that means is you got 490 plus other stocks, other companies that really haven’t performed. Okay, so would you put all your money in seven stocks? I think the answer would be no. Also to consider is looking at the Last decade, from 2000 to 2010, US large cap stocks made exactly nothing. And for you to have your money in that leading up to retirement or even going into retirement where you had to pull income and the market’s down 20, 30% and you’re liquidating your whole plan because you weren’t diversified. That’s not a good plan. That would blow up your whole portfolio. So, uh, over the long term, if the S P has that kind of returns, that’s great, but we need to be much, much more diversified than that. So that, that one, you know, one asset class and it has a rough year, doesn’t blow up your whole plan. And I think that’s one of the major mistakes I’m seeing out there.

Walter Storholt: Lots to kind of keep our eyes on as we get closer to retirement. But I love your, uh, description there. It’s not really about your age, it’s about that time horizon and that can be different for various folks, depending on kind of all of those different inputs, uh, the pensions and how much is in your 401k and when you’re going to need to tap. A lot of people just don’t understand, I think, that depth and that complexity to the planning process. I know you’re going to try and make it simple and easy for folks to understand, but we do need to understand that it’s, uh, that it does have some complexity to it that we just need to make sure we’re thinking about and addressing. And sometimes, unfortunately, it’s not as simple as saying, when you’re 55, turn conservative. Like, it’s, it’s more nuanced than that. And, uh, and that’s what you’re doing every day for folks I know in appointments, Ryan, after they get the retirement toolkit and they go through the analysis with you of their portfolio and their plan, you’re starting to uncover where some of these pitfalls, where some of these issues are, and beginning to solve for them.

Ryan Fleming: If you’re 75 years old and you’re living off your pensions, you’re not tapping into your, your 401k at all, and you start thinking about legacy planning. Why are you being so conservative with that money? Uh, if you want to pass it on, you’re never going to use it. You’re going to pass it on to your children or grandchildren, push the throttles back up. Let’s make some money with it. And then when it’s time to pass it on, they’re going to be that much happier and they’re going to think Grandma and Grandpa were the best thing ever. But if you’re never going to touch that money, why are we putting it at cd? Or why are we pulling the throttles back to idle? Guess what happens in an airplane. The nose drops and you start heading towards Earth. Okay, push the throttles up and let’s, let’s let it work for you. Let’s let that money work for you.

Walter Storholt: Well, great points, Ryan. Uh, all you have to do if you want to get your retirement toolkit is go to Retire Pilots. That’s Retire Pilots dot com. Of course, it’s linked in the description of today’s show. So whether you’re watching on YouTube or listening on your favorite audio app, again, just check the description and you’ll find the link to retire pilots.com and that will get you in touch and allow you to learn, uh, more about the pilots advisor himself, Ryan Fleming, and get some great guidance into your financial future. Ryan. Thanks for the help today. We’ll look forward to chatting with you on the next episode.

Ryan Fleming: Shiny side down. Fly safe. Talk to you soon. Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal or tax professional before taking any action.