Originally Posted by
PilotWombat
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.
The MBCBP is not a prerequisite for an annuity
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.
According to DALPA I am putting 9% of my compensation toward the plan. Putting money in the plan takes it away from other areas of the contract. Give me a 9% pay raise and let me chose what to do.
The extra $20K per year for hookers and blow won't make or break my plan, but my heirs may appreciate the $308,000 per year in perpetuity because of the MMIC plan. Your 6% annuity stops paying on death, the 4% withdrawal rate is in perpetuity. If I chose a 6% annuity for MMIC, my H&B budget just increased by $60K.
There is a way to do a valid comparison among the plans, I've intentionally chosen a vanilla conservative comparison using S&P ETF. The MMIC plan far exceeds those numbers in a conservative real estate portfolio, but that requires more effort than an ETF and isn't an equivalent comparison of the different vehicles. When you start factoring in the flexibility of the MMIC option it is far superior.
With the exception of the min balance plan, DALPA is making a good effort at providing solutions. I hope they continue pursuing an optional MBCBP, because it has a place for older pilots looking to defer income. The plan is safer than the NQDC plan because of the reduced bankruptcy risk. The problem with the proposal is that it puts too much in a stable return fund relative to the balance of a pilot's overall portfolio.