Dalpa R&I Roadshow
09-20-2018, 07:15 AM
#221
Gets Weekends Off
Joined APC: Nov 2011
Posts: 4,535
Trip, what are you going to do with all your Roth money if the government changes the law and "means-tests" your tax exclusions in retirement? 
Brackets may go up, brackets may go down, at least your principal is higher with the MBCBP (and 401k) vs after tax money.
If you have DPSP cash, it means your income is $275k+. If you have a lot of DPSP Cash, it means your income is well above $275k and you are well into the high tax brackets. At least with the MBCBP you have immediate tax savings you can bank. With after tax dollars, its the hope you find tax savings down the road.
I think in retirement the safest play is to have both tax-deffered and tax-free dollars in buckets you can pull from. Hopefully they can engineer the guardrails of the retirement plan to allow for both.
Also Trip, did they say the management fee on the MBCBP was 1% or is that just speculation? Most of index fund fees we pay fidelity are less than 0.3% I think SP500 was 0.1%.
Brackets may go up, brackets may go down, at least your principal is higher with the MBCBP (and 401k) vs after tax money.
If you have DPSP cash, it means your income is $275k+. If you have a lot of DPSP Cash, it means your income is well above $275k and you are well into the high tax brackets. At least with the MBCBP you have immediate tax savings you can bank. With after tax dollars, its the hope you find tax savings down the road.
I think in retirement the safest play is to have both tax-deffered and tax-free dollars in buckets you can pull from. Hopefully they can engineer the guardrails of the retirement plan to allow for both.
Also Trip, did they say the management fee on the MBCBP was 1% or is that just speculation? Most of index fund fees we pay fidelity are less than 0.3% I think SP500 was 0.1%.
09-20-2018, 07:59 AM
#222
Gets Weekends Off
Joined APC: Jun 2015
Posts: 1,757
It was addressed very briefly and then the rest of the presentation went back to selling the tax savings. It was not addressed clearly because you have many pilots and at least one rep stating you need to 60ish percent return on your DPSP Cash to match the MBCBP return. This what happens when you present information like the first attached picture. Why compare after tax DPSP dollars to Pretax MBCBP Dollars? To make matters worse, they used the comparison to determine FAE. That is Bernie Madoff like misinformation. The presentation lost all credibility for me after I saw the slides. If the presentation wanted to convey transperancy they would have attached something similar to attached tax chart.
The Union should be trying to extract as much value as they can for our next contract. They should not be trying to act as our CPA and/or financial planner.
The Union should be trying to extract as much value as they can for our next contract. They should not be trying to act as our CPA and/or financial planner.
https://www.forbes.com/sites/kellyphillipserb/2018/03/07/new-irs-announces-2018-tax-rates-standard-deductions-exemption-amounts-and-more/#58c32e943133
09-20-2018, 08:02 AM
#223
Gets Weekends Off
Joined APC: Dec 2007
Posts: 5,597
Trip, you have the pre Trump tax brackets listed. The new ones are lower:
https://www.forbes.com/sites/kellyph.../#58c32e943133
https://www.forbes.com/sites/kellyph.../#58c32e943133
09-20-2018, 08:26 AM
#226
Gets Weekends Off
Joined APC: Nov 2011
Posts: 4,535
IF this was a separate company funded thing IN ADDITION to what we currently get, including DPSP Cash, I'd be all for it.
09-20-2018, 08:27 AM
#227
Gets Weekends Off
Joined APC: Dec 2007
Posts: 5,597
No, the primary reason I am against it takes away control of a pilot's hard earned money for minimal if any tax savings. Pilots should be able to do as they see fit with their own money.
09-20-2018, 09:07 AM
#228
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Joined APC: Apr 2007
Posts: 4,614
A one size fits all plan that forces contributions into an asset with below market returns does a dis-service to the pilot group.
Solution
If we proceed with the Modern DB Plan, invest the contributions into a one size fits all asset.
Most of us will agree that something simple like an S&P 500 Index fund or a Total Market Index Fund has a place in almost every pilot's retirement plan. Even at 65 years old a portion of assets should be in long term equities. Your life expectancy is another 18 years. A conservative cash balance plan with a target 5% return doesn't fit as well. Pilots who desire that stability can invest in a life-cycle fund or a balanced income fund within the DPSP. Raising company contributions to 20%, then directing company funding above $55K (or current 415C) limits into a broad market equity Index Fund would better serve the pilot group. Individuals can use their DC plan funds to balance the mix for their personal needs.
The company saves 1.45% in Medicare taxes in exchange for providing a low cost plan. Pilots get tax savings on a retirement investment that is a better fit for the group as a whole.
09-20-2018, 09:33 AM
#229
Gets Weekends Off
Joined APC: Jun 2015
Posts: 1,757
Problem
A one size fits all plan that forces contributions into an asset with below market returns does a dis-service to the pilot group.
Solution
If we proceed with the Modern DB Plan, invest the contributions into a one size fits all asset.
Most of us will agree that something simple like an S&P 500 Index fund or a Total Market Index Fund has a place in almost every pilot's retirement plan. Even at 65 years old a portion of assets should be in long term equities. Your life expectancy is another 18 years. A conservative cash balance plan with a target 5% return doesn't fit as well. Pilots who desire that stability can invest in a life-cycle fund or a balanced income fund within the DPSP. Raising company contributions to 20%, then directing company funding above $55K (or current 415C) limits into a broad market equity Index Fund would better serve the pilot group. Individuals can use their DC plan funds to balance the mix for their personal needs.
The company saves 1.45% in Medicare taxes in exchange for providing a low cost plan. Pilots get tax savings on a retirement investment that is a better fit for the group as a whole.
A one size fits all plan that forces contributions into an asset with below market returns does a dis-service to the pilot group.
Solution
If we proceed with the Modern DB Plan, invest the contributions into a one size fits all asset.
Most of us will agree that something simple like an S&P 500 Index fund or a Total Market Index Fund has a place in almost every pilot's retirement plan. Even at 65 years old a portion of assets should be in long term equities. Your life expectancy is another 18 years. A conservative cash balance plan with a target 5% return doesn't fit as well. Pilots who desire that stability can invest in a life-cycle fund or a balanced income fund within the DPSP. Raising company contributions to 20%, then directing company funding above $55K (or current 415C) limits into a broad market equity Index Fund would better serve the pilot group. Individuals can use their DC plan funds to balance the mix for their personal needs.
The company saves 1.45% in Medicare taxes in exchange for providing a low cost plan. Pilots get tax savings on a retirement investment that is a better fit for the group as a whole.
If the company can't give us this portion in a tax deffered status, we might as well take a raise instead of retirement gains, and just let the individual pilot decide what to do with their money.
The whole crux of the DB plan would be to offer a way to tax defer above the DC plan IRS limits; the tax savings+ICR exceeding otherwise after tax dollars in self-directed investments.
Last edited by Planetrain; 09-20-2018 at 09:43 AM.
09-20-2018, 09:45 AM
#230
Gets Weekends Off
Thread Starter
Joined APC: Sep 2008
Position: Kickin’ Back
Posts: 6,971
Really? A 40% marginal tax rate is pretty easy to hit especially when your wife works and you live in a State that has a state income tax. Throw in medicare surtax too. If I either of the preceding was true for me, I'd easily reach 40%. Throw in a 10% sales tax and I am there.
Denny
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