Originally Posted by
Gunfighter
Great job with the spreadsheet on DropBox. The lookup tables for tax rates were a nice added feature. My biggest complaint is the 6% distribution rate on MBCBP vs 4% on MMIC (My Money, I Control). The correct analysis is to compare the account values, as both distribution options are available in either plan. When applying an equal rate for distributions, the MMIC comes out ahead for all years tested. Anything less than 6 years wouldn't calculate.
I disagree with your analysis recommendation; these are retirement income vehicles, what matters is how they affect my/your retirement income. I used the proposal that DALPA has given us and what they said is the most likely use of that money. I'll look at adding other options in the future. Having said all that, if the account values are what you are looking for, they're the first three lines under in the "At Retirement" table. Pre-tax, of course.
Also, I fixed the 6 year bug, thanks for pointing that out. I'll try to roll it out tonight.
Originally Posted by
Gunfighter
A second adjustment I'd recommend is to look at marginal tax rates vs average tax rate for calculating the MMIC contributions. You are giving an unfair advantage to the MMIC plan by reducing the contribution by the average tax rate not the marginal rate as you should do.
Thanks, I kind of forgot I did that. It was too difficult to figure out what that would be if the "DPSP Cash" took you into a higher bracket, so I'll add that to the list of things to work on.
Originally Posted by
Gunfighter
Also, the capital gains taxes didn't seem to be properly calculating. The VLOOKUP was referencing only the capital gains income and not total income when applying the capital gain rate.
I'll work on that too. I don't have a lot of experience with how capital gains are taxed, so I'll need to do some more reading to make it right.
Originally Posted by
Gunfighter
I have yet to meet with a CFP, fiduciary or otherwise that grasps what can be done with money outside of traditional paper investments...there is an entire world of investments that extend beyond an ETF that are available within the MMIC option...spend some time with a room full of multi-millionaires and you quickly realize that a 5% MBCBP vs an 8% MMIC is not even a relevant conversation. There are so many things that can be done with money outside of the traditional investments. There is a large group of pilots asking for the freedom to pursue some of those options.
I'm fairly certain that they know what can be done outside of your standard investment. It's just that those things come with significantly higher risk and as such are not suitable for a retirement portfolio. If you've maxed out your IRAs, 401(k)s, HSAs, and every other option available to you to the point where you're literally trying to figure out what to do with all the extra money you have, then I don't think anyone would blame you for being willing to take risks with it. In fact, that's pretty much your only other option at that point.
Originally Posted by
Gunfighter
Again, no issue with the 6% return, but the proper analysis is to apply it to both piles of money. A 4% withdrawal rate from the MMIC plan will likely leave a sizeable estate for your heirs, but a 6% lifetime annuity is worth exactly $0 when you die. These values are not captured in the 6% vs 4% analysis.
Also true. But, just to play devils advocate, having guaranteed income from an annuity (whether you wanted it or not) could potentially let you keep all that money in the market making more money because you don't need to pull it out. Make some smart roll-overs to some vehicles not subject to mandatory withdrawals and you've got yourself quite a legacy.
Originally Posted by
Gunfighter
The real issue with the MBCBP is the "optional" nature only exists within DALPA
While I understand that nobody likes being told what to do, I think the anger is misplaced. Having an essentially guaranteed return of 5% of the income over and above 401(k) limits, of which you put exactly $0 towards, is a hell of a lot better than a sharp stick to the eye. I mean, using my default numbers (which, yes, I've heard your complaints about) over a 30 year career, the difference in retirement income is $288k/yr vs $308k /year. If that extra $20k is what makes or breaks your retirement, I think you need to start looking for some slightly lower quality hookers and blow.