interceptorpilo

Valid argument. I ran it with 5M staring retirement balance and came up with similar numbers as far as difference in value at 67. 5M would get you quite a few more years. BTW life expectancy of a 65 year old male is 83.

SideStickMonkey

I like math fine enough.

You can also make numbers prove your point when you are pulling numbers out of one’s ass.

interceptorpilo

OK your first argument was that I didn’t account for the 65 year old’s account accruing interest. I showed you I did. Then you argued that I had the retiree taking home more than the active pilot. I showed you that was not true. So then you just throw names and say I’m pulling numbers out of my ass. I did the math. I won’t respond to you again unless you actually do some math to show me wrong.

SideStickMonkey

Someone earning $425k after savings isn’t spending $425k.

There’s this little thing called taxes.

So yeah, this mystery person is burning more money as a retiree than as they were when they were actively employed. It doesn’t pass the common sense test.

TED74

I don’t care enough about your math to show you all the ways it’s wrong. I honestly don’t care if you’re surprised now or later that what you think you’re going to earn or what you think you can/will spend in retirement is way off. If you’ve got a money guy or gal, throw them your assumptions if you care to - it honestly matters that you know what you’re likely to have and to spend, but of course it’s your prerogative to do as you wish.

First, I don’t know if your 500k includes or doesn’t include the 17% DC.

If your 500k/year doesn’t include the 17% DC, I’d love to see how you still take home 400k after state/federal/social security/Medicare/ALPA. If your 500k is inclusive of the 17% DC, you’re absolutely not taking home 400k.

If you have a “typical” airline pilot life and actually SPEND (meaning into things that aren’t appreciating or contributing to your net worth and aren’t producing any current or future income potential) $33k/month every month starting the first month you retire…yeah, the numbers are going to look terrible. Because that’s not sustainable, particularly if you plan on doing so in perpetuity, and in addition to spending your social security income and any other spousal income or social security or military pension. But I’d also like to be your buddy and ride along on this spending spree!

For a job that pays 500k/yr and yields 750k of actual money deposited into your checking account by the end of two years (and I think I’m being overly gracious on after-tax residual)…you simply aren’t going to be down $2M in the same time period.

Is the 15% you reference above additional savings beyond the 17% DC? If so, that’s demonstrating that the pilot’s monthly expenditures don’t even require all of his take-home, since he’s able to save.

There once was a draw-down “common wisdom” that 4% was a pretty safe back-of-the-napkin math number to ensure you don’t run out of money. It’s debatable how good or universal that number is, but it’s not off by a lot for most people. Your scenario of drawing down 10% of your best egg annually is truly nonsensical. It’s also not uncommon and thought to be relatively conservative to estimate needing 80% of your final annual income in retirement (not 100%)…so there’s that.

Just for fun, what do you suggest this hypothetical pilot is spending $33k/month on, since to make your math work it can’t in any way feed back into his net worth?

interceptorpilo

First thank you for having a mostly logical debate on this vice the SSMonkey. Although the “I don’t care about your math” makes me think you can’t counter it because it is just math. Also let me say that this was simply an exercise to show how at least it was plausible that the extra two years didn’t just mean $1M more but could plausibly be closer to $2M. Do I make assumptions? Hell yes. Show me your assumptions. For instance if you don’t think 500K a year for two years that you wouldn’t otherwise be getting isn’t considered an extra $1M then OK but I thought that was the agreed on starting point. Do the math and show me how you come up with another number.

TED74

I know it’ll sound rude and I’m sorry…I honestly just don’t care enough because I don’t even know you. If we flew together, I’d write it all out and help the time go by at cruise because I’d know you and I wouldn’t want you to screw yourself financially.

Even at a very basic level, just ask yourself:

If I COULD put an extra $750k in my bank account over two extra years…but I don’t. How am I going to be $2M short of where I’d be if I had? Where did the extra $1.25M go??? Is that unrealized investment gains, equating to 160% of the money I didn’t earn? You’re essentially suggesting that you can turn 750k earned over two years into 2M at the end of those two years. That’s not a thing.

Extenda

I think he means the interest accrued on your nest egg that isn’t being drawn upon and instead being reinvested in itself and added to for two extra years is huge. I don’t math good but it seems to make sense.

Puddytatt

Just to be clear, are you saying it is close to a $2m difference in net worth when pilot A works until 67 and pilot B works until 65? Or even a $2m difference pre-tax?

A couple things. You said "Gains are actually higher because that 75K isn’t put in all at the end" yet you treated it like it was all put in on day 1 of the year and got the full 6% growth. A more realistic number would be 4-5% growth on the $75k addition, since pilot A would probably hit max out of pocket by July at the latest if they make $500k a year. Earlier with a large profit sharing check.

Second, did pilot A have no expenses at all over the course of his 65-67 years? To get anywhere near a $2m increase in pre-tax money by working 2 more years, you would have to count your change in retirement plans of roughly $1m, and then count all of the $500k income for both years for pilot A as well. You took in to account $400k of expenses pre-tax for pilot B via 401k withdrawals, and the subsequent drop in their 401k and growth on those withdrawals. For pilot A, you would also have to reduce their $500k income by some expense amount as well, unless they are living in the crew room and eating all their meals out of the snack baskets. You would also have to reduce the $500k by some share of the $75k that they put in their 401k out of their own deductions, as the company can't put in that much. Counting the full $75k as an increase in the 401k for pilot A and also as income is counting at least some portion of it twice.

Super over simplified, but the same $400k in pre-tax expenses and the pilot deducting $20k of that $75k 401k contribution on their own, would only leave $80k of that $500k at the end of the year. $80k x 2 + the $1m in 401k change would only be $1.16m difference between the 2 pilots.

Also, you said "And you are two years further down the age road toward death and will need two years less of withdrawals from retirement account." So is pilot B in your example. They are both 67.
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interceptorpilo

. Hookers and blow.