Pilot Retirement Plan Survey Reveals Investing Behavior

Robert Warner, Managing Director, Cleary Gull

A recent survey we conducted of pilots on retirement planning confirms what I have found to be true over the 15 years I have worked with pilots. The survey results showed that pilots are focused on saving, engaged in planning to reach their retirement goals and looking to take full advantage of all their retirement plans have to offer. Like other well compensated, more sophisticated professionals, many pilots are good at putting money aside for retirement, allocating their assets and rebalancing their portfolios.

Here are some of the survey highlights:

80% of the pilots surveyed contribute to their retirement plan
Most are contributing a sizable percent of their income to their plans:

o 12% contribute 20% or more
o 41% contribute 11 – 20%
o 20% contribute 6 – 10%
o 18% contribute 0 – 5%

74% of the pilots surveyed have a financial plan and one third of those plans were prepared by an advisor
19% rebalance quarterly, 23% rebalance annually and 40% rebalance on an ad hoc basis
24% of the pilots surveyed already work with an advisor and 64% aspire to work with an advisor to help meet retirement goals
75% are confident in their retirement planning
60% use the brokerage window their plan offers

Pilot Retirement Plan Advantage: Brokerage Window

Many of the 401k retirement plans serving pilots offer a brokerage window and pilots take advantage of that feature - our survey indicated that 60% of pilots used the brokerage window feature in their retirement plan. In comparison, only 15.5% of all retirement plans offer a brokerage window feature and only 2% of plan assets are invested through the brokerage window.1 Retirement plans offered to pilots, like other well compensated, sophisticated professionals, offer this feature because these populations are generally more actively engaged in retirement planning. Based on the results of the survey, it appears many pilots understand that using the brokerage window option can be a good way to maximize asset class diversification, integrate the highest quality funds into their portfolio, and potentially augment their retirement accumulation and income goals.

Beyond the Plan's Core Options

Typical retirement plans offer between 10 - 20 different investment options, usually a solid array of traditional stock and bond funds. The question to ask is whether you can meet your investment or retirement objectives with just the core options. What we have not seen in the plans are complements to these funds, such as alternative investments which are typically not correlated to the stock or bond markets -- commodity exposure, real estate, emerging markets or international bonds. With investment experts calling for below average returns for the next decade, having exposure to non- correlated asset classes could be an advantage. Taking advantage of the brokerage window can give plan participants more options and more control.

A Plan + Brokerage Window Access = Retirement Planning Choices

Experience has shown me that when planning for retirement, the single most important thing to have is an overriding investment strategy and plan in place. The plan should take into consideration the different goals of accumulation during the pre-retirement phase, and then in retirement, a strategy that considers how to deliver a steady retirement income stream. Having a plan you can follow helps you stay on track for your retirement and limits short-term or emotional decisions based on the latest investment fad or hottest fund of the moment. The bottom line is the more investment choices your plan can offer you, the more advantages you have when building your strategy and plan. For this reason we encourage pilots, and others, to take full advantage of what the brokerage window in their plan has to offer them.

For more information on the survey click here, Cleary Gull Pilot Survey.

1. 401khelpcenter.com

Cleary Gull (www.clearygull.com) is an employee-owned firm headquartered in Milwaukee, Wisconsin providing specialized financial services through two operating divisions: Investment Banking and Investment Management Services. Cleary Gull is a registered investment advisor guiding client assets totaling $2.6 billion as of 12/31/13 with a focus on high net worth individuals, pilots and health care organizations.

Certain statements made in this article referring to pilots were based solely on the results of the survey and should not be construed as attributable to all pilots in the airline industry. The survey was not randomly selected, the sample size may not be large enough to produce a statistically meaningful conclusion, and the survey was not designed or intended to reveal conclusions about airline pilots in general. The survey was mailed to 4,500 legacy United and legacy Continental airline pilots that have a 401k full brokerage window, and none of which are clients of Cleary Gull. Of these pilots, 182 completed the survey.

The information contained herein is for informational purposes only and is not reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular fund, security or strategy. Certain investments, including “alternative” investments, may involve a substantial degree of risk. Diversification does not ensure against loss. Past performance does not guarantee future results and, as with any investment, there is a possibility of loss of principal.

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