Originally Posted by First Break

When you receive DC excess, you are paying the highest marginal tax rate on those dollars, because they are effectively the last dollars you earn. Depending on your state, you may be losing upwards of 40+% of your spill cash to taxes, not to mention the 1.85% to Ambrosi. The arbitrage has nothing to do with the “tax bracket” you will be in during retirement. It has everything to do with the effective tax rate of the dollars that are withdrawn from your tax deferred retirement plans while in retirement. If you are paying a 40%+ effective tax rate on ALL dollars you withdraw from your tax deferred accounts, you won the game of life and likely have substantial income in retirement outside of your retirement accounts. Most realistic scenarios for an average pilot have an effective tax rate or IRA withdrawals of no more than 20%, and even that would require a pretty large yearly withdrawal rivaling a pilots pre retirement active income.

Some quick googling of the difference between marginal tax rates and effective tax rates may help illustrate where we might not be lined up on how we view this decision.

On the investment return side, you have to consistently earn something like double the return of the MBCBP to overcome the tax arbitrage above to come out ahead for a middle of the road pilot with normal circumstances.

If you are gifted enough to make a 10-12% return every year, without losing anything, EVER, consistently for your entire career, i admit you may come out ahead. Pilots with the ability (or luck) to achieve this remarkable rate of return for multiple decades in a row with no losses are in a pretty rare demographic amongst our seniority list. If you know any of them, I’d gladly give them my password and pay a handsome commission to manage my accounts.

One place you and I are in violent agreement is that Real Estate can reliably eclipse these gains if one has the fortitude and desire to invest the time, energy, and risk tolerance required to be successful.

But I also applaud the union for thinking outside the box and trying to improve the retirement outcome for the average Joe who wants nothing to do with having a second job owning/managing real estate or actively trading their spill cash.

And there must be some value beyond “basic math” in this plan, as nearly every other major pilot group has disclosed they are actively seeking a MBCBP. I’ve seen it mentioned by UAL, APA, SWAPA, FedEx, JetBlue, and Alaska. To my knowledge, Delta is much further ahead than any of these other groups.