Money: Pilot financial well-being?

[Spartacus]

Ok, so I decided to go after my dream and not think about money or anything like that. I am so excited to be an AF pilot, but what can pilots expect financially?

I know about the pay charts and flight pay, but what can you count on making? If you stay in for 10 years where can you be financially? (Assuming that you are responsible and invest.) For 20 years and beyond where can you be?

I've heard of officers investing well and retiring completely after 20 years with

1 million+ in the bank and a nice house. What's your take on all of that? Is flying for the airlines after you are done whether it's 10 or 20 years a good way to go? I don't care about being a huge millionaire but I do want to be able to buy a nice house with some land after a while.

[Guest comanche]

million in the bank, find that VERY hard to believe unless you are a 4 star. You may take a pay cut when you leave the military and go to the airlines (majors) but you will make up for it pretty quick, http://www.airlinepilotcentral.com/index.htm there is a link if you want to see what civ pilots get paid.

Edit: I guess it depends if you play the stock market and get lucky.

[ 04. April 2005, 11:59: Message edited by: comanche ]

[Scooter14]

That's tough to answer, because there are so many variables. It depends on how often you deploy, get tax free money, HFP, family sep, how much your rent/mortgage is compared to the housing allownace you are authorized, whether or not you get the bonus, whether or not you get the '05 Mustang or you stick with your '98 Ford Ranger that's already paid off, etc.

Look at the pay charts, flight pay, etc, then look at your expenses, student loans, car payment(s), thngs like that. That should give you an idea.

Make sure you take advantage of the TSP, open a Roth IRA for yourself, make it all direct deposit, and pay yourself first. If you leave it all in your checking account, you will spend it on stupid bullshit. Many people have many opinions of where it is best to put your money. Talk to your buds, the cadre, watch out for First Command (although I think they have been neutralized), PAY YOURSELF FIRST, and don't rack up a lot of debt. Being debt free is nice, especially when you go to buy that land.

[Bergman]

Originally posted by PAB:

PAY YOURSELF FIRST

Someone has been reading too many David Bach books! Plagerist! haha Seriously...good advice. Check out David Bach's books, "The Automatic Millionaire", "Smart Couples Finish Rich", and several others. Very easy to read and IMHO are full of good advice.

A short answer to the original question...a Major w/10 years in service and 9 years flying makes roughly $88,000 per year total entitlements before taxes. That doesn't include any hostile fire or TDY pay.

[Spartacus]

Bergman,

Thank you! That gives me a little better of an idea. Is the $88,000 hard money or are you talking about benefits that are included in that too?

One more question. At my Det the Colonel has 28 years in the AF as an aircraft maintenance officer. I was under the assumption that he was making around $95,000 a year. If a Major makes $88,000 after 10 as a flyer then what would the Colonel be making at 28?

[Scooter14]

I try not to do math in public...

Take the 28 year O-5 (or O-6 if he's a full bird) pay chart, then look at the housing allowance rate for his rank with or without dependents, add 'em together, and there you have it, within a couple grand or so.

www.dfas.mil has all the charts.

[ 04. April 2005, 13:02: Message edited by: PAB ]

[M2]

JetJock

You can live well as an officer in the USAF, probably middle to upper-middle class. If you are really savvy with the market you might be able to build up quite a financial portfolio over your 20-year career, possibly even making a million (we are talking dollars, right? ) but as it has been said there are a ton of variables you have to contend with to reach that goal. For one, factor in a wife and kids and it might be a lot tougher. Right now I am driving a car that is older than the one I drove in college!

But consider a few other things as well. First, whereas you want to be as fiscally secure as possible, if you want to make gobs of money then the military probably isn’t the best choice of professions. However, the other tangible benefits--experience, education, opportunity--will make you a much ‘richer’ person. This was never so evident to me until I went to my twentieth high school reunion. Comparing what people have done with their lives over the past two decades, I realized I did make the smart choice when I stumbled into the recruiter’s office after high school. The USAF later sent me to college, and I have been lucky enough to be stationed overseas for almost half of my career. For all that I will always be grateful.

But, to answer your question, I have bought three properties since I have been in, one of which thanks to my veteran’s benefits. It is easy to obtain and sustain a comfortable lifestyle, but be smart and come up with a good investment plan early on in your career. Look into USAA or another investment organization…. STAY AWAY from First Command Financial (formerly known as USPA/IRA). See these threads on the bad experiences most people have had with them:

http://www.dynamictruth.com/cgi-bin/ultima...t=001913#000000

http://www.dynamictruth.com/cgi-bin/ultima...t=001103#000004

There is also a load of good advice in the above threads, just figure out what works best for you and go for it!

Good luck with both your finances and your career!

Cheers! M2

[Guest goldbar03]

All pilots make huge sums of money (which is precisely why there are so many pockets on the flight suit -- space needed to be available to stuff the ginormous wads of cash).

alright, so the recruiter lied to me too.

there's a lot of good information on this post already, so I won't repeat anything that's been said... shyeah right

As for the hard money/benefits question, your 10-year flyer is pulling in roughly 72k (w/ the fly pay) plus whatever BAH he's entitled to. So 88k is your pay with all the perks before taxes.

Your Det O-6 is a maintainer without the fly pay, so that probably explains why the math doesn't add up based on what the 10-year flyer is making.

(flight pay is nice)

Eliminate consumer debt, reduce your taxable income through smart investments, plan for retirement/homes/college early, and don't buy expensive hookers.

Check out a book called a random walk down wall street if you're interested in investing.

I think everyone will agree that the air force supports a comfortable financial life -- especially for a pilot. We have the bonus (hopefully it'll stay around, c'mon big money, no whammies) and the fly pay. As for airlines, man, when that point comes, who knows what the commercial guys will be making... it ain't the let's have a few drinks before we do our one trip this month from palm springs to las vegas and cash our 250k checks lifestyle anymore.

[Spartacus]

Some good info and advice!

MajorMadMax,

If you don't mind me asking... what kind of properties do you own? Are you talking rental, or did you buy a house in Colorado, a cabin in Montana, and a house in Germany? I'm just kind of curious about how you did and what the ins and outs to it are.

I'm getting married soon and my fiance comes from, well... MONEY. I don't care about being Bill Gates but I want to provide well for my family. I plan on taking advantage of TSP, getting a Roth IRA, and investing in Mutual Funds the Stock market (maybe), and real estate. I just want to be able to buy a nice house (not a mansion) and a few acres of land to surround it before I'm 50!

Also, I'm leaning toward staying for 20, but either way you can make some good money in the airlines. Southwest for example pays pretty dang good (right now), better than a lot of the majors even. So, whenever I get out if everything goes well I'll have the pension plus airline pay. (I would also like to own my own business someday.)

[Guest RaptorwannaB]

Is there a flight pay chart somewhere?

edit: found it in the next page in the military pay charts. doh

[ 04. April 2005, 13:57: Message edited by: RaptorwannaB ]

[Spartacus]

Sorry, one more questions. What will a flyer make after 20 years? I've also heard that there are a lot of bonuses after 10 to stay competitive with the airlines. How much is this and does your base pay go up too just to stay with airline pay?

[M2]

JetJock

I bought a condo in Maryland and assumed my wife's condo (in the same complex) when we got married. We lvied in them until we moved to Germany in 1995, at which time they became rental properties. The tax breaks are sweet. We just sold one last month and took in a cool $51K.

When we left Germany in 1999 for San Antonio I was all determined to only rent, but the rental market is shit there and the realtor we were using showed us a beautiful house that was for sale. Sinec both my wife and I fell in love with it, we decided to take the plunge and buy. I figured I was going to take a bath on it in three years, but renting is basically the same as flushing the money down the toilet so what's the difference? If I lost a lot of money (as we would have done if we sold the condos in Maryland), I could always use loss as a tax write-off. However, the market was in our favor and we actually made $18K when we sold the place three years later.

Oddly enough, I was always a believer that real estate was a bad investment unless you let it build up over a decent amount of time (at least 10 years). In retrospect my property investments have paid off better than any of my other investments. But YMMV and all the usual caveats.

Cheers! M2

[Guest rurban12]

As an NASD-licensed Financial Advisor (and 0505 AD Hopeful!), the best advice I can give outside the realm of specific investment advice is to sit down with a financial advisor or financial specialist at your bank. Most major banks and many large credit unions now have financial advisors on the premesis (or one that covers every two or three branches), and their advice is uaually free. As a bank, they will take a conservative tack, geared more towards long-term capital growth and accumulation of wealth (read: retirement), and they'll also be able to help you put together a plan to prepare for your home purchase. Bottom line is they'll present you with options tailored to your specific situation and goals, and they'll help you decide which way to go.

[Guest medik6]

Jetjock-

Look into USAA once yoa are in. They have an investment type program where you invest you flight pay every month and say that you will have a million (or close to it) when you retire.

[Guest medik6]

sorry for the spelling before you guys say something. But you try typing with two babies on your lap and see how well you do!

[ClearedHot]

Let me tag team off what some of the others said.

1. Flight pay – invest it! You earned it by risking your life so make something good out of it. You will earn enough base pay to chase women and swill beer. The best part is your flight pay will rise to a peek of $840.00 per month. You have a tremendous advantage over other non-flying officers in the USAF;

Assuming 2005 Rates

24 Months x 125 = $3,000

12 Months x 156 = $1,872

12 Months x 188 = $2,256

24 Months x 206 = $4,944

96 Months x 650 = $62,400

72 Months x 840 = $60,480

10 years x $25,000 = $250,000

Career aviation incentive pay assuming 20 years = $384,592, large portions of this can be dumped into the TSP. You are foolish if you don't do something constructive with at least part of this extra capital.

2. Assuming you stay 20 and make O-5 (not hard these days), your retirement check will be around $3400.00, based on 2005 rates.

3. I took a three-phased approach when I came in. Individual stocks, Mutual funds - IRA (Roth now), and Real-estate. TSP and the Roth are no-brainers, and I always kept another account to manage some stocks on my own. I purchased a home at every base after UPT and when the rates went down in the mid-1990’s I put them on 15 year mortgages.

4. As for not making 1 million by the time you retire…well I would say it depends on how much due diligence you apply. After 12 years I had 1.2M on paper, all before the dot-com bubble burst of course, but it can be done. Thanks to real-estate, I have almost recovered everything.

5. I did find time to enjoy what I was making with vacations and a few toys. I even bought the pilot sports car when I made captain, I still have it. However, I was never one to burn my whole paycheck in a bar over the weekend.

6. At this point I am extremely lucky, my wife works and pulls down nearly as much as I do. We live within our means (in fact, we live off her pay and put mine aside for our retirement home.) I don’t know if I will stay past twenty, but with a little work you too can have the option.

[ 05. April 2005, 14:21: Message edited by: Clearedhot ]

[Guest fosterbeer]

For those of you with rental properties, do use property management companies or do you take care of them yourselves?

I have considered buying a house back in my hometown, purely for rental/investment purposes, but I'm concerned that something will happen during flight school. Just wondering if it is worth it to hire a company to take care of all the assorted activities behind owning/renting a house.

Thanks

[ 05. April 2005, 14:53: Message edited by: fosterbeer ]

[M2]

Foster

Go with a property management company, I have had great ones and I have had not-so-great ones, but the best part is that I know someone else is taking care of business when I can't.

Considering that I have spend 7 out of the last 10 years overseas, there is no way I could properly run my properties. Their fees aren't too bad, and my current property managers were the one who sold one of our condos (they make out like bandits in doing so, but the overall price and timing was enticing enough for me to share the wealth a bit).

Cheers! M2

[ClearedHot]

Concur with M2, I managed my own for a number of years and with OPS Tempo, it became impossible. Most companies charge around 10% and it is all tax deductable.

[ 05. April 2005, 15:31: Message edited by: Clearedhot ]

[Spartacus]

So, I take it that it's a really good idea to buy income/rental properties wherever you go? Is that where you can make a lot of money? Is there a lot of liability with that? Is it hard to do, and how risky is it?

Thanks, sorry for all the questions!

[M2]

JetJock

Again, I would advise you to take to a financial advisor. Real estate may or may not be a good investment, the market moves up and down. Had I tried to sell our two condos before leaving for Germany in 1995, we would have taken a big hit--$20-30K--as we hadn't owned them for a long time. I also expected to take a bath on the house we bought in Texas, but as I said we actually made some money on that one.

If you consider rent versus mortgage (rent gets you no returns), and if you are willing to accept the risks/benefits of owning rental properties (guess who pays the mortgage on them when you have no tenants? Yep, you do! Also guess who pays for the new a/c, fridge, water heater, clothes dryer, etc when they crap out? Yep, you again! But it is tax deductible...), then by all means consider buying properties. But balance your portfolio and don't put all your eggs in one basket, so to speak. Also don't expect any golden-egg-laying geese, just ask anyone that lost big on the dot-coms! Also, for the longest time my saving accounts were making more money off interest than my mutual funds! I would strongly recommend you read the advice/suggestions given above, and get a professional to help you work out a plan to make your money work for you!

Oh, one last helpful hint...try and find a wife like ClearedHot's!

Cheers! M2

[Guest pavesooner]

Ok the secret...

Buy a house everywhere you go if plan to be there at least 3 years...

the AF gives you BAH..let them pay the mortgage for you...

After 3 years you can make a little money if you want to sell the house and you have made it past the closing costs you paid initially...However, turn that propery into a rental...again let someone else pay the morgage for you...keep it or unload it a few years later for a bigger chunk of change and turn those proceeds into more real estate.

The longer you hold the property the more equity you will build, the tax breaks are great for writting off your interest you paid (yeah you paid it but not really BAH or your rent paid it) Dont expect to make a lot off a rental and use that money as extra income...it is ok to break even on the rent vs mortgage property mgt fees and taxes.... because of the tax write off you get and the equity you build....

I know several guys that already have a million in the bank using this scheme...it isnt unrealistic...remember, to keep about two months of mortgage payments tucked away in the event the house sits empty...even if it sits empty a year (which will never happen if the house is nice and near a base) you can take a 10,000 loan and cover the rent....not a big deal...I have never had to do that with the two properties I own...I am just getting stated (been at this scheme for bout 5 years now and have about 200,000 in equity from those two properties.....again a million isnt unreasonable....Nothing is impossible...some things are just more challenging that is all...

I'll buy another home as soon as I PCS....and watch the snowball get bigger as it rolls down hill...

NEVER EVER RENT....use your money to make money (renting is ok if you only plan to be somewhere a short time like UPT or RTU...after that buy buy buy and make some other smuck who complains that he doesnt have any money rent your house and pay you!

[ 07. April 2005, 18:17: Message edited by: pavesooner ]

[Skitzo]

Unless your base gets closed....

[Guest Jollygreen]

Originally posted by pavesooner:

Buy a house everywhere you go if plan to be there at least 3 years...

That is the truth. It isn't without some risk, but purchasing and then selling a house is the safest way to gather enough funds for retiring comfortably w/o the need for a well paying retirement job. Ask people who bought a house in the DC area 3 years ago and then sold it. Same holds true for Ft Walton, Las Vegas, and every other location I've been assigned to.

[ClearedHot]

Originally posted by ktulu34535:

Unless your base gets closed....

When a base gets closed the government actually step s in and provides a buyout program for active duty military personnel. You won't make a mint, but you won't lose your entire investment.