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Retirement Planning > Retirement Investing

A Flight Attendant's Dilemma: Take a Pay Cut or Retire Early?

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The U.S. airline industry has been among the sectors hit hardest by the COVID-19 pandemic as most Americans stopped flying for business and leisure as soon as it started, sending airline stocks tumbling in March.

As a result, flight attendants, pilots and other employees throughout the industry — including a client of Alexandria, Virginia-based RIA firm Campbell Wealth Management who works as a flight attendant — were urged by the airlines to take voluntary buyouts or extended time-off or early retirement packages.

Although U.S. airlines that accepted federal aid under the Coronavirus Aid, Relief and Economic Security (CARES) Act agreed to not cut jobs or salaries of employees until Oct. 1, it is widely expected they will slash jobs and pay after that date.

The situation has directly affected Campbell Wealth Management’s client, a single woman who has “worked for the airline industry for decades as a flight attendant” and wasn’t planning to retire for a few years, according to Kelly Campbell, CEO of the firm, whose clients have an average of $1.5 million to $2 million in wealth being managed, he said.

The flight attended contacted a Campbell Wealth advisor in early April and said the airline she works for offered her the choice of a voluntary early retirement package or to continue working for lower pay, at least for the time being, and that created a dilemma for her, he told ThinkAdvisor, noting that, for one thing, “she’s not quite ready to retire.”

But she had one major concern if she continued flying: She was worried about the “danger out there” from potentially contracting the coronavirus, he said, adding: “Several of her coworkers actually tested positive for COVID and two of them actually passed away.”

The client was also in the at-risk demographic from a health standpoint due to her age, he pointed out, adding: “There’s a lot of competing issues” that she had to weigh. On top of all that, the airline didn’t give her much time to make a decision on what she wanted to do.

As the firm’s advisors do with every client, the advisor who worked directly with the flight attendant went over a financial plan with her, Campbell noted. The main issue for every client planning retirement to consider is that if they retire early, they will have less money in their retirement accounts and would need more money to live off of in retirement, he pointed out.

The advisor reviewed this client’s options with her and how it would affect her retirement planning and overall investment portfolio. “From a portfolio standpoint, we were able to really do a few different things,” Campbell said, explaining: “One is just come up with a much better portfolio strategy because she really had no portfolio strategy.”

The advisor and the client were both optimistic that the airlines would be back to business as usual eventually, he said, adding the client opted to go on a three-month furlough and get paid just “a fraction” of what she was making.

“The biggest thing that I think helped her was having that financial plan and someone to go through it with her and talk to her about it,” he said, adding: “She’s in pretty good shape monetarily” and “did have some emergency funds that she was able to tap into.”

Her situation has not yet been resolved and this is a “planning conversation that  continues to be discussed as new developments emerge,” he said.

The Troubled Transit Manager

Campbell also pointed to a client of his firm who works in management for a local public transit agency that was also affected by the pandemic. She’s several years away from retirement and recently widowed.

“The transit system was down 90% on ridership,” he noted.

For this client, it was “another situation where you’ve got different things hitting you at once,” he said.

Unlike the flight attendant, this client didn’t need to fear contracting the virus at work because the transit agency was letting her work from home, he pointed out.

Still, “she’s nervous about the market” and had concerns about how this pandemic might jeopardize her retirement planning, he said. Although her pay was not cut and “I don’t think” the possibility of her losing her job was an issue, Campbell said, he was quick to add: “I think it’s still a concern” for her because there is no way to know for sure what the future will bring.” What happens if ridership remains way down even when things return to normal?

What eased this client’s concerns was that, just like the flight attendant, she will be getting a pension to go with her Social Security when she retires, he said, noting that discussing her retirement and overall financial plan with the advisor helped alleviate her fears.

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