Category: Education

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Education Kevin Retirement Video

The Three Bucket Approach: Securing Your Retirement Income

In this video, Kevin from Leading Edge Financial Planning breaks down the Three Bucket Approach — a retirement portfolio strategy as vital as oxygen for financial peace in retirement. He explains the importance of each bucket: a cash bucket for immediate expenses, a conservative bucket for steady income in the medium-term, and a growth bucket to guard against inflation and maintain purchasing power. Discover how this method can bring security and peace of mind, along with ideas to consider for managing your retirement portfolio using this approach.

Kevin also discusses some pros and cons about this strategy and offers insights on how to visualize these buckets to achieve peace of mind in retirement. If you're planning for retirement or just want to understand how to make your income last, this video is a must-watch.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions

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Charlie Education

Plan and Prepare for the Unexpected: My Personal Lessons Learned from Hurricane Helene

As I write this article it was almost exactly one week ago that I drove through the night to pick up my daughter from Furman University in Greenville, SC. The evening before I left, my daughter and I chatted about her driving home from school since there was no power, and very little access to food or fuel.


Even after that conversation I wasn’t quite sure of the extent of the damage from Hurricane Helene in the western Carolinas. My daughter mentioned that she was going to make her way to a friend's house or a hotel in the Greenville area. However, the power was out at both places. There was literally nowhere to go to get food, water, or electricity. 


After that conversation, I realized my daughter wanted out of there and she might be crazy enough, like her dad, to start driving just to make something happen. I really wanted to get there before she decided to leave for home that Saturday morning. That is what really motivated me to get up at 2 AM and start my four-hour trip from Maryville, TN, to Greenville, SC. Interstate 40 from Tennessee to North Carolina had washed away in the flooding, so I took a famous path of mountainous roads called the Tail of the Dragon, aka Highway 129. I’m sure that stretch of highway is exciting under different circumstances and with a different vehicle than my Toyota 4-Runner!


I still didn’t know the full extent of the damage, but I knew there was a possibility of flooded roads, downed trees, closed roads, areas of no cell service and limited gas at gas stations. In fact, all of these conditions existed and more! The damage, especially to the Ashville, NC, area was far worse than I thought. Even now, the death toll is still rising, and there are ongoing search and rescue operations for missing individuals that live in remote and mountainous areas. 


After witnessing a small portion of the damage from Hurricane Helene, I’ve apologized to my Florida and other coastal living friends for my lack of empathy and understanding of the true devastation Hurricanes can inflict on communities and human lives. I’ve often read that knowing something to be true and having the experiential knowledge of that something is vastly different. I came to experience that principle firsthand after the short rescue operation of my daughter from college. Clearly, what I witnessed was just a fraction of what was happening to those who live in the areas affected by Hurricane Helene. 



Get a Plan and Change Your Mindset


What are some steps we can take to prepare for a catastrophic event of any kind? Catastrophic events happen in many different forms; disability, untimely death, loss of employment (see the latest news for Spirit Airlines). However, just like flight planning, having a plan in place for the unexpected can bring security, confidence, and reduced stress, but we must do the work. 


The most important part of any plan is to have the right mindset. I’ve certainly been guilty of a mindset of, “...that (hurricane, earthquake, tornado, etc.) only happens to other people and it won’t happen to me.” 


Furthermore, put aside the idea that you’ll be labeled a crazy prepper if you have a generator and fuel source in your basement. Get one asap!


As we have already discussed in this article, we don’t know what the next event will look like. We do know it will look very different from what we experienced in the past – remember 2020? Also, like you, I’m a bit skeptical of the electromagnetic pulse (EMP) grenade that your captain told you was going to happen soon, but you’ll be prepared for it anyway!



Create a “Go Bag”


One of our Leading Edge team members, Amelie, shared with us a time when they lived in an area in California prone to wildfires. She mentioned that they prepared a couple of duffel bags they could grab quickly and run out the door to escape the fires. The bags might contain the items below, but you may decide to include other items as necessary for your area. Click here to get more ideas from the California Department of Forestry and Fire Protection. 


• Cash! – more on that below
• Short supply of non-perishable food and water
• Maps with evacuation routes. (Like mine, your cell phone may not be the latest and greatest that still provides GPS directions without a Wi-Fi or cell phone signal.)


○ I learned after my trip that the iPhone 16 has satellite connectivity features that allow you to send and receive messages, request roadside assistance, and share your location when you don't have cellular or Wi-Fi coverage – That would have been nice!


• Necessary prescriptions or medications
• First aid kit and sanitation supplies
• Flashlight and battery-powered radio with extra batteries
• Copies of important documents; birth certificates, passports, etc


****Another one of our Leading Edge advisors, Mark, currently living in Asheville, said he was caught off guard by the almost immediate switch to an all-cash system. He also mentioned the long lines at the ATM machines made it very difficult to obtain cash if you didn’t already have it. Make sure to add cash to your “Go Bag” or your fireproof safe at home.



Financial Considerations for Preparing for Emergencies and Natural Disasters


1. Understand your homeowner’s insurance and what it covers. Replacement cost value is one of the most important elements in a home insurance policy. If your house is destroyed by a problem covered by the policy, your dwelling insurance policy pays to rebuild it.


• If your house costs more to replace than your coverage limit, you’d have to pay for some of the work yourself or reduce your rebuilding budget.


2. A standard homeowners insurance policy covers your home against wildfires, tornadoes, hurricanes, hail, and other common storms, but not flooding from bodies of water. 


Furthermore, if you have flood insurance, understand the difference between flood damage and water damage. Under the vast majority of homeowner’s insurance policies, flood damage is not considered a form of water damage. Since standard homeowners' insurance doesn’t cover flooding associated with hurricanes, storms and heavy rains, it’s important to have protection from the floods that often accompany these types of disasters and to understand how your insurance company defines a “flood.”


From Investopedia; You may need different types of insurance to mitigate disaster risks in your area. The precise types of insurance are region- and hazard-specific. The amount of coverage you will need can vary significantly depending on the location, the type of natural disasters prevalent, and home prices in your area.


Homeowners in hurricane-prone areas might need windstorm insurance, while others may require flood insurance.



Build a Robust Emergency Fund Using a Taxable Brokerage Account


In almost any emergency, whether it’s a natural disaster, personal disability or financial catastrophe, quick access to money without being penalized (I.e., IRAs, 401ks) can provide the most security and peace of mind. 


We love it when our clients put forth the extra effort to build a large savings balance in a taxable brokerage account. A taxable brokerage account is very flexible and can be used for any purpose from retirement to college to funds to pay for living expenses in case of a disability. 


You can use a brokerage account to purchase investments, such as stocks, bonds, mutual funds and ETFs. A brokerage account doesn't have limits on how much you can contribute or what you can do with the money.


We’ve seen the peace of mind and other emotional rewards pay off when someone has a healthy balance in their taxable brokerage account. For example, in 2020 when our world was turned upside down by the COVID 19 pandemic, many people dipped into their 401ks and withdrew large amounts or borrowed from them because of temporary government rules. Those that built a large savings balance had no need or desire to dip into their 401k in order to weather the COVID storm of 2020. I realize this is not always possible, as there were many brand new first officers that were furloughed or did not get hired as planned due to the pandemic.


Currently Spirit Airlines is considering filing for bankruptcy. A friend of ours at Spirit has absolutely zero debt and a very healthy emergency fund. Although losing his job at Spirit Airlines is a disturbing possibility, he and his family are not nearly as stressed as they would be without a strong balance sheet. 


Finally, catastrophes and emergencies come in many forms. Although it may not be practical to be prepared for every possible scenario, there are many steps we can take so that we can weather the inevitable storm with less stress and more peace of mind. And, like we are seeing in the areas affected by Hurricane Helene, if you are prepared then you can quickly be of service to your neighbors and your community and lend a helping hand like our Leading Edge teammate, Whitney. She is a resident of Inman, SC near Spartanburg and Greenville, SC. 


After a day in Charlotte, NC to avoid the worst of the storm they returned home to help in any way they could. At one point they were helping to coordinate helicopter airdrops in remote areas of the western Carolinas most affected. I’ll conclude this article with a few of her comments. She texted our team while she and her husband George were working with Operation Airdrop to help hurricane victims. 


From Whitney: 


“All is well here, just still very disconnected - no power, no hot water, no gas and VERY spotty cell service. Thankfully we had minimal damage to our house/property and by some miracle, George was home for all of it. (He’s an airline pilot) We spent Sunday night in CLT for a little moral boost (yay hot showers and wifi!) but there were several reports of looting near us so George didn't feel comfortable leaving the house unattended, so we headed back to the darkness on Monday morning!

The past two days have been incredible though. I've been working with an organization called Operation Airdrop coordinating helicopter drops into very remote areas! They had tons of helicopters and planes loaded with supplies but were having a hard time finding SXS (Side by sides) to help unload and distribute once they landed in these remote areas. I did what any good military/pilot wife would do (haha) and asked the Pilot Wives Facebook group if they knew anyone! Within 2 hours we were able to coordinate 2 drops full of medical supplies and food! Attaching one of the photos (see below) to this because how awesome are people! We have three more drops going out as we speak -- all coordinated via the Pilot Wives on FB! Wild.


They need pilots on the ground to help with OPS and flight planning, etc. so we are heading back to Concord this afternoon. George will be working with the flight operations team and the boys and I are loading supplies.

Also, if anyone you know is asking for a reputable organization to donate time or resources, I can personally recommend Operation Airdrop. I don't work for them obviously and they don't know me from any other volunteer out there, but they are truly saving lives and getting supplies directly into the hands of those that need it most!



Hopefully this (message) sends and hopefully my hotspot will get me into the meeting this morning!” 


~Whitney




Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.

Categories
Education Kevin Pilots Video

United Airlines Benefits Open Enrollment: Key Health Insurance Options Explained

Join Kevin Gormley, CFP®, CPA and Andy Christopher, CFA from Leading Edge Financial Planning as they explore the upcoming open enrollment period for health insurance. The fall season means it’s time for United pilots to review their health plans for the upcoming year. Many individuals stick to last year’s choices without reevaluating their options, but this discussion aims to encourage informed healthcare decisions.

They break down essential terms like premiums, deductibles, co-pays, and co-insurance, emphasizing their significance in personal financial planning. The conversation also covers various health insurance plans for United pilots, including Health Savings Accounts (HSAs), Preferred Provider Organizations (PPOs), and Exclusive Provider Organizations (EPOs), as well as early retirement options and supplemental coverage as pilots transition to Medicare.

If you're a United pilot or considering your healthcare options, this episode is packed with valuable information to help you navigate the complexities of health insurance open enrollment.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions

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Education Pilot Money Guys Pilots

Spending Mindshift: Spend with Freedom and Peace of Mind

From Runway to Retirement: Savings Priorities for Airline Professionals
Author: Nolan Clark


The world of savings priorities and the newest financial strategies can be overwhelming, especially when each seems to have its own rules. I’m not here to push a one-size-fits-all approach, but rather to offer a fresh perspective, specifically with airline professionals like yourself in mind. Whether you're an FO aiming to strengthen your emergency fund and tackle debt, or a captain looking to maximize tax-advantaged accounts beyond your 401(k), the goal is to focus on strategies that fit your unique situation and goals.

Below is a great list of long-term savings priorities for retirement that I will reference in this article, sourced from a comprehensive report by JP Morgan Asset Management. For a deeper dive, visit J.P. Morgan Private Bank (jpmorgan.com) to explore the full guide.

Let’s dive into what really matters for you as a pilot and how you can make the most of your financial journey.


1. Emergency Reserve


An emergency fund is essential for everyone, regardless of your life stage. It may not be the most exciting savings goal, but it's crucial because it's not a question of if you'll need it, but when.

When looking up advice on a “healthy” emergency fund, you'll often see recommendations of 3-6 months’ worth of non-discretionary expenses. This typically covers essential costs like food, utilities, and housing. While this guideline works for many, it's not one-size-fits-all.

As airline pilots, you know first-hand the volatile nature of the airline industry. Therefore, considering a larger emergency fund—6-9 months or even up to a year’s worth of expenses—might be more appropriate to navigate unexpected challenges.

While this is a large amount of savings for many, the value of this step in all the priorities will be greater than the dollar value in your account. We see it time and time again with our clients who have the liquid savings to weather major storms that have a peace of mind in difficult times compared to those without. Tough times are already hard, we don’t want them to be any harder for you than they have to be.

To help get some momentum, you can set multiple emergency fund goals along the way until you reach the ultimate number that works for you and your family. Having enough money saved to cover all your insurance deductibles is a great start, then you can work towards 3-6 months saved, 6-9 months, and so forth. 


2. Maximize Your 401(k)-Employer Match


Your employer match is one of the closest things to a "free lunch" in investing you’ll ever receive! Find out what percentage your employer matches up to, match your 401(k) percentage to that, and reap the benefits!


3. Pay Down Higher Interest Loans (Loans with Greater Than 7% Interest)


Most people understand the impact of high-interest consumer debt and how it hinders savings goals. The real question is why people fall into debt in the first place. From what we see, it often comes down to lacking a solid emergency fund and not planning for large, foreseeable expenses such as crash pad costs, commuting expenses, changes in lifestyle when you upgrade, or other future costs. Without these savings, people may turn to high-interest credit cards when unexpected costs arise and it makes them feel more behind financially, even though they are making more money than ever.

Here are a few questions to consider on this topic: (adapted from an article on the Financial Order of Operations written by The Money Guy Blog):

 

•  Does my mortgage count as high-interest debt?

Unless you were fortunate enough to lock in a mortgage rate that you can count on one hand, you may be asking if your mortgage qualifies as high-interest debt. My wife and I bought a home this past year and have a 7% interest rate. Does this count as high-interest debt? While the interest rate itself does meet the 7% or greater criteria, there are a few reasons I may still count our mortgage as low-interest debt, and not be as adamant about making huge extra monthly payments. First, homes are typically appreciating assets, a distinct difference from consumer debt, student loans, car loans, etc. Mortgage interest may be deductible if you itemize your tax deductions. This could be even more of a consideration as the current tax laws expire in 2026 and the standard deduction will not be as large as in years past. 

•  Which high-interest debt do I pay off first?

Mathematically, paying off your debt with the highest interest rate first makes the most sense on paper. However, I am a big believer that the best debt repayment plan is the one you will stick to. If paying off smaller debts first motivates you more, you can start with those to build momentum. Just remember to consider the type of loan, minimum payments, penalties/benefits with paying off early/late, tax implications, and most importantly, your goals before you decide one way or the other.


4. Health Savings Account (HSA)


For couples entering retirement this year, it is projected they could spend roughly $315,000 on healthcare alone during their retirement period, according to the annual Fidelity Retiree Health Care Cost Estimate. This sum doesn’t include long-term care, over-the-counter medications, or dental services.

$315,000! That is a whole lot of money out of a retirement portfolio. Thankfully, there’s a specialized account designed to handle medical expenses: the Health Savings Account (HSA). An HSA offers triple tax benefits: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free.

To qualify for an HSA, you must be enrolled in a high-deductible health plan (HDHP), which typically has a lower monthly premium but higher out-of-pocket cost. Additionally, HSA funds roll over from year to year, allowing your savings to grow over time. However, be aware that withdrawals not used for medical expenses may incur taxes and penalties.

Lastly, while many people use HSAs as a fund for current-year medical expenses, an even better strategy could be to keep your funds invested and save your receipts for future use. Depending on your employer, you may also have access to other types of health savings vehicles, such as United's Health Reimbursement Accounts (HRA) and Retiree Health Accounts (RHA).

We discuss this in more detail on our YouTube Channel: United Pilots: RHA & Healthy Fear of Healthcare Costs


5. Additional Defined Contribution Savings 


For 2024, the IRS Defined Contribution Savings Limits are:

•  $23,000 for those under 50

•  $30,500 for those 50 and older, which are the maximum amounts you can contribute to your 401(k).


Many airlines also offer Non-Elective Contributions (NEC), which can boost the total contributions between you and your employer up to $69,000 for those under 50 and $76,500 for those over 50. That is a great chunk of money set aside for one year! This is not to mention the Market Based Cash Balance Plans (MBCBP) that many airlines have implemented that offer an extra savings vehicle.

The key takeaway in this step is to focus on what you can control. If you’re under 50, aim to contribute the full $23,000 to your 401(k). If you’re 50 or older, strive for $30,500. Your company will do its part on the NEC.


6. Pay down lower interest loans (less than 7%)


The low-interest loans have been able to hang around until step 6 because the above steps were important enough to put on the backburner, and the math made sense. Now, it is time to bring it home and pay it off! 

While low-interest loans may be manageable, reducing your debt load can provide practical and psychological benefits. As mentioned before, remember to consider the type of loan, minimum payments, penalties/benefits with paying off early/late, tax implications, and most importantly, your goals before you decide one way or the other. There are times when not paying it off can make sense as well. For example, some folks have 2% mortgage interest rates locked in and have 25 years remaining on their mortgage. At the time of this article, some banks are offering a 5% interest rate on money just sitting there. We have clients who are still stashing that money away, but instead of locking it up in their homes, they have opted to save that money in a high interest bank account that offers them greater liquidity and flexibility. The beauty of this situation, if you’ve made it to step 6, is that you're well-positioned financially regardless of the outcome. At this stage, it's unlikely that either choice will significantly harm your financial future. While there might be mathematical differences between the options, the peace of mind and better sleep you gain could very well outweigh any other minor financial factors.


7.  IRA


A traditional IRA involves pre-tax contributions with potential tax deductions, and earnings grow tax-deferred. Withdrawals are taxed as ordinary income and subject to penalties if taken before age 59 1⁄2, with RMDs required starting at age 73.

A Roth IRA involves contributions made with after-tax dollars, allowing investment earnings to grow and be withdrawn tax-free if certain conditions are met. There are no required minimum distributions (RMDs) during the account holder’s lifetime, but contributions are subject to income limits.

If your income is too high to contribute directly to a Roth IRA, you can look into using the backdoor Roth strategy. However, this approach can lead to unexpected tax consequences if not done correctly, so it’s crucial to consult with your tax professional.


8.  Taxable Account


A taxable brokerage account can be used for short, medium, or long-term goals. It is taxed at favorable capital gains rates, and you can invest as conservative, moderate, or aggressive as appropriate depending on your goals.

Many find that the taxable brokerage offers great flexibility compared to other retirement vehicles because there are no early withdrawal penalties for taking money out before age 59.5. This makes it a great account for those considering early retirement, an emergency fund, a college savings vehicle, or maybe you are saving up for that airplane you’ve always wanted; take your pick!

Finally, I leave you with two quotes from personal finance expert, Morgan Housel. He explains in his book, The Psychology of Money, that sometimes sticking to a simple strategy is more effective than endlessly searching for the perfect one. Don’t get bogged down by details; focus on saving and spending less than you earn.

•   “My own theory is that, in the real world, people do not want the mathematically optimal strategy. They want the strategy that maximizes how well they sleep at night."

•   "The reasonable investors who love their technically imperfect strategies have an edge, because they're more likely to stick with those strategies.”

 

~Nolan Clark

Financial Planner


Leading Edge Financial Planning, LLC. 

Hopefully, you found this article interesting and helpful. 

If you have any questions, contact us at: 

• Phone: 270-545-5880   

• Email: Nolan@leadingedgeplanning.com.  


Also, please tell us if we can help you on your journey to financial peace and prosperity! Click here to sign up for our newsletter or click here to schedule some time to chat about your circumstances in more detail.  Also, check out our Pilot Money Guys podcast where we regularly discuss these types of financial topics along with some fun airline news updates and interesting guest interviews.  


Sources & Links:

• JP Morgan’s Guide to Retirement Slide Deck: J.P. Morgan Private Bank (jpmorgan.com)

•  FOO - Your Ultimate Guide to The Financial Order of Operations | Money Guy

• The Money Guy Blog - Blog | Money Guy

• Fidelity Investments’ annual report on retirees’ healthcare planning featured in this MarketWatch article: The cost of retiree healthcare is climbing — here’s what you should expect to spend - MarketWatch

•  What Is a Health Savings Account? How It Works, Tax Benefits, Drawbacks and More - CNET Money - CNET

• Leading Edge Financial Planning YouTube Video - United Pilots: RHA & Healthy Fear of Healthcare Costs

• Schwab Backdoor Roth Article: Backdoor Roth: Is It Right for You? | Charles Schwab

• How Brokerage Accounts are Taxed in 2024 - Benzinga

• 529 vs. Brokerage Account: Which Is Better for College Savings? (savingforcollege.com)


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.

Categories
Education Kevin Retirement

One Reason To Invest in Roth NOW

Tax Changes Ahead: Why Invest in a Roth IRA Now

Kevin Gormley, CFP®, CPA discusses upcoming changes in tax policy that may affect your retirement investment strategy. With the expiration of the Tax Cuts and Jobs Act on January 1, 2026, the tax landscape is set to shift significantly, potentially resulting in higher taxes for many individuals.  Kevin outlines key strategies for investing in Roth IRAs, Roth 401(k)s, and utilizing “Backdoor” Roth conversions. He emphasizes the importance of considering these options, especially if you're in your 60s and have substantial funds in traditional IRAs or 401(k)s. This discussion offers valuable insights into how these strategies may help you minimize your tax burden and maximize your retirement savings.  Please note, Roth investments and conversions can potentially affect your taxes in the current year. Consulting a tax professional is essential before implementing this strategy.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions

Categories
Charlie Education Pilot Money Guys Pilots

Why Estate Planning is Essential for Pilots

Professional pilots are economically valuable and worth every penny earned not just because they can fly safely from Chicago to LAX.  The real reason pilots are so valuable to their airlines and the flying public is that they are prepared to navigate dangerous weather, handle in-flight emergencies, and make difficult decisions. In other words, pilots are trained to get their passengers safely where they want to go regardless of what happens along the way. 

One of the most difficult things pilots do is prepare for an event that will most likely never happen in your flying career.  In almost 25 years of flying, I never lost an engine.  Which is great because one of my airplanes only had one engine!  I never lost a hydraulic system or experienced a dual-engine flameout, Sully-style.  However, I did (and you continue to) prepare for these events as if they are common occurrences.  This requires tremendous discipline, preparation and intense attention to detail.

The financial equivalent of preparing for life’s catastrophes is what financial nerds call estate planning.  I explain the gist of estate planning with a question to our pilot clients; will your spouse and children be okay if the unthinkable happens to you on your next trip?  It takes a lot of planning and preparation to answer this question with a confident “yes!” 

In this article I will explain the action steps and resources to help you confidently answer “yes” and have peace of mind knowing you’ve done everything you can to take care of your loved ones in case of a catastrophic life emergency.

Preparing for our own disabilities or death is akin to preparing for an engine loss right at rotation. It’s very unlikely that it will happen to you during your airline career. However, many pilots experience premature death and disability every year. But like the catastrophic emergency in the airplane, it’s hard to fully comprehend that it might happen to you at any moment. 

I recently returned from a family vacation in Edisto Beach, SC. The water was very rough with strong winds and currents. I shared with my kids about rip currents and what to do in case they thought they were in one. Tragically, when we returned from our trip, I noticed an article about two parents drowning in a rip tide while their six children were on the beach in Stuart Beach, FL.  Sadly, their children tried to yell instructions to the parents while dialing 911 from the beach.  It’s hard to comprehend this devastating family tragedy. I’m sure the parents woke up that morning and thought, like the rest of us, those tragic things only happen to other people. Therefore they may not have been fully prepared for this unimaginable scenario. 

Can you imagine the estate planning that needs to be considered when both parents with six children pass away? Who will take care of the children- aka guardianship? Who will take care of the financial needs of the children? Especially if they are minors. These are questions many of us need to address and prepare for. 

While we can rationally acknowledge that we will all die someday, we can't imagine our own deaths.  In fact, it may be our brain’s biological tendency to protect us. In a research study conducted by Bar Ilan University in Israel, Yair Dor-Ziderman explains; “The brain does not accept that death is related to us...We have this primal mechanism that means when the brain gets information that links self to death, something tells us it’s not reliable, so we shouldn’t believe it.”

“...The moment you have this ability to look into your own future, you realize that at some point you’re going to die and there’s nothing you can do about it,” said Dor-Ziderman. “That goes against the grain of our whole biology, which is helping us to stay alive.”

I probably should have prefaced that section with the same warning in the article I quoted; “Warning: this story is about death.  You may want to click away now.” 

However, as I mentioned in the first sentence of this article, the very reason you are so valuable as a professional pilot is because it is your job to prepare for scenarios that we believe probably will not happen to us. And in the airplane, the chances are in our favor that they never will happen. On the other hand, we’re all gonna die...someday! I know you’re inspired now, right? 

Now that you know why it’s so difficult to get around to accomplishing estate planning for your family, it’s time to do some of that pilot stuff and get it done! Let’s start with the question:

Will your spouse and children be okay if the unthinkable happens to you on your next trip?

Here are the essential steps to prepare for your potential disability and/or untimely death:  

1. Do you have the essential estate planning legal documents?

Estate planning attorneys recommend that we all have the following documents at the ready:

  • Power of attorney; financial and healthcare
  • Last Will and Testament
  • Beneficiary designations
  • Living Will
  • Life insurance policies
  • Titles and property deeds
  • Living Trust – may or may not be required, depending on circumstances. 

2. Ensure the loss of your income will be replaced by savings and life insurance.

3. Does your spouse know where to find essential documents listed above?

  • Take inventory and make sure everyone knows where to find these documents and passwords.  Review the contents and location occasionally.

4. Does your spouse have access to cash, funding to pay bills in your absence?

  • Our experience was that financial account transfers and life insurance payouts can take some time.  Be sure to have access to several months of cash to keep the household going while waiting for access to other assets.

5. Digital logins and passwords

  • This deserves its own category now.  Consider using a password manager for information security of passwords plus the ease of sharing with your spouse. 

Click here for a PDF version of an estate planning checklist from Freewill.com.

Great resources to help get with estate planning

•    Great website: Getyourshittogether.org:  https://getyourshittogether.org/

I almost always refer to this website to help people.  Not just because the name of the website is awesome! Founder and author of “What Matters Most”, Chanel Reynolds, experienced the premature death of her husband at a very young age.

From her website, “I am immensely proud of the book and grateful for the opportunity to tell the whole story of what happened, what I wish I’d done and what you can do when life goes sideways and what can help before and after the shit hits the fan...”

Another excerpt from the website: “Will you be prepared if life knocks you sideways?

Get your family protected with the critical ‘What-if’ answers like wills, power of attorney, healthcare directives, digital details and legal documents you need today and someday...”

•    Online website, TrustandWills.com, for great information and getting your estate documents completed:

There is still much debate about getting estate planning legal documents accomplished online.  I can’t give advice in this format, but I will say the online resources have vastly improved over recent years.  Using TrustandWills.com you can accomplish estate planning and get the support of an estate planning attorney in your state. 

From their website:   “Just like estate planning isn’t a one size fits all deal, neither is the help that our clients need. That’s why we're giving our members access to one-on-one time with licensed estate planning attorneys in their state. We want to offer products and estate planning tools that are inclusive for everyone, whether you have a multi-million dollar estate, or you’re just starting out planning for the future. Learn more about the benefits of Attorney Support.”

I have not personally used TrustandWills.com for my own estate planning documents, but I refer to this website regularly for great information, resources and learning. 

•    Workbook – “I’m Dead Now What?”

We often give this book as a gift for those who prefer a physical document(s) to refer to in case of emergencies.  This book, if completed correctly, covers all the nitty gritty details that a loved one will need to know in case of the unexpected death of a spouse.  The circumstances will be more difficult than we can comprehend, I believe we should not make it worse by not being organized. 

•    Airline specific financial podcast (and shameless plug), Pilot Money Guys Flight #12: I’m Dead, Now What?

This is part 2 of the Estate Planning Series "I'm Dead, Now What?" Three steps to make sure your estate is prepared. If you are unsure whether you have a good plan for the unexpected, this is the podcast for you...documents you need to have in place, why getting organized is important, and how beneficiaries and trusts go together to protect your family. Also see, Pilot Money Guys Flight #13: I’m Disabled, Now What?

 

Charles Mattingly, MBA, CFP®

CEO, Leading Edge Financial Planning

Hopefully, you found this article interesting and helpful. If you have any questions, I can be reached at 865-240-2292 or charlie@leadingedgeplanning.com. 

Also, please tell us if we can help you on your journey to financial peace and prosperity! Click here to sign up for our newsletter or click here to schedule some time to chat about your circumstances in more detail.  Also, check out our Pilot Money Guys podcast where we regularly discuss these types of financial topics along with some fun airline news updates and interesting guest interviews.  Even the editor and founder of Aero Crew News – Craig Pieper!


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.

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Education Kevin Pilot Money Guys Pilots Retirement Uncategorized Video

United Pilots: RHA & Healthy Fear of Healthcare Costs

Kevin Gormley, CFP®, CPA and Andy Christopher, CFA and Lead Financial Planner, discuss the intricacies of Health Reimbursement Accounts (HRA) and Retiree Health Accounts (RHA), exploring how to determine the optimal amount to save for future healthcare costs in retirement. They break down the advantages and limitations of these accounts, provide mental models for effective saving, and offer practical tips for United pilots.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.

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Charlie Education Kevin Pilot Money Guys Pilots Retirement

Southwest Airlines Market Based Cash Balance Plan

SWA Market-Based Cash Balance Pension Plan (MBCBP) Tips and Techniques

Below is an overview of the topics we cover in the video:

• Market-Based Cash Balance Plan basics

• Why do we love it? 

• How to max out the MBCBP 

• How to minimize your 401k spillover if you do not want more MBCBP. 

• How to use the potential MBCBP tax savings to contribute more Roth to your retirement savings.

Leading Edge is not affiliated with Southwest Airlines.  This is informational only.  Please refer to the Southwest Airlines Pilot contract for further information.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.

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Education High Income Kevin Pilot Money Guys Pilots

Live like a Multi-Millionaire Pilot: 7 Action Steps for Success

Live Like A Multi-Millionaire Pilot: 7 Action Steps For Success

Dreaming of a multimillion dollar nest egg? Kevin Gormely, CFP®, CPA shares 7 practical actions pilots can take to significantly increase their chances of achieving financial freedom. Learn valuable tips like maximizing retirement contributions, understanding healthcare costs, and creating a strategic savings plan. The video is inspired by the wisdom of Charlie Munger, who emphasizes consistent smart financial decisions over chasing high returns. Forget the "when I get rich" fantasies and start building your wealth today!

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.

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Charlie Education

Stop Budgeting and Change Your Spending Mindset!

Of all the so-called sophisticated investment strategies that exist, I’m not sure any are as effective as building a solid foundation for how we spend our money.  

The way we spend our money reflects our belief system and values. For example, if I value time together as a family and with kids, it may be a good use of my money to purchase a backyard pool. On the other hand, if I purchase items solely because I can afford it and it’s because that’s what other people are buying, then the items I purchase may make me more unhappy than if I hadn’t purchased them at all.  

This is the non-mathematical concept behind the economic concept of Opportunity Cost. Chances are, we are all familiar with the idea that if I spend my money or make an investment in one area there is always the opportunity cost that must be considered. For example, before I purchase the monster truck I’ve always wanted, I must consider the opportunity I missed by not putting my money in an investment or savings account that may be able to yield four or five percent.  After analyzing the opportunity cost, the monster truck is much more expensive than I may have originally thought. 

The often-overlooked part of Opportunity Cost is the emotional component of our spending. Every time we make a decision to spend or invest our money in something, there is an emotional cost that we must consider as well. That emotional cost comes in the form of more stress due to budgeting constraints. Possibly more discord in our marriage because one person is a saver, and the other is the spender.

What does this look like in real life?

As a financial adviser (and former airline pilot), I get the opportunity to learn many valuable lessons from all of our clients. Many of our client families have done exceedingly well at saving money not only in their retirement accounts but also in their checking, savings and other non-retirement accounts as well. When I ask them how they can save in excess of retirement needs they simply respond with comments like these:

•     “We only spend on things that we know are going to bring us tremendous value.”
•     “We just don’t need to spend that much in order to enjoy our friends and family.”
•     “We learned that spending money on items just because someone else is doing it actually makes us unhappy.”
•     “We spend lavishly on the things that bring our family joy and we skimp on everything else that doesn’t.”

What I’ve learned from these informal interviews is that it’s not always about a fancy budgeting system. It’s not about using your superhuman willpower to forgo buying cool stuff. In fact, buy the cool, fun stuff! But make sure you only buy the cool, fun stuff that truly aligns with your values.

So, how do we make great spending decisions considering the emotional and mathematical components of Opportunity Cost?

I came across a great article the other day by Joshua Becker at www.becomingminimalist.com. The article, “It’s better to drive an old car than be burdened by new debt”, described how the well-known economic principle of Opportunity Cost can help reduce overspending, allow someone to save more for the future and reduce stress around spending habits.

Definition of Opportunity Cost from the article:

“In other words, with every purchase we make, there are sacrifices we assume—alternatives that we must forgo. Every dollar spent on an item is one less dollar that could have been spent somewhere else. Of course, it is also a principle that carries weight beyond mere dollars. Because sometimes the purchases we make require us to forgo alternatives that are bigger than dollars and cents.” “In this scenario, I had to give up something potentially more valuable than dollars. I had to sacrifice calm, peace, financial freedom, and the satisfied feelings of knowing the car I drive is fully paid for.”

Below are five ways to help develop a healthy mindset for spending that will help you build wealth. But first, why might you consider taking these steps? What is the reward?

One of my favorite speakers, author and podcaster, Ed Mylett says to “choose your hard.” I love this idea because we get to choose to make it difficult now; workout, eat right, etc. Or we can ignore the hard decisions now and suffer the consequences later. When it comes to spending your hard-earned dollars, choose to do the hard things now so it won’t be really hard in the future when you wish you were less stressed about money, more prepared to retire early from the airlines or God-forbid, didn’t get that divorce due to financial stress.

Five ways that work against us and using the economic principle of Opportunity Cost to increase financial peace of mind and happiness:

1. Be on guard against “consumerism” and know how it clouds your judgment.

If billions of dollars were on the line for a corporation you owned, what lengths would you go to get people to buy your stuff? My answer would be, there are no limits.

I personally believe that businesses and corporations are wonderful, they solve problems and make our lives better. However, they are also very good at convincing me that I need that new truck to be truly happy. Seriously, I’m convinced!

Advertisements are powerfully designed to influence how you feel about yourself. One of the most effective tools for advertisers in our culture is to foster jealousy and envy among us. Our faulty definition of success allows marketers to pander to our weaknesses while they define our success. New car, new boat, bigger home, etc.

For example, I didn’t know that if I owned a Hyundai Santa Fe that I could take my family on a grand adventure in the mountains, and we would all feel like powerful Vikings! Conquer the Weekend | Vikings | The All-New 2024 SANTA FE | Hyundai (youtube.com)

No action required, just be aware that there is a battle being waged and no psychological weapon is off limits!

2. Comparison is the thief of joy! Aka Envy.

President Theodore Roosevelt said it best, “comparison is the thief of joy!” If you do not know what your own values are, you will default to those of your neighbor. We always compare the worst of what we know about ourselves to the best assumptions we make about others.

Take the time to discover your personal and family values. It takes intentionality and effort but remember to “choose your hard.”

3. Adopt the “A” in the WRAP Process.

Chip and Dan Heath wrote a great book called, “Decisive.” In the book they wrote about how we all have a faulty process for decision-making. In fact, in one part of the book they compared the decision-making of Fortune 500 CEOs to that of a teenager. Those in the airlines have witnessed that phenomenon firsthand!

They suggest a framework for decision-making called WRAP. WRAP is an acronym that stands for: Widen your options, Reality-Test Assumptions, Attain Distance Before Deciding (wait), Prepare to be Wrong.

When it comes to making spending decisions, the “A” in WRAP is very powerful. Attaining distance before deciding. Wait and see if you still want that mountain cabin in six months. Is it still on your mind? This concept is akin to delayed gratification. Remember layaway! I do. That concept is long gone and not even a consideration in purchasing decisions. I recommend googling layaway and adopting the concept to help with a healthy mindset for spending and building wealth!

4. Practice gratitude.

There’s power in gratitude. Every institution from science to religion produces mounds of evidence about the mental and physical health benefits of practicing gratitude. If you routinely write down what you’re grateful for you will soon realize what you really need to be fulfilled and happy may be right in front of you.

Check out this great article about gratitude from Harvard Health Publishing: Giving Thanks Can Make You Happier.

Excerpt from the article: “In positive psychology research, gratitude is strongly and consistently associated with greater happiness. Gratitude helps people feel more positive emotions, relish good experiences, improve their health, deal with adversity, and build strong relationships.”

5. Work towards contentment.

I intentionally used the word “work” in this title because I believe that’s what we must do to become content. It doesn’t happen automatically most of the time.

I also believe that contentment is a powerful state of mind that is the pinnacle of not just financial but success in life as well. Another concept I’ve learned is that just because a person has more money, they may not be more content.

The best definition I could find of contentment is very simple, contentment is the state of being happy and satisfied. It is the opposite feeling of, “if I only made more money, had a bigger house, a nicer car, etc.” Furthermore, contentment does not mean you must be happy with the status quo. It doesn’t mean that you can’t strive for a higher income and nicer things. In fact, it is normal and healthy to be content and not complacent at the same time.

Finally, budgeting expert Dave Ramsey says it best in his book, The Money Answer Book: Quick Answers to Your Everyday Financial Questions, author Dave Ramsey says that the most important financial principle is contentment.

“You can get out of debt, save money, and get on a budget, but until your intellect forces your emotions and your spirit to accept that STUFF does not equal CONTENTMENT, your finances will always feel stressed.”

P.S. Read the oldy-but-goody “Millionaire Next Door” and listen to and read anything by Ramit Sethi

~Charlie Mattingly

Hopefully, you found this article interesting and helpful.

If you have any questions, contact us at 865-240-2292 or Charlie@leadingedgeplanning.com

Also, please tell us if we can help you on your journey to financial peace and prosperity! Click here to sign up for our newsletter or click here to schedule some time to chat about your circumstances in more detail. Also, check out our Pilot Money Guys podcast where we regularly discuss these types of financial topics along with some fun airline news updates and interesting guest interviews. 

Disclaimer

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.