Originally Posted by
golfandfly
We have other line in the sand items. We wanted to burn the heretics that dare considered to look at other retirement options. I have to admit it, but I agreed with the union's position at the time. Now many of us wonder if that was so smart after all. If they would have said, "the retirement high five number would stay at 260k", would you have entertained any other options? Let's say you are 30 and just got hired here. What is 130k (minus any survivor benefit) going to be worth in 2046? We can only use statistical inflation numbers to guess, but I'd say it won't be worth a lot. What would a 17% B fund (cash over cap)be worth? Again, we can only guess at market performance, so we really don't have a clear picture. But, needless to say, I think most of us would have listened to the offer had we known that our A fund wasn't going to improve.
Again, I'd be willing to listen to any offers they want to talk about.
We can guess, based upon historic and expected market returns to evaluate which is the better deal. We also have to guess\assume that there's no huge knockout blow to FedEx in the future. There's no way of knowing what technology may bring to us in the future. If you think FedEx is going to go away, then Freezing or eliminating the A play is a better bet. That 130k would look mighty good to whatever the PBGCC was willing to pay out if they let FedEx handover the A plan (Current PBGCC is 39k at 60, 60k at 65)
That 130k is going to be worth about 70k in todays dollars (ballpark WAG using rule of 72, it'll be a bit more if you use Govt's WAG, bit less if you use historic norms. Way less if the US implodes ala Greece)
Keep in mind, that if you look at expected wage growth in the US, that 130k is still going to be above the Median and Average income in the US.
As to a 17% B plan, most people who run the numbers never quite think of the fact that Taxes will be an issue and cut into your returns. Companies contributions to the A plan are tax free to US and that's a huge benny, and they always will be. A big B plan runs into issues with cash over cap surprisingly quickly if you are also saving into your 401k. But, for the purposes of Internet Number calculations, let's assume that cash over cap isn't an issue and the company volunteers to pony up extra cash to pay for the taxes involved. And let's also assume a newhire that wants to enjoy some relative Seniority and QOL who was fortunate enough to be hired as a WB FO, the NB Capt at 6, then WB Capt at 15. Assuming the 6% expected return will net you a cool 3.46M at 30 years. (of course that 3.46M will only be worth 1.86M of today's dollars)
Sounds great, and way better than the 1.83M a 9% B plan will get our mythical newhire.
Until you look at the cashflow.
Suggested cashflow for your $$ in retirement is a 4% drawdown rate. 4% of that 3.46M nets you 138.2k. The cashflow the lowly 130k pension will get you plus the same 4% drawdown of your tiny 1.83M will net you a cashflow of 203.2k
It's quite true that the value of your 17% B plan will be greater than the 9%, possibly leaving $$ for your heirs-especially if you die early. But if leaving money to your heirs is a goal, doesn't take very long of simply saving the extra 64.9k the A+B plan combination gives you to match the money in the big B plan.
And, just as we don't know what will happen with FedEx, we also don't know what Medical Advances are just around the corner. There's been some recent breakthroughs with stem cells, so certainly not outside the realm of probability that lifespan could increase another decade or two.