Trip7

Gotcha, so only pull out the amount you've contributed or less

m3113n1a1

And I think you have to wait 5 years after a conversion. Read about the roth conversion ladder. It's what a lot of early retirement people do to minimize/avoid taxes and access their money.

JamesBond

One thing I would do differently if I could go back would be to have a self directed ROTH IRA and buy rental properties. Pay cash for the property and ALL gains (rent/appreciation etc..) are tax free.

dyodd/ymmv/etc etc

Trip7

Correct, as I read it, at my income level only way to contribute to Roth IRA is thru a conversion, and then I'd have to wait 5 years to withdraw those contributions.

LeineLodge

You hope to never need to withdraw the contributions. It’s an emergency (only) option. Otherwise why bother contributing? Also once you withdraw the contribution you can’t put it back - losing that tax protected space forever. IMO it’s a safety net, but a last resort.

With proper record keeping, you should be able to withdraw contributions >5 years ago. I hold (probably too much) cash to avoid having to go there.

I’m currently keeping $ in an ally savings account (1.85%), and some more in an ally CD (2%). This is emergency fund/cash for the next rental property. It sucks letting it sit there, but it’s FDIC insured and almost keeping up with inflation...

I’d be curious to hear where you RE guys hold your cash reserves. Any better ideas?

Trip7

I'm holding mine in a 3 fund lazy portfolio with 60/40 stocks/bonds.

Falcon20

So I want to thank Denny for pushing people to go to the roadshow. Apparently they are going to post the video of the Atlanta one so everyone can watch it. Great information was given out.

I will say that it made me rethink what I put in the survey about the DB plan. While I’m not thrilled about the targeted rate of return I am seriously warming up to the MBCBP and the tax advantages to it.

The biggest reason is that I tended to assume that the IRS limits would go up but didn’t think about the possibility of them being reduced. In the event that they are reduced we would definitely need something else in place.

Also the fees associated with administrating the plan would be covered by the company through savings in not having to pay payroll taxes on DPSP cash amounts.

Trip7

I also went to the Atlanta Roadshow and was disappointed. The presentation leaned heavily on the tax advantages of the MBCBP plan yet very misleading information was presented. All slides presented the MBCBP returns in a zero tax scenario. Never once was the After Tax dollars of the MBCBP compared with 16% DC plus investing the DPSP CASH because obviously the results would be virtually the same. If tax rates go up in the future it is entirely possible the MBCBP could cost you money.

These financial management companies see $190 million dollars(And growing) worth of DPSP Cash which they can make big bucks off of managing while setting low expectations with numbers based off 5%. Just a 1% management fee pays $1.9 million. $1.9 million to aim for 5% return would be one sweet gig.

It's almost as if the R&I Committee is saying majority of pilots are not smart enough to control their DPSP Cash so let's take it from everyone and invest it with someone who will basically throw it under a mattress into a conservative fund that preserves capital barely above inflation rate.

With DPSP Cash a pilot can control their own destiny with money today and turn it into real wealth. This MBCBP will make someone wealthy but it's not the pilots.

The presentations on the optional plans were short but great and had several excellent vehicles that a pilot can utilize as they see fit.

Schwanker

Agree Trip. Aiming for 5% just to defer taxes is a very poor choice. Would much prefer to take the ca$h and invest it myself. At a minimum, take a little risk for much greater returns in an S&P index or equivalent.

notEnuf

Excess RE cash goes into laddered CDs or pay down principal to have equity to borrow against. Maybe not the best return but it works for me.