Our lives here in the good ole USA are as varied as ice cream flavors nowadays (think Ben & Jerry’s Marshmallow Sky or the tried and true Cherry Garcia). We all enjoy and prefer different hobbies, places to live, and professions. We love different people, drive different cars, and enjoy different vacations and recreations; this variety helps make life exciting. Thank God we are different; this would be a pretty dull world and nowhere close to the innovative planet we live on today if we all enjoyed the same things. Some people love science, others love art, some like flying planes, whereas others love finance. And some crazies actually enjoy both. Thank goodness we have this variety of skilled folks creating and working in our world to improve it. If we were all rocket scientists, I’m pretty sure we couldn’t even build the best rocket. What would we use to design the rocket, not computers. What would we sit on and eat? Where would we live? And who would make the wine and whiskey?!

Thankfully, in the United States, we do not live in a communist culture that pushes everyone to be the same because NEWS ALERT—We are not the same and never will be! This variety and aspirational differences make us uniquely us. These differences drive why your financial plans should be more than just one-size-fits-all carbon copies. Your plans should be specifically tailored to your ambitions, values, and life.

Bespoke – the term tailors use to describe a suit that is made precisely to your body and no one else’s. This tailored approach is what I look for in my financial plans. We know there are all kinds of suits out there differing wildly depending on the occasion, size of the individual, the expected weather, and the budget. Nevertheless, there are articles that all suits include, such as pants, a jacket, buttons, a tie, and shoes. Similarly, our financial plans should be tailored to our circumstances depending on our values, goals, income levels, time horizons, and risk tolerances. Nevertheless, they should all include risk assessments, retirement planning, estate planning, education wishes, insurance needs, etc.

Ideally, everyone would have tailored clothing. However, for many people, a bespoke suit or financial plan is outside their budget, and an off-the-rack suit or plan in their size is fine and can help them accumulate the assets where a bespoke financial plan makes more sense than the off-the-shelf answer.

Let us take a 23-year-old minimumwage worker living paycheck to paycheck. Let’s call him “Rooster.” Rooster has ambition, is disciplined, and would like to retire at age 67 and live a comfortable but not extravagant life in retirement. At this point, he does not have a family or much in the way of assets or complexity. His investment plan may look like this:

Step 1. Save at least 20% of every dollar earned.

Step 2. Start saving 5% in an Emergency Fund (consider I Bonds, but know the limitations). Rooster will save here until he has one year of expenses, called his Minimum Dignity Floor (MDF). Read my next article if you would like to know more about the MDF.

Step 3. Open a Roth IRA account and put the other 15% there.

Step 3. Put these dollars to work in a respectable low-cost (less than 0.10% Expense Ratio) target-date retirement fund for now.

Step 4. As his dollars gain steam through the power of compounding and he gets a little older, Rooster may opt to talk to a fiduciary advisor about how he can be more deliberate with those dollars outside of a target date fund.

Step 5. Save for shorter-term goals in a separate brokerage account invested in a money market fund.

This general strategy is fine for Rooster’s circumstances. Now, let’s consider a 59- year-old major or legacy airline Captain. Let’s call him “Maverick.” Now, Maverick is married to a younger bar owner who is 49 years old. Let’s call her “Penny.” They have one child they want to put through college and aging parents they will help care for. Maverick will retire at age 65, and Penny will retire at 55. They would like to continue their current lifestyle in retirement and have aspirations of traveling the world. Penny wants a new Porsche 911 in retirement, and Maverick wants a new Kawasaki motorcycle and to be able to fly his P-51 Mustang 10 hours a month. Maverick is maxing out his 401k 415(c) limit of $69,000 plus his $7,500 414(v) catch-up contributions (for folks 50 or older). Penny’s bar does well because of all the drunken sailors (joke), and she is able to contribute $69,000 to her Solo 401k. They both max out their IRA Roth Conversion with catch-up contributions (Backdoor Roth; $7,000 for Penny, $8,000 for Maverick). They also contribute $15,000 to their brokerage accounts. Maverick also has a MarketBased Cash Balance Plan of ($16,100 per year, plus a Navy pension ($54,000 per year), plus a military disability benefit ($12,000 per year).

Maverick and Penny are likely to have quite a bit of income in retirement, and a target date retirement fund could be a costly decision, and a bespoke financial approach is more appropriate. This plan would include many facets. Stress tests would help determine if they were on track, and the plan would consider the sequence of return risks. Maverick’s and Penny’s risk tolerance to weather the inevitable market storms would be assessed, as well as what type of income in retirement, they preferred (probability-based, safety-based, or mixed). Maverick and Penny prefer the potential higher returns of a marketbased probability approach versus a more stable safety-based annuity strategy. Perhaps a bucket approach would be implemented, and a safe withdrawal rate with guardrails would be used. Long-term care planning would be front and center for the parents as well as Maverick and Penny. Roth versus non-Roth options and when, or if, to convert these dollars would be evaluated. Tax-loss harvesting strategies would be implemented for their brokerage accounts, and a diversified ETF factor approach would likely be utilized for long-term investments. Insurance needs would be considered; however, they are close to being “Selfinsured.” A charitable giving plan would be developed to efficiently give to families of fallen Naval Aviators, given the current tax laws. The goal would be to maximize philanthropic contributions. Legacy planning would be discussed over more than one beer, not to mention many other types of planning to help stabilize and solidify their financial futures.

Although vastly different, both plans are appropriate for Rooster, Maverick, and Penny. A tailored financial plan can set you on the path to achieving your dreams and goals. Until next time, I hope you have only tailwinds and blue skies!

Rob Eklund Pilot. Fiduciary. Investor.
CRD #7317768
Wings & Wealth

Disclaimer
Wings and Wealth is an educational publication and is not a registered investment advisor. The information provided is for general informational and educational purposes only and should not be construed as financial, investment, or tax advice. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal. Always consult with a qualified fiduciary financial advisor before making investment decisions based on your individual circumstances. The views and opinions expressed here are my own and do not necessarily represent those of Creative Planning, Southwest Airlines, Tenacious Wave, or Norse Sky Ranch. Content shared through Wings and Wealth is for educational purposes only and should not be construed as individualized investment advice.