RETIREMENT AND AIRPLANE OWNERSHIP

[AH-1 Cobra Pilot]

We have several accounts with a large firm, and a rep called me a while ago about planning.  I normally hang up on this type of caller, but since he already knew how much I had in all those accounts, I was unconcerned.  He asked the usual questions about budgeting, especially any expected large expenditures, so I told him the Mooney will need annuals and a new engine every 15 years.  That was a new one on him.

[donkaye]

1 hour ago, MIm20c said:

Retiring in your 30’s?  Guess I missed the boat as well.  Not sure if I’d be able to do that with family, home expenses, business expenses, etc.  Real estate has not had the exponential growth in my area and I could not imagine dipping into my investments this early with so many unknowns going forward. 

I guess I’ll just be the dumb bloke that continues to work hard so I can play hard. 

Real estate doesn't have to have explosive growth.  You just need to buy early enough in your life cycle to have time for the tenants to pay off any loan you might have on the property.  Then you have free and clear property and income for life.  Appreciation is a bonus.  In my area it was a big bonus, but when I bought that certainly wasn't a known quantity.  Luck does play an unknown part, so the sooner you buy the better to capture that luck if it's going to happen.  For me, except for net worth calculations, I don't care what the values of the property are because I don't intend to sell in my lifetime, just collect the income.

One other thing.  To be able to sleep comfortably at night, I'd keep the value of the toys including airplanes at 10% of your net worth.  This number can get very large by the time you're in your 60's and make it so that a new engine, any avionics you could possibly want, and all other costs associated with your airplane become so small as to not even be a consideration in your life.

[EricJ]

3 hours ago, Marauder said:

Glad to see others are struggling with this decision as well. Felt like I was on an island on this topic. It also doesn't help having a parent who outlived their money. The challenge I have been struggling with revolves around predicting the unknown. And as pilots, none of us want to fly into a cloud without knowing what is in it. Retirement planning is a bit like this. Health issues, market changes and the rest of the unknown factors all play a role in making "the" decision. 

For my wife and I, the topic of retirement breaks down into 3 topics;

1) Health care costs. Medical coverage costs for us to retire before age 65 are significant. Be curious to hear (without political rhetoric) what others are seeing for these costs.

2) Another challenge as Junkman points out is the financial health topic. I struggle with this a lot. I have been tracking all of my household costs for the past 30 years and have a pretty good handle on our expenses. We are debt free but certainly have costs associated with owning a home and an airplane. Knowing how much to have saved should be simple math, but it is hard to see your funds being burned off.

3) Where to retire? There are benefits of retiring in some states (be curious what others have learned about this). Also being close to where the kids are located is important, also dealing with a wife who hates "hot" and me who is tired of "cold" all play into this discussion.

What I would love to know is for those who retired before 65 and have some experience managing their finances for a period of time, what are the pros & cons of retiring early? 

Nobody knows how expensive the future is going to be, especially when it comes to health care costs.   Aging is expensive from that perspective.   Nobody knows how long they're going to live or what ailments or injuries they're going to incur along the way.    So detailed planning isn't possible, and you just need to do as well as you can and have some sort of contingency plan for when things get to a certain point.   Obviously non-health related expenses can pop up unexpectedly as well.   Inevitably for everybody this means having to stop flying someday.  If you're extremely lucky maybe it's the day you keel over at 97 years old, but for the vast majority of us it's unlikely to go that way.   So converting assets to cash as you don't need the asset any more but need the cash is definitely a realistic plan, and one of those assets is easily the airplane.   If you never reach that point, then kudos, but nobody knows how it's going to play out for themselves and at least having a plan is reasonably smart.

Pros and cons:   The obvious pro is freedom in how you use your time, and the stress reduction that goes with that.   Being able to travel more freely or just spend more time in other places is very nice. 

For me the main con is always just the usual uncertainty around what the future may bring and facing that without the additional source of income.   I've not had a salary or employer-provided benefits for a long time, though, so I don't miss those but I think many people might.  

All that said, a guy a few hangars down from me is well into his eighties and has an M20A.    A couple months ago he was changing his oil and telling me about the epic trip around the country he'd just done, visiting friends and family in Oklahoma, Nebraska, Iowa, Minnesota, etc.   3k miles popping around in an old Mooney and obviously enjoying the hell out of it.   I hope it goes that well for all of us.

[neilpilot]

17 minutes ago, EricJ said:

So converting assets to cash as you don't need the asset any more but need the cash is definitely a realistic plan, and one of those assets is easily the airplane.   If you never reach that point, then kudos, but nobody knows how it's going to play out for themselves and at least having a plan is reasonably smart.

I realize that everyone's finances are very different.  I own a relative inexpensive Mooney, and have a partner.  The value of my M20C is insignificant, at well under 1% of my assets.  I considered two aspects of my flying in retirement as way more important than the asset value of my M20C:

[1] The cost of my flying at the current rate constitutes 10-15% of our total post-tax expenses.  Will your retirement cash flow, including any asset depletion, support your flying considering those unknowns of longevity, health concerns, etc?

[2] My flying profile is dependent on moderate IFR currency and proficiency.  As I age, will I be safe in continuing to fly IFR?  

I'd be very cautious in converting too much assets into cash, assuming you plan to preserve capital for a long life and/or an estate.  Your cash is likely to, at best, almost keep up with inflation.

[Cruiser]

Retirement flying is very different than when it must compete with other things.

Of course there will always be schedules but I can leave a day early or stay an extra day if the weather doesn't suit me. 

IFR is still possible but I don't need hard to minimums pressure just clearing a layer or a few clouds will do.

Modern avionics makes it even easier. We are very near "auto land" even today.

Flying is great in retirement.

[peevee]

2 minutes ago, Cruiser said:

Retirement flying is very different than when it must compete with other things.

Of course there will always be schedules but I can leave a day early or stay an extra day if the weather doesn't suit me. 

IFR is still possible but I don't need hard to minimums pressure just clearing a layer or a few clouds will do.

Modern avionics makes it even easier. We are very near "auto land" even today.

Flying is great in retirement.

The cirrus I pretty much monitor the approach and kick the AP off when she yells minimums at me. So lazy.

[neilpilot]

1 minute ago, peevee said:

The cirrus I pretty much monitor the approach and kick the AP off when she yells minimums at me. So lazy.

In my ancient 65C, I can fly an LPV couple to our sTec 60-2 with GS capture vertical speed.  Probably not too different from your plastic flyer.  But at some point, your reflexes and mental capabilities may still degrade with age.  You just may be taking your afternoon nap when you breakout at 250'.  

[peevee]

3 minutes ago, neilpilot said:

In my ancient 65C, I can fly an LPV couple to our sTec 60-2 with GS capture vertical speed.  Probably not too different from your plastic flyer.  But at some point, your reflexes and mental capabilities may still degrade with age.  You just may be taking your afternoon nap when you breakout at 250'.  

Well, luckily she yells pretty loud.

[Wayne Cease]

1 hour ago, EricJ said:

All that said, a guy a few hangars down from me is well into his eighties and has an M20A.    A couple months ago he was changing his oil and telling me about the epic trip around the country he'd just done, visiting friends and family in Oklahoma, Nebraska, Iowa, Minnesota, etc.   3k miles popping around in an old Mooney and obviously enjoying the hell out of it.   I hope it goes that well for all of us.

There's a gentleman here in Atlanta that is 81 and flew the most Angel Flight missions for anyone in Georgia last year; 50 missions!  He owns and flies a 2001 SR22.

I sure do hope my health allows for that.

 

Edited January 11, 2018 by Wayne Cease

[carusoam]

Wholly cow...

This is a tough one to summarize.

1) I’m amazed regarding the point in life where some have left the full time working world.

2) I’m not too surprised that Mooney pilots have a long term, well thought out plan, covering the direction they are going...

3) Getting Capital expenses pared down is key...

4) Covering Insurance costs is a necessity...

5) Thanks to those who have chipped in the additional insight... business experience, investment experience. Government employee benefits, and the key words like Compounding interest...

6) The important part, is the open discussion.  Shared ideas.

7) Applying these ideas, to what you are doing... is what makes it works for you.

8) kind of like risk management on a full life scale.

9) Always have a plan B, and a plan C...  and a plan for 2020 and beyond...  

10) Always Get the free money in the company 401k. Get and Talk with your financial planner.

11) The oddity of Flying is... it takes so long to have the time and the money... there is always going to be a shortness in either of these commodities.

Thanks @bonal for opening the discussion.

Best regards,

-a-

[Marauder]

1 hour ago, peevee said:

The cirrus I pretty much monitor the approach and kick the AP off when she yells minimums at me. So lazy.

Aren't you supposed to be on the CAPA site? I wouldn't bother with these metal plane owners. 

[TTaylor]

Hopefully three years away from "retirement".  Just bought our retirement home on an airpark (UT47) last week, 1500 sq ft of shop and 2100 sq ft of hangar with a 45 ft hydraulic door. There is a house somewhere there as well.  Enough room that I hopefully wont drive my wife crazy .  I hope to keep a plane and a glider.   One way to keep the cost of the airplane down is to find some partners if you need to.  I can't imagine not flying, isn't that the reason to retire? .  I figure I can go away and be a crazy scientist/engineer inventor in retirement.  Also, in talks with an aircraft company to be a rep.  I know I will stay busy, just on my own schedule. I may have to go find a J in need of rebuilding as a project as well.

[jlunseth]

I tried, and scaled back, but people kept asking me to help with things and one thing led to another and I am pretty much full time.  I do enjoy having a place to come to and see colleagues.  What I missed in all the years of scrambling to make litigation schedules, was not being able to just stay home and pay attention to my house.  I am definitely not a "homebody," but there was not time at all for that for about 30 years.  I am able to do a little more of that now but not much yet.  

[Piloto]

I am 66 living on SS, Medicare, retirement fund, real state leasing. I bought three properties in Florida 30 years ago and they all now worth three times of what I invested and they are all paid off. On rent I get at least 8% annually on each. Try that in the stock market.

José 

[nels]

2 hours ago, TTaylor said:

Hopefully three years away from "retirement".  Just bought our retirement home on an airpark (UT47) last week, 1500 sq ft of shop and 2100 sq ft of hangar with a 45 ft hydraulic door. There is a house somewhere there as well.  Enough room that I hopefully wont drive my wife crazy .  I hope to keep a plane and a glider.   One way to keep the cost of the airplane down is to find some partners if you need to.  I can't imagine not flying, isn't that the reason to retire? .  I figure I can go away and be a crazy scientist/engineer inventor in retirement.  Also, in talks with an aircraft company to be a rep.  I know I will stay busy, just on my own schedule. I may have to go find a J in need of rebuilding as a project as well.

Good job on the airpark purchase. I've been kicking around buying into one in Arizona, New Mexico, Colorado or Florida. Kids are in Denver which puts Florida at the bottom of the list but geographically it makes more sense commuting from our home base in Cincinnati.

[neilpilot]

13 minutes ago, Piloto said:

I am 66 living on SS, Medicare, retirement fund, real state leasing. I bought three properties in Florida 30 years ago and they all now worth three times of what I invested and they are all paid off. On rent I get at least 8% annually on each. Try that in the stock market.

José 

Actually the stock market return over the past 10 years exceeded 10%. A 30 year investment in the Dow is worth 6 times what you would have invested.

[cliffy]

Hit the magic number 11 years ago and they showed me the door (thanks FAA). BUT I had 5 airlines and 7 corporations in my resume all of which were dead except the last one. Wasn't ready to retire (mentally) so I picked up a few odds and ends for a while. Luckily we planned and had the housing paid off so no mortgage. THAT is the key! Have seen too many of my friends with high house payments and (in many airline cases) 2 or 3 ex-wives to pay off when the day arrived!

Once you decide to retire it will take two years to really fall into the mode of every day being Saturday.

In our case we bought the Mooney to fly around the country to find a city to retire in. We kept it to travel while we were working. Now 16 years later we still travel but at our own leisure. This has allowed me to "retire" from IFR and the concomitant needs of an IPC and staying in what I feel is current status. 6 in 6 is NOT currency in my book. When I was doing 100 hrs / month, hard IFR 30-40/mo, 50+ ILSs/mo I was current. After 8 years of retirement and trying to do more than 6 on 6 I decided it wasn't worth the effort as I didn't have to be anywhere in than much of a hurry. It brings on a completely different reality to flying. I've had all the challenges of 200/ 1/2 and 600 RVR auto-lands that I want. Don't need the ego stroke any more. Been there, done that going back to 727s. I can see changing to a 170 or a short wing Piper even for long trips as even now, if I see something in front of me that I don't like we land and visit a new city for a day. Most of our flying is saying bye-bye to the tower and monitoring 121.5 for the rest of the flight. Looking out the window has its advantages. 

Being that I can do all my own maintenance that has helped keep expenses down considerably. 

Compile that with a few good investments and a wife who is VERY good at investment management and we can do just about what we want, when we want and our desires are very modest. We don't need to keep up with the Jones'. 

One BIG item to bear in mind as the years go forward is ones "cognitive response". It WILL decrease as the years progress. If you're watching you will see that you start to miss little things that you wouldn't have missed in your 50s once you pass about 68. It doesn't matter who you are, it will happen and needs to be tracked. How rapidly it progresses is determined by genes. Only YOU can decide when its time to hang it up. Just be aware it will happen. 

[Raptor05121]

17 hours ago, gsxrpilot said:

This thread is hitting pretty close to home...

I hear ya. I'm almost ready to retire myself

[Bob_Belville]

43 minutes ago, neilpilot said:

Actually the stock market return over the past 10 years exceeded 10%. A 30 year investment in the Dow is worth 6 times what you would have invested.

And you do not have to deal with renters! 

[Browncbr1]

24 minutes ago, Bob_Belville said:

And you do not have to deal with renters! 

But no depreciation on a K1!

[TTaylor]

1 hour ago, Piloto said:

I am 66 living on SS, Medicare, retirement fund, real state leasing. I bought three properties in Florida 30 years ago and they all now worth three times of what I invested and they are all paid off. On rent I get at least 8% annually on each. Try that in the stock market.

José 

I have a mix of investments including real estate.  I sleep better knowing if the market goes to pieces I still have rental income as well. 

[ArtVandelay]

But no depreciation on a K1!

But stock dividends and long term capital gains are taxed at lower rates, 0 if in the 15% tax bracket.

[Browncbr1]

16 minutes ago, teejayevans said:

But stock dividends and long term capital gains are taxed at lower rates, 0 if in the 15% tax bracket.

So are properties held longer than one year.  Don’t get me wrong.    I do play the dogs of the Dow every year, but I like cashflowing properties I can see, touch, and feel that I can write down depreciation to further lower taxable income.   

[Bravoman]

 I am turning 57, and as a trial lawyer I am trying far fewer cases, but really can’t imagine not practicing law or giving up my office.  I am blessed to have invested early and wisely, and don’t have to worry at all about keeping the lights on, but  have always enjoyed what I do and plan on continuing to do it till at least my mid 60s. I do take far more vacations where I used to take none, and plenty of long weekends.  As long as I can do that, I’m happy.  I have been self-employed for almost 30 years, so that probably contributes to my ability to be happy while continuing to work. 

[Yooper Rocketman]

9 hours ago, donkaye said:

 Luck does play an unknown part, so the sooner you buy the better to capture that luck if it's going to happen.

I was talking with the father-in-law of my sales manager after church a month ago and he had just heard my wife and I bought a Florida winter home.  He asked if I was getting any flack from employees or friends and I said not really.  He said anytime someone gives him flack about his Arizona home, telling him how "lucky" he is, he says "Yep, I'm lucky.  The harder I worked, the luckier I got".

Tom