Aviate, navigate, communicate. This mantra is burned into the back of the eyelids of anyone who has ever learned to fly. And every pilot knows that even though the last two are important, it’s the first one that keeps you alive. You absolutely can’t stop flying the airplane, no matter what the distraction is.
And so how do we learn about this in our training? We practice emergencies in the simulator, read case studies about mishaps and prepare ourselves. And even still, after hours of practicing engine failures at takeoff or other complex non-normals, when that fire bell ACTUALLY goes off in the cockpit in real life, your heart still races — no matter how many times you’ve practiced it in the sim. This is because your “lizard brain,” formally known as the basal ganglia, reacts first. It’s the instantaneous flight-or-flight mechanism built into our human DNA originally meant to keep us alive in life-or-death scenarios when pitted against saber-tooth tigers and similar predators of the prehistoric era. And now it’s screaming at you to do something as that engine fire bell is sounding in your cockpit.
And then you remember the other age-old adage of aviation that’s vital when the proverbial “stuff” hits the fan: “No. Fast. Hands. In. The. Cockpit.” Don’t just start flipping switches or moving levers. Stop. Pause. Take a breath. Then go to your checklist. Doing so forces you to use the part of your brain that’s responsible for logic over emotion — your frontal lobe.
But why? Why is this so important? Simply put, emotional decisions can be destructive (and, in some aviation cases, deadly). And make no mistake, your instinct to start shutting things off when you’re on fire is an emotional one. If you move too fast, you risk turning a situation that’s manageable into something much worse.
This turns us to our dear friends and clients at Spirit Airlines. First, we express our heartfelt sympathies over what you’re going through right now. This probably feels about as white-knuckle as things can get for you right now. Just like with the fire analogy, your lizard brain is screaming at you to do something … anything. But second, we want to take the opportunity to give you some hope and guidance, as this isn’t the first catastrophic industry event our team has helped pilots navigate — and there’s a light at the end of this tunnel. So we’ve created a checklist to appeal to your logical brain over your emotional one. Time is of the essence, but your decisions need to be methodical and unemotional. Because what you do next could be the difference between the equivalent of a smooth landing met with a round of applause … or something irrecoverable.
Spirit Airlines Pilot Financial Checklist
Step 1: Stop all unnecessary spending
Until further notice, reduce your spending to “survival mode” levels. Ideally, this is why we encourage people to have anywhere from six to 12 months of non-discretionary spending needs set aside in cash. But whether you have a robust emergency fund in place or not, it’s important to get lean with regard to your budget. No more eating out. If you have numerous streaming subscriptions, cancel them. Spend only what you need to live on (mortgage/rent, food, keeping the lights on, etc.). These are all things you can continue in the future once things stabilize, but for now, you need to look at your financial situation the same way you look at your fuel situation when ATC directs you to hold as a thunderstorm passes over the airfield. You have no idea how long this might take, so you need to utilize a “max conserve” mindset.
Step 2: Save everything you can while you still have access to Spirit UKG
Download every single personal record you can find for at least the past year. This includes W-2 forms, tax documents, paystubs and any other financial records. Verify your contact information is accurate and up to date in the system.
Step 3: Secure healthcare for yourself and your family.
Healthcare coverage ends on the date of your termination. You can apply for COBRA benefits, but even that will only last you until May 31, so you need to shop the Affordable Care Act (ACA) website for a healthcare plan, and do your best to get enrolled by May 15 to delay a one-month gap in coverage in an ACA plan. Both COBRA and ACA plans can be expensive, but these should be considered non-discretionary aspects of your budget (see Step 1).
To enroll in COBRA:
- Go to https://inspirafinancial.com/individual/health-benefits/cobra-coverage
- Select “Create Profile.”
- Select “Enroll Online” and follow the prompts for COBRA.
Next, enroll in an ACA plan:
- Go to www.healthcare.gov.
- If your state of residence has its own marketplace, the website will direct you as appropriate.
*Think of the first three steps as you would “immediate action items” in a non-normal checklist. These things are immediately time-sensitive and should be dealt with quickly.
Step 4: Don’t panic with your 401(k)
This step isn’t as time-sensitive as the steps above, but it must be dealt with swiftly nonetheless.
Avoid withdrawing from your 401(k) if possible
It’s tempting to take regular or hardship withdrawals in dire circumstances like these, but we encourage you to tighten your belt and explore all other possible options before withdrawing from a retirement account — especially if you’re under the age of 59½. If you do have to take a withdrawal, in most cases, these withdrawals are taxed at your ordinary income tax rate and then hit with an additional 10% penalty.
Rollovers
You have 90 days from the termination of the plan to roll your assets into an IRA. If you don’t have a rollover IRA set up already, Charles Schwab reps are standing by (they’re also the custodian for the 401(k) plan). Choosing Schwab for the IRA bucket to roll your 401(k) into could very well streamline this process for you. While some of these things can be done online, this is one instance where it probably helps to get a live representative on the phone. Your Charles Schwab plan reps can be reached at 800-724-7526. For clients of our Creative Planning Aviation team, we’ll be making these calls with you.
401(k) loans
If you are carrying a loan on your 401(k) plan and owe a balance once the plan terminates, you have 90 days to pay off the balance — otherwise it’s considered a taxable distribution by the IRS. As an example, if you’re carrying a $20,000 loan and fail to pay it back, that $20,000 will be added to your taxable income for the year, and you’ll pay ordinary income tax on it.
However, the tax on this distribution isn’t due immediately, and you have more time to try to remedy this than you think. Because the Spirit Airlines plan is terminating due to the company dissolving, the IRS gives you more of a window to deal with matters — up until when 2026 taxes are due next April, and perhaps even until October 2027 if you file an extension. Below are the mechanics of how it works.
Let’s take the example of someone with a $100,000 balance in their 401(k) and a $20,000 loan taken out. Once the plan terminates, the 90-day clock begins. During this time, you want to find a custodian (like Charles Schwab) that offers an IRA that recognizes what’s called a qualified plan loan offset (QPLO). This is essentially an IRA that will accept the balance from your 401(k), but with a loan offset assigned to it. So, in this example, you’d roll $80,000 of your 401(k) balance (your $100,000 balance minus your $20,000 loan) into your new IRA, with the IRA carrying a $20,000 loan offset. In other words, it’s acting almost exactly like the loan balance did in your 401(k). You then have until your 2026 tax filing deadline to pay as much of this balance back as you can, and you can use any means available to you to do so, such as cash or liquidating taxable assets. You then make payments to the IRA to pay off the balance, but they are coded as rollovers rather than contributions. It’s important to note the difference, as contributions are limited annually by IRS limits, but there’s no limit to what you can roll over annually.
Continuing with the example, let’s say the above pilot lands a new job, things stabilize and he or she can now start making payments toward the loan offset. If there’s no balance left on the loan offset at the time of the 2026 tax filing, then there are no taxes paid on the distribution.
There are, of course, those who might decide not to pay it back and just take a tax hit. This is where planning might come in handy. If you’re ultimately going to have a very low taxable income for 2026, you might just elect to do this and save your cash rather than using it to pay off your 401(k) loan.
Step 5: File for unemployment early
For anyone reading these words, there’s no doubt this one stings. All too often, pride can lead to a delay in leaning in on this benefit. No matter how confident you are in lining up your next flying job, until you actually start indoc at a new airline, it behooves you to go ahead and do this so that you don’t find yourself delayed in receiving benefits. To file for unemployment, go to the Department of Labor website’s unemployment link, select your state of residence and begin your application.
Step 6: Look into life insurance options if needed
Most group policies are portable, meaning that if you separate from employment, the insurer will allow you to keep the policy in force. The catch is that it’s usually incredibly cost-prohibitive to do so, and the same group policy you paid a reasonable premium for can now skyrocket. For those who still need life insurance, porting the policy over initially can at least cover you in the short term, but in most cases, it’s better to start shopping around for a more affordable term policy on the open market. This assumes you meet underwriting standards and are actually insurable. Some people may not realize they can effectively self-insure when it comes to life insurance, meaning their assets would be sufficient to cover their beneficiaries’ financial needs if they were to pass away.
Step 7: Work with a fiduciary advisor to create a comprehensive financial plan
This last step of the checklist is actually the most important step in the long term.
A plan is what significantly reduces anxiety in our lives when the unexpected happens. During COVID, as airlines were furloughing or even going out of business, we worked with numerous pilots that came to us feeling anxious only for them to be reassured that, through proper planning ahead of time, they were set up to weather the storm long term. The peace of mind that comes with planning can’t be overstated, and for airline pilots, who work in an industry that can be very volatile at times, it should be considered mandatory. It’s important to choose an advisor who’s independent and a fiduciary — someone who isn’t trying to sell you a product and must always act in your best interest first and foremost.
We’re Here for You
We wish all Spirit Airlines pilots the best of luck. There’s no doubt this is a scary time for you. Just remember, the most important time to act without emotion is when emotions are running highest. While this checklist isn’t all-encompassing, it should hopefully quell some of the anxieties you’re feeling and get you headed in the right direction.
Creative Planning Aviation can help guide airline pilots through their anxieties by providing comprehensive wealth management and a financial plan built to weather the industry storm.
