From generous salaries and equity compensation to strong retirement plans and healthcare benefits, the aerospace industry offers opportunities to build a successful career and accumulate significant wealth.
But as you transition to retirement, the same assets that helped contribute to the overall health and security of your financial life present important decisions and increased complexity. What was once a seemingly simple, single-minded plan — save, build, grow — now involves complex, interconnected issues that require careful coordination.
Having started my career in engineering, I recognize that for those who’ve spent decades developing processes and solving problems, a framework that defines the decisions to be made and the considerations to keep top of mind is valuable. To that end, here are five decisions every Aerospace professional should make before retiring. Ideally, they should be addressed years in advance of your last day.
1. Manage Concentrated Employer Stock
It’s common for aerospace companies to offer equity as part of compensation packages. Over the years, that can help accelerate the process of building wealth, but it can also introduce risk. Decades of ESPP participation and equity grants can translate into a significant portion of your net worth being tied to one company. A down quarter can erase years of growth. During your working years, when there’s time to rebound, that may be okay. But as you transition into retirement, you want to mitigate that risk to help create and protect sustainable income.
Diversifying that concentrated position can help reduce your risk. But the real decision is how to diversify. Selling a chunk of your position all at once can trigger a significant tax event, so it’s often better to develop an intentional tax-aware approach that considers cost basis, capital gains exposure, timing of sales, and charitable giving strategies.
2. Understand Your Pension Options Before You Have to Decide
Unlike other industries that have moved away from pensions, many companies in the aerospace and defense world still offer them to employees. That guaranteed, predictable income adds a measure of confidence and security to your retirement, but pensions also include decisions that can't be undone.
Should you take a lump sum or an annuity?
Do you opt for single life or joint and survivor coverage?
These are lifetime elections with consequences that ripple through your Social Security timing, your portfolio withdrawal strategy, and a spouse's long-term financial security.
Take the time to understand your options well before the decision has to be made, while you still have time to look at how it fits into your larger financial picture and interacts with your long-term retirement income strategy — model different scenarios to see how they impact outcomes.
3. Build a Tax-Efficient Withdrawal Strategy
Like many professionals, a large portion of your retirement savings may be in tax-deferred accounts such as a 401(k) or traditional IRA. As you begin to withdraw from those accounts, every dollar is taxed. Without a coordinated strategy that takes into consideration all sources of income, withdrawals could impact your taxable income, tax bracket, and even Medicare premiums, potentially causing you to pay significantly more in taxes over a multi-decade retirement.
The window between retirement and 73, the age when you have to start taking required minimum distributions (RMDs) from a tax-deferred account, is a critical planning opportunity to develop a drawdown strategy, consider Roth conversions, and sequence withdrawals.
4. Prepare for Healthcare Costs
On the whole, the aerospace industry tends to be generous with employer-sponsored healthcare benefits. Plans are typically comprehensive and affordable, with most needs covered through copays. That can make the transition to retirement coverage surprising. If you retire before 65, when you’re eligible for Medicare, you’ll need to bridge a gap in coverage. Whether it's through COBRA or the marketplace, most people significantly underestimate the cost.
Once you’re on Medicare, the challenge becomes managing potential IRMAA (Income-Related Monthly Adjustment Amount) surcharges, which can add hundreds of dollars per month based on income levels. It’s worth speaking with a specialist early to understand how your retirement income affects your Medicare costs and plan income around IRMAA’s two-year lookback. By the time bills arrive, i.
5. Define What Your Wealth Needs to Do
This is the step far too many people overlook. You’ve spent years working hard to save and build wealth for retirement. But before you can build a retirement income strategy, you need a clear vision of the life it will support. Not only does this help bring meaning to retirement, but it provides guidance for how much you’ll need to fund retirement. People often ask how much they need to retire, and the answer often comes back to this very point: a lot depends on the retirement you want. Travel, a second home, philanthropy, funding the education of grandchildren, supporting future generations — each can affect your retirement plan.
Building a retirement plan starts with the life you want and works backward to create the strategy to support it.
The Earlier You Address These Decisions, the Better
Retirement isn’t a single event, one day that marks the end of a chapter and the start of another. Symbolically, maybe that’s the case, and in that sense it’s a day worth marking and celebrating. But a successful retirement plan is truly a years-long process that begins well ahead of your final day and continues for the rest of your life.
By starting to plan early, you provide yourself with plenty of time to make thoughtful, informed decisions while maintaining flexibility. Waiting not only contracts your timeline, but it can put you in a situation where you need to react to deadlines and severely limits your options. Given the complexity of many of the decisions aerospace professionals face, a general rule is to start planning five to ten years in advance. If you're within that window, we can help start the process and guide these key decisions. Connect with our team to start the conversation.