When discussing retirement planning and the transition into retirement, one of the primary considerations is the retirement timeline. This refers to the age at which individuals aim to fully or partially retire and marks the first step in the planning process. The subsequent challenge lies in successfully reaching this transition point.
I once asked a former commercial pilot about how a plane initiates its descent and executes a successful landing. This whole process is analogous to the journey retirees face as they “land the plane” into retirement. As the pilot discussed various concepts such as timing the descent, communicating with air traffic control, and managing disruptions, a common theme emerged—many of these in-flight decisions rely on time and fuel.
You see, every flight undergoes a pre-departure flight plan where the pilot and crew discuss the route, weather conditions, and ultimately determine the required fuel. Unlike filling up a car’s tank to the brim, airlines, being businesses, are concerned about costs, with fuel expenses being one of their largest expenditures. Carrying excessive fuel on a flight results in less efficiency. A heavier plane requires more thrust to climb to higher altitudes where the air is thinner. Inability to climb efficiently leads to increased fuel consumption while operating in denser airspace. Conversely, inadequate fuel presents obvious consequences. Hence, pilots and airlines strive for safe and efficient flights.
This concept closely aligns with the retirement transition. Landing the plane successfully in retirement involves aspiring for a secure and efficient transition. Whether you realize it or not, you have created a flight plan through the savings and investments you have made for retirement. These financial resources serve as your retirement fuel. By investing and potentially experiencing growth on these assets, you have attained higher altitudes, enhancing your fuel efficiency. Judging by this perspective, your flight has progressed quite well. Now, it is time for the descent.
A pilot prepares for descent using a general rule: it takes roughly 3 miles to descend 1000 feet. For a flight cruising at 30,000 feet, the descent commences approximately 90-100 miles before reaching the destination. What if the pilot deviated from the plan and descended earlier to enjoy some scenic views at a lower altitude? As we have learned about planes, descending into lower altitudes means traversing denser air and taking longer to reach the destination—inefficient by design.
But what if a retiree does the same? Knowing that the retirement runway is close, why not lower your investment risk and descend earlier? After all, there’s no need to rush, right? However, this assumption presumes that everything ahead will proceed smoothly. It may seem reasonable to decrease risk and approach retirement cautiously, but what if the conditions around the runway are different than expected? What if healthcare costs surpass your initial estimates? Or what if inflation rises more rapidly than anticipated? It would have been beneficial to have a larger reserve for such unforeseen circumstances. Just ask a pilot—they’ll advise you to “prepare for the unexpected.”
What if instead you cruise at higher altitudes, where the air is clear. If your descent occurs too swiftly, you risk crash-landing. It doesn’t matter how clear the runway may be, you can’t control a 250-ton bullet.
Landing the plane safely and efficiently is paramount. We can’t guarantee there won’t be disruptions during your descent. In fact, let’s assume there will be. Yet, there are greater risks in descending too slowly or too quickly.
So, how can you accomplish a successful landing? Well, the final leg of your flight plan must achieve two objectives: income predictability and growth opportunity. If we continue discussing investment returns when the runway is in sight, something is missing. Returns do not necessarily translate into retirement income. On the other hand, if we secure a reliable income stream but lack growth potential, we better hope for blue skies ahead.
Income and growth—in that order—are what every retiree needs when landing the plane for retirement. Once you secure these elements, you will be better prepared for whatever challenges may come your way.
