MoosePileit

The one whose member created this website we all use.

JustInFacts

I was using the 4% because that is what the poster I quoted used. And that amount was for the max retirement in the rejected TA, not our current retirement.

NO, THE COMPANY DOES NOT BUY AN ANNUITY FOR PILOTS. THEY NEVER HAVE. Ask the R&I people, or look back at past publications about the subject on the union website. They did purchase an annuity some time ago for other employee groups, but not pilots.

You can not use the cost of an annuity today to conflate the value of our pension to $1.7 million.

You can not assume that every pilot will wait until 65 to retire. Our current pension allows full benefits at age 60 and 25 years at Fedex.

Moneybags

Use the below link to calculate the lump sum value of a pension at the start of retirement. In this example, an annuity is just a fixed payment. It doesn't necessarily mean it's the insurance product, which incorporates additional fees besides the principal payments.

https://www.financialmentor.com/calc...ity-calculator

Using a 4% interest rate, the values of a $130k pension are:

Years of retirement: Value
15: $1.45 million
20: $1.76 million
25: $2.03 million
30: $2.25 million

Keep in mind, if you and your wife die in a boating accident day 1 of retirement, the value is zero.

MonkeyChunk

The poster that you quoted was using the 4% rule as a withdrawal rate from a retirement account that continues to increase to cover cost of living increases. Additionally, that retirement account stays in that person’s name, and will stay with the family after that person dies. A pension is a totally different retirement vessel, you cannot in any way apply the 4% rule to it to compare it to a 401k retirement nest egg. The closest you can do is find the annuity value of it, which is no where near your calculated $4m. If FedEx indeed did stop buying an annuity for retiring pilots, you can be sure of one thing; it’s because they found a cheaper way to do it, otherwise they could just go out and buy an annuity insurance product on the market.

The increased pension value of the failed TA1 was an additional $39k/yr. Per PM in one of his briefings, the cost to increase the pension for those retiring soon was going to be north of $500k per pilot. Coincidentally, the cost to buy an additional $39k/yr annuity for someone retiring around 65 is guess it: about $550k. My point being, you can be confident that valuing a similar annuity product to our pension will get you in the ballpark of what it is valued at.

JustInFacts

Like you said, that calculator does not include any costs for the actual annuity. You also fail to mention that annuities are much cheaper today than they were just 5 years ago due to the Fed tightening and treasuries returning a higher rate. So that 4% that you are using could easily be less than 2% when someone retires. Even so, using your numbers, you still fail to account for the money that the COMPANY must put into your DC plan so that you could purchase that annuity, even though the company does not purchase annuities for pilots. Let's take the 30 year cost. Since you would have to pay taxes on the one time withdraw from your DC plan to pay for the annuity, and those withdraws are considered normal income, it would be taxed at 37% today (39.5% after 2025). So, the company portion of the DC plan would have to be worth north of $3.57 million to have the cash for you to purchase that annuity. And if you retire at 60 and live past 90, you get nothing from that annuity every year you live after 90. So that calculator isn't for a lifetime annuity.

JustInFacts

Yes, and what I am trying to get at is how much the company funded DC plan would have to be worth so that an individual could purchase that lifetime annuity. See my reply to moneybags.

No, Fedex did not stop purchasing annuityies for retiring pilots, THEY NEVER STARTED PURCHASING ANNUITIES FOR RETIRING PILOTS.

If you don't purchase a lifetime annuity, then the 4% rule is a pretty safe rule of thumb. If you are insistant on comparing it to an annuity, then the $169,000 per year pension would require a one time payment of about $2.5 million today. If you took that money from the company DC plan, you would pay taxes on it as ordinary income, so to end up with the required ammount after taxes, that plan would need to be worth about $3.97 million. That is a lot closer to my number of $4.225 million than your $1.7 million. Again, the company doesn't purchase an annuity. The question is how much would your company funded DC plan need to be worth for you to get the same monthly payments as the pension guaranteed for life.

Moneybags

Absolutely incorrect analysis. This has NOTHING to do with buying an annuity.

1. Buying an annuity would be setting money on fire
2. These numbers are what you need at the start of retirement in your DC plan, to pull 130k a year from it for the years provided. It assumes a 4% rate of return in retirement, which is a pretty standard amount used by financial advisors.
3. Don’t confuse annuity the insurance product with annuity in financial language, meaning a a regular, fixed payment. I think many people confuse this. For example, the MBCBP proposed had a lump sum or annuity option. The annuity option didn’t mean the company would buy an annuity, it just means the pilot would receive a regular fixed payment from the MBCBP trust. The value of that fixed payment would be based on the lump sum the pilot had at retirement.
4. The link I provided converts a fixed regular payment into the lump sum required at the start of retirement. Do not add another million to that because of taxes etc. Also, legacy pension payments are taxed…

Stan446

Most widebody Captains were not working extra during negotiations, it was the group now complaining that TA1 sucked. And a pension bump benefits everyone, but that makes no sense to you. Its the same cycle at every airline. When guys are voting on their last contract prior to retirement, they are going to vote for what benefits them, thats their right and their vote. But the TA goes to the majority. Everyone here whining about how the, "senior" guys are voting for themselves will be doing the same thing on, "their" last contract. Lets not fool ourselves. There is no unity. Its one for all when it comes down to taking care of what benefits "YOU". If you think there is unity, then guys would vote for the pension bump to give the guys who have been here decades the pension increase guys have been fighting for. But no, its all about onself.

Anthrax

WRONG … again!

For Stan it’s all about you!

There were plenty of senior pilots on the cusp of retirement that, on principle, voted NO on the POS TA.

I know that this is hard to grasp, given your selfish nature, but it is a fact.

globalflair

Bwah HAHAHA!

yeah right!

Just ask around. One of the LCA's brags about how much he made during covi...ahh em ....negotiations.