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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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Asia’s biggest economy & the world’s second largest economy is slowing, the Federal Reserve is about to kick off an interest rate tightening cycle, and China has just devalued its currency. Is this the repeat of Asian Financial crisis we saw in 1997? There are certainly parallels, but important differences as well. This time around, Asian economies have stronger current account balances, fiscal positions and foreign exchange reserves that provide a thicker buffer against turbulence. In addition, the exchange pegs that existed at that point have seen significant changes as well.

China’s Yuan devaluation comes on top of a steep slowdown in the world’s second-biggest and Asia’s biggest economy (Japan was No. 1 back in 1994) and a commodities slump that is hurting nations from Brazil to Australia, Malaysia and South Africa. Chinese companies now threaten to displace exports from Asian and emerging market competitors just as the U.S. Federal Reserve prepares to raise interest rates for the first time since the global financial crisis.

Analysts have also questioned China’s growth outlook although it posted economic growth of 7% year on-year in the second quarter, unchanged from the first quarter. They point out that Chinese growth cannot be sustained in the second half of the year given the exports decline and the drop in financial services’ contribution to the economy following the Chinese equity rout. They said a lot more may be needed to achieve this year’s target growth rate of 7% for the economy, given the weaker-than-expected macroeconomic data in recent weeks. To-date, Beijing has cut interest rates four times since November and also reduced the amount of money that banks need to keep with the central bank. Also, large infrastructure projects continue to have funding. However, the good news is that falling real estate prices in China, which were seen as a very big threat, have started to stabilize.

Let’s take a look at why is this happening? After the sub-prime crisis in the US and the steep fall in markets following the Lehman Brothers bust, the world has tried to solve the problem by throwing more and more money at the problem – money printed and lent out at near zero interest rates almost all over the developed world.

The US, after seven years of grappling with the problem, is still making only intermittent noises about raising interest rates; if the markets continue to crash and the global economy slows down, it may yet chicken out; Europe is keeping near zero rates in the hope growth will revive even as Greece is trashing about for survival; Japan kept the money-printing presses working overtime for more than a decade, but has, under Shinzo Abe, gone back to the same trick of monetary expansion.

The Chinese are unable to grapple with the new challenges that come with becoming the world’s second largest economy and key driver of demand. Two issues are paramount: one, there is huge financial repression, where Chinese savers are paid low returns and the cheap money raised from them has been invested uneconomically in unwanted infrastructure; and two, while financial repression helped fund investment-led growth over the last three decades, today it is constricting consumption – which is what China needs to boost internal growth.

India could use the opportunity provided by China’s problems to get its own growth engines revving. The tumult in China’s stock markets has turned into a blessing for Indian shareholders. Investors who poured into India in 2014 pulled back this year over concerns about taxes and the slow pace of reforms, preferring markets such as China, Taiwan and South Korea..

Now, fears about Chinese stock market volatility and Beijing’s interventions are overriding those concerns and driving them back to India. In this way India can have a much bigger pie of global capital which it can use to fund infrastructure requirements.

We find India a good alternative, given its improved macro data.

On the inflation front, a fall in both Consumer Price Index(CPI) and Wholesale Price Index (WPI) continued. CPI based inflation in July decreased to 3.78% from 5.4% in June 2015 due to a higher base last year. WPI fell for 9th consecutive month to -4.05% from -2.4% in the previous month. India is gaining from cheaper commodity prices. Cheap global crude and commodity prices mean that the imported component of inflation will also be lower. In fact, its impact is clearly visible in the wholesale price index, which has been showing negative growth for nine consecutive months now, mainly due to high deflation in minerals and mineral oil. India imported $139 billion worth crude and petroleum products in the 2015 fiscal, and as a rough rule of thumb, every $1 drop in crude prices results in a $1 billion drop in the country’s oil import bill. This will be good for reduction in India’s Current Account Deficit. India also imports $3 billion of copper and copper products. Also, lower input costs translate into higher profit margins for many Indian corporates. This will be a major respite for them. Due to depressed domestic demand, they had been struggling with their pricing power over the past few years, and were not able to pass on the increased cost.

With the government of India focusing on “Make in India,” this may be the time to provide impetus to manufacturing and even invite Chinese companies to set up a manufacturing base in India. However, this may require fast-tracking several pending economic reforms and easing the norms for doing business in India.

The Indian rupee has also been relatively stable over the last couple of years, vis a vis other emerging market currencies. This relative stability of the Indian currency, adds comfort to investors looking to invest in India.

Last but not the least, whilst most parts of the developed world are currently sitting on record low interest rates, India is one of the few countries which can potentially see interest rates getting cut, making it attractive for both companies to begin their investment cycle, as well as improve margins for corporate India going forward.

All in all, China’s pain could be India’s gain, but it won’t come easy. After all, there are no easy roads to success, doors only open to a combination of hard work and the constant desire to get better.

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Asset Allocation should also include global stocks and mutual funds as a diversification strategy is always better. Its always good to get the best of all global markets.

Break your home bias-page-001

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