Recently I listened to an interview with The Delta Captain Who Chartered His Own Retirement Flight. It cost Keith Rosenkranz a year’s salary or so to do it! You know this has to be a great story.
What’s amazing about this story, as the interviewers note, is how relatively boring his investing approach was. He’s not a crypto guru, he didn’t own a bunch of Chick-fil-As, and he isn’t a day trader. He did benefit from a well-timed Apple stock purchase and he took advantage of a unique opportunity to convert what remained from his stolen retirement into a Roth IRA.
But beyond that, he lived by a few simple financial principles.
He didn’t assume that because he’s a great pilot, he’s also a great investor. He sought wise financial counsel and took advice.
He saved and lived below his means. If he got a pay raise he put 50% of that raise towards retirement and the other 50% towards lifestyle. He remained in this First Officer house and resisted keeping up with the Joneses. Now he is the Joneses!
He did a great job and deserves all the credit in the world. But does this mean that if you do what he did, you’ll be in the position to spend upwards of $400,000 on your retirement flight and bring 112 of your family members and friends?
Not exactly, and Keith himself says that everyone’s situation is different and unique.
I’d like to add a few insights to his financial experience, based on the thousands of resources I have studied, my experiences with clients and prospects, and my own unique experience.
First, times are different now than they were then. I have a colleague who refers to the period of 1980 – 2000 as the Roaring Twenty. The stock market went to the moon during that time, and we may never see a 20-year period like that again. During this time I assume Keith built a formidable financial portfolio.
Second, taxes were historically low. If Keith is 65 now, he’s likely to make it under the wire and get to spend down his fortune without being crushed with taxes. And to the extent that his money is in Roth IRAs – which appears to be a large portion of his retirement – he has no tax burden at all! Well played, sir. But if you are deferring your taxes thinking that rates will be lower in the future, you’re in for a devastating surprise.
Third, I question the 4% rule, which was “invented” 30 years ago, in the peak of the Roaring Twenty.* The 4% rule says that you can live off 4% of your assets and not run out of money over 30 years.
A number can’t possibly be applied to all investors, given all the variables. Does everyone have the same amount of money at retirement, live in the same state and neighborhood with the same cost of living, have the same health status, the same life expectancy, the same budget, or the same number of kids or exes?
Besides that, while Dave Ramsey thinks the 4% rule is ridiculously constrictive and offers a more ridiculous 8%, I’d put the number more around 3% based on thoroughly documented research by Dr. Wade Pfau and others.
Last, while Captain Keith stuck with mutual funds and market-based instruments from what I could ascertain, I highly recommend using cash value life insurance not only as a diversification tool but as a foundational element of your portfolio.
“Becoming Your Own Banker” is a way of wresting control of your money from the banks – which are always making money off your money – and pocketing the benefits yourself. It’s how I bought a dream investment and retirement property for cash.
It’s how you can turn forever-taxed money (think Delta “spill cash,” where the company's 401(k) contribution exceeds the IRS limit and is paid out in after-tax dollars) into never-again-taxed money. It’s how you can access the cash in your account to fund life’s emergencies or other financial opportunities WHILE STILL ENJOYING UNINTERRUPTED, CONTINUOUS, COMPOUNDING GROWTH of the life insurance cash value. Read that sentence again and think about it!
It’s how you can provide for your own chronic care without having to pay for long term care insurance you hope never to need. Finally, it allows you to pass on enormous amounts of money to your heirs or charities tax-free, creating a financial legacy and giving you control from the grave.
In no way whatsoever am I criticizing anything Captain Rosenkranz did. He nailed it. I am adding some insights that I believe will be critical in the future and will increase your odds of ending up with this man’s level of financial achievement.
We cannot count on the stock market dependably delivering the gains we hope for. In fact, not only can’t assume a 7% average return, a 7% average return doesn’t even mean you make 7%! Are you aware of the faulty math?
Most of us assume that markets will crash again, maybe multiple times, before we die. But we have zero control over when those crashes occur. The market delivered leading up to Keith Rosenkranz's retirement. What if the crash happens when you’re 64, though no fault of your own? Will your charter flight to your favorite island still be possible? What if you experience a catastrophic illness along the way?
Wouldn’t it be great to have certainty?
July 2024 – The Captain who chartered his own retirement flight (Pdf Download)
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Thank you for your time and for taking control of your financial future!
Sincerely,
Sam Arieff
Arieff Consulting
(904) 478-0102
* Dividends are not guaranteed. However, companies we use have paid dividends without fair for more than 100 consecutive years.
Disclaimer: This newsletter represents the opinion of Arieff Consulting, Inc, and does not constitute financial, tax, or legal advice.