*Long Post Alert*
Hey guys,
Background: 31 years old, married (wife is 29), with a kid on the way. No debt (other than mortgage), decent emergency fund.
I’m an airline pilot – will make about ~230K this year, but my earning potential is going to grow exponentially over the next 10 years. Next year should be ~275K+. Potential in 6-8 years (depending on when I upgrade to Captain) is $450K+ (I frequently fly with Captains making $700K+, it just depends on how much I want to work). My wife makes ~120K a year with lots of potential growth. What happens when the kid comes, we don’t know (she may not work for a while).
I have a fantastic 401K in which my employer contributes a 16% Non-Elective Contribution. This goes to 18% in 2026. I contribute 12% myself. My 401K is maxed each year (70K). The company continues to contribute that 16% to my paycheck after the 401K is maxed. I have company paid basic life insurance ($800K) and I am also enrolled in the Optional Life for another $150K. So $950K total. Obviously, this isn’t enough (more on this later). I’ve got fantastic disability and health insurance (I pay NO premiums for my health insurance).
Financial Planner: I hired a financial planner about ~6 months ago. I knew I needed some Term Life Insurance. I was also thinking my wife and I should both be doing a backdoor Roth IRA ($7K each for a total of $14K). I would then put some money into a Vanguard VTSAX account.
However, the FP suggested doing Term Life and then a Variable Universal Life Insurance policy. We also did a PCRA so he could adjust my 401K as needed. Against my better judgment I signed up. We’ve been contributing for about 4 months. Yearly premium for my wife and I is ~$14K/year. I’m very torn on whether or not this policy is truly in my best interest. The surrender value is “the accumulation value less any unpaid policy charges which we assess against accumulation value, less any outstanding policy loan and any unpaid policy loan interest, and less the surrender charge.” I have NO idea what any of that means.
So now I am wondering if I should just start managing this stuff on my own, cancel the Term Life and Variable Universal Life, and manage the 401K on my own again (I was just using a Target Date Fund).
At this point, I have little trust in financial advisors.
Questions: First off, I’m just a dumb pilot. I’ve read various financial books over the years (The Intelligent Investor, Millionaire Next Door, Dave Ramsey, etc). Most of this stuff my eyes start to glaze over. It also seems like many folks make this exceedingly complicated, which is partly why I hired a financial advisor. I’ve read A LOT on the Personal Finance Reddit page as well as Bogleheads. It honestly just makes me more confused.
401K: I have read a ton about Traditional 401K vs Roth 401K. This is the topic that makes my head explode. The more I read, the more confused I am. Obviously the 16% NEC I get from my company is all pre-tax (Traditional). I've always done my 12% contribution as Roth 401K. I've seen arguments for doing all Traditional (pre-tax). I have NO idea what my tax situation will look like in retirement. It seems like a safe bet is to keep doing my contributions as Roth since my employer's contribution is Traditional. This will at least give me some sort of split and not have all my eggs in one basket.
Term Life: I’m not exactly sure how much I need, because my income is going to rise drastically. Do I buy Term Life based on my potential income in 10 years or what I am making now? I’ve tried various calculators – each one is a bit different. I’ve read the Wiki pages as well. Still not sure.
Does $1M for my wife and $4M for me make sense? 15 years? 20 years? 30 years? Remember I already have about $950K in Life Insurance through my company. My wife gets practically nothing through her company.
Investment Strategy:
Here are my basic thoughts on my strategy going forward:
Thanks for reading this long message.
Hey guys,
Background: 31 years old, married (wife is 29), with a kid on the way. No debt (other than mortgage), decent emergency fund.
I’m an airline pilot – will make about ~230K this year, but my earning potential is going to grow exponentially over the next 10 years. Next year should be ~275K+. Potential in 6-8 years (depending on when I upgrade to Captain) is $450K+ (I frequently fly with Captains making $700K+, it just depends on how much I want to work). My wife makes ~120K a year with lots of potential growth. What happens when the kid comes, we don’t know (she may not work for a while).
I have a fantastic 401K in which my employer contributes a 16% Non-Elective Contribution. This goes to 18% in 2026. I contribute 12% myself. My 401K is maxed each year (70K). The company continues to contribute that 16% to my paycheck after the 401K is maxed. I have company paid basic life insurance ($800K) and I am also enrolled in the Optional Life for another $150K. So $950K total. Obviously, this isn’t enough (more on this later). I’ve got fantastic disability and health insurance (I pay NO premiums for my health insurance).
Financial Planner: I hired a financial planner about ~6 months ago. I knew I needed some Term Life Insurance. I was also thinking my wife and I should both be doing a backdoor Roth IRA ($7K each for a total of $14K). I would then put some money into a Vanguard VTSAX account.
However, the FP suggested doing Term Life and then a Variable Universal Life Insurance policy. We also did a PCRA so he could adjust my 401K as needed. Against my better judgment I signed up. We’ve been contributing for about 4 months. Yearly premium for my wife and I is ~$14K/year. I’m very torn on whether or not this policy is truly in my best interest. The surrender value is “the accumulation value less any unpaid policy charges which we assess against accumulation value, less any outstanding policy loan and any unpaid policy loan interest, and less the surrender charge.” I have NO idea what any of that means.
So now I am wondering if I should just start managing this stuff on my own, cancel the Term Life and Variable Universal Life, and manage the 401K on my own again (I was just using a Target Date Fund).
At this point, I have little trust in financial advisors.
Questions: First off, I’m just a dumb pilot. I’ve read various financial books over the years (The Intelligent Investor, Millionaire Next Door, Dave Ramsey, etc). Most of this stuff my eyes start to glaze over. It also seems like many folks make this exceedingly complicated, which is partly why I hired a financial advisor. I’ve read A LOT on the Personal Finance Reddit page as well as Bogleheads. It honestly just makes me more confused.
401K: I have read a ton about Traditional 401K vs Roth 401K. This is the topic that makes my head explode. The more I read, the more confused I am. Obviously the 16% NEC I get from my company is all pre-tax (Traditional). I've always done my 12% contribution as Roth 401K. I've seen arguments for doing all Traditional (pre-tax). I have NO idea what my tax situation will look like in retirement. It seems like a safe bet is to keep doing my contributions as Roth since my employer's contribution is Traditional. This will at least give me some sort of split and not have all my eggs in one basket.
Term Life: I’m not exactly sure how much I need, because my income is going to rise drastically. Do I buy Term Life based on my potential income in 10 years or what I am making now? I’ve tried various calculators – each one is a bit different. I’ve read the Wiki pages as well. Still not sure.
Does $1M for my wife and $4M for me make sense? 15 years? 20 years? 30 years? Remember I already have about $950K in Life Insurance through my company. My wife gets practically nothing through her company.
Investment Strategy:
Here are my basic thoughts on my strategy going forward:
- Stop using the financial advisor
Cancel the term life and variable universal life
Continue to max out my 401K ($70K/year)
Wife’s 401K – contribute to company match which is $6K/year (wow that’s horrible!)
Setup a Vanguard Backdoor Roth IRA for my wife and I – max this out each year ($14K/year)
Anything left over gets invested into Vanguard VTSAX
Thanks for reading this long message.
Statistics: Posted by CC268 — Tue Dec 10, 2024 9:37 am — Replies 0 — Views 45