FLYING Magazine
Most airline pilots are diligent savers. They max out their 401(k)s, capture every dollar of employer contributions, and stay on top of their investment allocations. Still, for many pilots in their peak earning years, even doing everything right may not be enough.
This is the central message of a recent webinar hosted by Allworth Airline Advisors, in which James Risalvato, a financial planner with Naval aviation experience, walks pilots through a retirement savings strategy that most have never heard of. The good news is, some airlines are already offering this plan.
“Your income has taken off, but your savings capacity may still be constrained by 401(k) limits if you’re not taking advantage of all the benefits,” said Risalvato, who specializes in advanced retirement and tax planning for pilots and their families. “The question becomes: how do you extend that runway?”
Standard financial planning advice often falls short for pilots. Unlike most high-income professionals, pilots face a combination of factors that makes tax-efficient savings urgent.
“Pilots have a very unique income trajectory,” Risalvato explained. “A relatively short peak earning window—usually ten to fifteen years—and often an earlier retirement horizon.”
Federal regulations require pilots to retire at age 65, which means the window to accumulate wealth is narrower than in virtually any other high-income profession. Not to mention the cyclical nature of the industry, wherein fleet transitions, base reassignments, and potential furloughs are common. Time is the one resource pilots can’t afford to waste.
“If you don’t fully utilize that window,” Risalvato said, “it’s very difficult to recover later.”
The 401(k), while generous in the airline industry (with some major carriers contributing nonelective amounts at or around 18 percent of eligible compensation) still has a hard ceiling on total contributions. For 2026, the combined employer and employee limit is $72,000 for those under 50, $80,000 for those 50 and older, and $83,250 for those ages 60 to 63 where the plan allows. That cap can leave a significant portion of peak-year income fully exposed to taxation, which can be a major blow to a captain who earns $400,000 or more per year.
Market-Based Cash Balance Plans
The solution Risalvato outlines centers on a market-based cash balance plan. It’s a type of defined benefit retirement vehicle that functions differently from a traditional pension, but more intuitively than you might expect.
“The simplest way to think about it: a traditional pension promises a future income stream, a 401(k) is based on contributions and market performance, and a cash balance plan sits somewhere in between,” he said.
Here’s how it works in the airline context: once a pilot’s 401(k) has been fully funded (including after-tax contributions), the airline’s remaining nonelective contributions have nowhere to go inside the 401(k) plan. A market-based cash balance plan captures those overflow dollars in a separate, tax-deferred structure with dramatically higher contribution limits.
“Instead of being capped in the tens of thousands, you now have the ability to contribute six figures annually, potentially,” Risalvato noted. “Depending on your age and income, contributions can range from $50,000 to $200,000 or more over the course of your remaining career.”
Risalvato highlights three primary benefits. First, every dollar contributed reduces taxable income immediately. “If you contribute $150,000, that’s $150,000 less in taxable income for the year, potentially saving you tens of thousands in taxes.”
Second, the strategy allows pilots to compress more savings into their peak years, effectively lengthening the financial runway the webinar title promotes.
Third, integrated with a comprehensive financial plan, the cumulative tax savings can reach into the hundreds of thousands of dollars over the course of a pilot’s life.
The plan does carry trade-offs you should be aware of. Unlike a 401(k), consistent funding is required, meaning it suits pilots with stable, high earnings rather than those with variable income. Growth inside the plan is also more conservative, typically tracking interest-rate-based returns in the 3–4.5 percent range rather than equity market performance.
“If you’re looking for heavy growth, this might not make as much sense for you,” Risalvato said.
The Mega Backdoor Roth Setup
The cash balance plan doesn’t operate in isolation. To unlock it, Risalvato walks through a specific sequencing strategy using an existing 401(k) mechanism known as the mega backdoor Roth conversion.
He illustrates it with a composite client example, “Mr. Smith”: a major carrier captain earning roughly $400,000 per year, with two college-age children and a spouse who doesn’t work outside the home.
“One of the first things I noticed outside of portfolio compensation was that his financial plan did not take into consideration some key company benefits that he should know about and he should be utilizing right now,” Risalvato said.
The strategy works in stages. First, Mr. Smith maximizes his pre-tax 401(k) contributions. Then, rather than leaving the remaining plan space open for additional employer contributions, he uses after-tax 401(k) contributions and immediately converts them into Roth inside the plan. This is the mega backdoor Roth conversion.
That conversion consumes the full 401(k) annual contribution limit, leaving no room for the airline’s nonelective contributions inside the plan.
“That nonelective contribution (eighteen percent for the major legacy carriers) was now crowded out,” Risalvato explained. “Because there was no other place for those tax-deferred dollars from the airline to go, they had to flow into the market-based cash balance plan.”
Mr. and Mrs. Smith are simultaneously accumulating tax-free Roth assets and building a substantial tax-deferred cash balance while also establishing the foundation for Roth conversion analysis, proactive tax-loss harvesting in their after-tax accounts, and strategic asset location across account types.
“Mr. and Mrs. Smith saved hundreds of thousands of dollars in tax liability over the course of their life,” Risalvato said. “That linear savings function for them turned exponential for the beneficiaries.”
The One-Stop Shop Advantage
Cash balance plans and the mega backdoor Roth are simply available tools within Allworth’s broader service model. Many pilots, though, lack the time or inclination to coordinate across multiple advisors, CPAs, and estate attorneys.
Allworth Airline Advisors operates as a division of Allworth Financial, which oversees more than $35 billion in assets under management and has built its reputation around a fiduciary model with no sales quotas, no commissions, and 100 percent transparent fees. The firm was founded more than 30 years ago by an American Airlines and a Delta captain who understood that the financial planning needs of pilots demand specialized expertise.
Today, that specialization manifests in a team-based model. A dedicated airline-specialized financial advisor serves as the single point of contact, backed by in-house CPAs, investment managers, estate planning attorneys, insurance planning consultants, and a client services team.
“We’re a one-stop shop,” Risalvato said. “We have an internal team of CPAs, advanced wealth planners for complex legacy strategies, in-house estate planning attorneys for document creation at no extra cost, and insurance specialists who provide fiduciary guidance on coverage decisions.”
A comprehensive approach can add meaningful value beyond investment selection alone. Research cited by Allworth suggests that working with an advisor who brings together behavioral coaching, optimized wealth management, and personalized planning can add up to 3.5% on an annualized basis to overall portfolio performance.
Allworth Airline Advisors serves pilots at major carriers including Alaska, American, Delta, FedEx, JetBlue, Southwest, and United, and also works with military aviators and other airline employees.
Is a Cash Balance Plan Right for You?
It’s worth noting, according to Risalvato, that the cash balance plan strategy is not universal. It works best if you’re firmly in your peak earning years, you’ve already exhausted other retirement savings options, and you have the income stability to support consistent funding.
“If you’re looking for liquidity, maybe that’s not the best strategy,” he acknowledged. “There’s no one size fits all solution in finance and financial planning.”
If you’re a high earning pilot in the back half of a career, watching your peak years pass with taxable dollars you can’t shelter, the strategy can be transformative. The first step, Risalvato said, is a one-on-one consultation to model the actual numbers: income, tax situation, estimated contribution capacity, and the downstream impact across a full financial plan.
“It’s about what we do from here on out,” he said. “How do we better prepare ourselves for retirement, maximize company benefits, and set ourselves up appropriately?”
If you’re interested in learning whether a market-based cash balance plan belongs in your financial strategy, you can schedule a complimentary consultation with an Allworth Airline Advisor at AllworthAirline.com/Consultation or call (800) 321-9123.