In this episode, Charlie Mattingly, CFP® | MBA & Nolan Clark, CFP® | BS (Finance) dive into a surprising financial opportunity for Southwest Airlines (SWA) pilots: why you may be able to save more for retirement while on disability than while actively working. Using a real-life case study, the team breaks down how the latest contract changes and IRS rules for 2026 create unique windows for maximizing wealth.

From leveraging high-percentage 401(k) contributions from sick and vacation pay to navigating the tax advantages of Roth conversions during low-income years, this conversation aims to simplify the complex SWA pay stub. The goal is to help pilots turn an uncertain situation into a strategic advantage for their family’s long-term plan.

Key Topics Covered

• The 80% Contribution Strategy: How pilots on disability may be able to defer up to 80% of their sick and vacation TFP into their 401(k).
• Maximizing Roth Contributions: Why being in a lower marginal tax bracket while on non-taxable Loss of License may make “shoving in” as much Roth as possible a smart move.
• The NEC Opportunity: Understanding why the Non-Elective Contribution (NEC) must sometimes be paid as taxable income and how saving it in a brokerage account may bypass standard IRS limits.
• Case Study Review: Analyzing a pilot who maxed out their 401(k) and catch-up contributions (totaling $32,500) by April while on disability.
• The “Roth NEC” Switch: A bonus discussion on the risks and rewards of turning on Roth NEC elections and the importance of planning for the resulting tax withholding.
• Living on Loss of License: Why knowing your “number” and whether your family can live on disability benefits may determine your ability to stay ahead in retirement savings

Actionable Takeaways

• Review your current disability benefits to understand if your Loss of License is selected as tax-free, as this may change how your NEC is handled.
• Analyze your marginal tax bracket while on disability; you may find it’s the ideal time to convert traditional retirement funds to Roth.
• If you enable Roth NEC elections, manually calculate your estimated tax liability to avoid a “nasty tax surprise” at the end of the year.
• Reach out to the Leading Edge team at charlie@leadingedgeplanning.com or nolan@leadingedgeplanning.com for a personalized model of how your sick time, vacation, and disability benefits fit together.

Planning for an unexpected disability may be stressful, but taking these strategic actions today may lead to significantly higher savings for your future.

 

Timestamps

00:00 Introduction 

01:06 Inspirational case study         

01:31 3 points on how to save more while on disability

02:44 Bonus point: NEC (if loss of license benefit is non-taxable)

04:43 Case study deep dive – SWA pilot savings while on disability

08:40 Roth NEC potential opportunity

11:09 Case study wrap-up

11:34 What to considerations before a disability event

12:13 Scenario calculators

12:53 Wrap up and disclaimers 

 

For personalized guidance, visit Leading Edge Financial Planning or reach out to our team anytime.

Connect with Charlie Mattingly

charlie@leadingedgeplanning.com 
865-240-2292

Connect with Nolan Clark

nolan@leadingedgeplanning.com 
270-545-5880