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Retirement 1Retirement is usually something that is not considered by most of us till we are nearing it, so naturally we do not plan for it, until it is probably too late. This general ignorance or lack of attention to retirement planning can have far reaching consequences.

Retirement planning in the simplest sense means preparing for life after the tenure of paid work ends.  This does not only include the financial aspect, but other aspects such as what to do during retirement, the lifestyle choices that one can take and what dreams one might want to pursue during the remainder of the years.

While the concept of Retirement Planning applies to pilots just as it does to other individuals, there are certain unique points that are exclusive to retirement planning for commercial pilots. These unique points are crucial while developing a retirement plan for a pilot.

Firstly, under the current DGCA rules, the retirement age in India has been pushed up to 65. This is an entire 5 years longer than the mandated retirement age in most other industries. This translates to more income earning years, probably at the highest salary slab of the industry, since usually pilots around this age are most likely to have their designations as Captain. This extra income earning period is crucial in formulating and ironing out the retirement plan before the pilot ultimately retires. The significant income flowing could be the difference between living a compromised and a fulfilling retirement.

One of the most important things a commercial pilot has to consider is Lifestyle Inflation. Because commercial pilots have one of the best salary packages amongst all industries, they tend to have more lavish lifestyles. And they are comfortably able to match up the ever increasing expenses that come alongside their lifestyle choices. But on retirement, the salary stops. Yet expenses continue to stay, with inflation only adding to it. But more significantly no one would want to compromise on their lifestyle they have become accustomed to. As such it becomes imperative to plan much ahead so that lifestyle compromises don’t become the norm during your golden years.

Just to drive home the impact of inflation, let’s take an example. Consider a pilot Mr. A, currently 30 years of age and has a monthly expenditure of Rs 12 lakhs every year (not a very high amount, from what we hear from our pilot clientele). Assuming he will retire at age 65 and taking an average of 8% lifestyle inflation till retirement,  the same Rs. 12 lakhs expenditure will inflate to approx Rs. 1.75 crores. In other words, to maintain the lifestyle that costs Rs 12 lakhs as of today, Mr. A would require Rs 1.75 Crores annually to maintain the same expenditure choices, forget upgrading!

Furthermore, pilots are used to having extremely busy schedules. So when retirement hits, they are unprepared to handle the ample time in hand. Hence they always look for options to keep themselves engaged. This could mean, taking long leisure trips or finding, researching on and investing lump sums in “exciting investment avenues”, committing money to be part of a start up or just following their long drawn passions or enrol at the local flying clubs just so that they can regularly indulge their lifetime love of flying. All this comes at hefty financial expenditures.

All of the above means that Pilots would need to plan and develop customized retirement plans for themselves to ensure a smooth flight during retirement.

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blog picPilots are probably one of the most stretched professionals when it comes to time management. The constant flux in schedules is always a hassle. Even when you are not flying you are on standby which means that you are still on your toes. The weekly off standard in the Indian Aviation industry is one day every week. And money matters are usually the last thing you want to tackle on such a day. Life is already stressful enough as it is!

By most industry standards, Indian pilots take away a very handsome salary. The more experienced you are, the more significant are your financial takeaways. But it is not all rosy all the time.

With the high earning potential at a pilot’s disposal, it becomes vital to channelize these earnings to fulfil a whole set of commitments and dreams that are unique to a pilot’s life, both during their career and post retirement.

But what are some of these unique problems that only pilots face? Pilots for once, have to always be medically fit. And for good reason! Priority to healthcare hence takes prime importance. Now a pilot reading this might say, oh we are covered by our company, so I don’t have to worry above covering any financial cost regarding my health. But if you really think about it, is that actually enough?

Another thing which pilots always need to be on top of is upgrading their skill sets. Not so much a unique item, but very important nonetheless. And it does not come cheap. Preparing for it well in advance can be far more beneficial than just scrapping up every penny at the last moment to fund for this expense.

One another issue is the state of aviation industry and opportunities. The last few years have clearly demonstrated that problems are plenty in the Indian aviation sectors. For e.g.  Airlines have closed down, (leading large time periods of unemployment), pay can be delayed significantly or indefinitely. All these lead to great financial complications for pilots and their families. Preparing for such circumstances is prudent and must at all times be actively considered.

Probably the biggest challenge a pilot will face is retirement! With no more significant inflows, you are faced with a very real possibility of compromising on your lifestyle just because of a lack of proper planning and this change is not easy! This struggle can be easily avoided with some proper and sustained guidance throughout the earning years so that you can live through your golden years in comfort all the while fulfilling your passions.

Pilots are well aware of the importance of planning. Every flight involves hours of preparation beforehand so that you can take the best possible decisions in terms of route, landing approach and understanding weather patterns of the areas you will fly through, just to mention a few!

As a fellow professional with a prime importance towards professional planning, it would be definitley worth your time for us to meet and discuss how to enrich your life!

Till then..Happy flying!

 

 

 

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WITH LIQUIDITY across the globe driving the prices of all assets upwards, and salaries and business profits in India poised for significant gains; all investors seem to be seeking the next big opportunity for huge gains. With stocks, commodities and real estate at record highs, investors are looking at the option of exotic alternative investments. The range of exotic investments are very large ranging from investing in wine, whiskies, champagnes, art, sculptures, antiques, coins, stamps, films and race horses, amongst other items.

Whilst each of these sounds like an exciting opportunity, the fundamental tenets of investing need to be kept in mind before making investment decisions in these products. In fact, sticking to the basics is probably even more important whilst investing in some of these exotic products.

  • Investing toward primary goals like education for children, retirement, home purchases and medical pro-visions need to be made into assets that have clearly verifiable track records so that you do not compromise any of these goals by allocating funds into these asset categories. Invest only a small portion of your wealth into this category if you finally decide to.
  • Being a connoisseur of wine or whisky, or purchasing paintings for putting up on the walls of your home does not make you an expert on the subject or give you the ability to make a good investment in the same. Just like driving a car to work everyday does not equip you to participate in a Formula one race.

If you are willing to buy a painting anyways because you really like it, go ahead and do the same but don’t believe that it is an investment that is likely to appreciate significantly.

You will need the help of an expert if you wish to invest in this category. Look for a clear track record of the person making the investment recommendation and do not be in a hurry to close the deal if you have not done adequate due diligence. You will do well to remember that investors in exotic investments burnt their fingers in the last bull run of 2007.

■ Investments in this space can take an extremely long time to deliver returns so you need to be extremely patient. During a downturn, these investments could lose significant values so you need to have the financial strength to hold during a downturn. Also remember that pricing of these assets can be very subjective, so it may not be easy for you to value your portfolio accurately.

■ Do not buy these products just because it makes great conversation at the next wedding party that you attend. If you are convinced that you have done enough research and there is a sound track record of the manager of these investments, only then go ahead.

Don’t get carried away by the optimism in the air when you discuss these options with your wealth manager.

This article was written by Vishal Dhawan, CFPCM and appeared in the Asian Age  on 25th  Deccember 2010 .

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