Originally Posted by
crazyjaydawg
I don’t necessarily agree with this. Mostly because of Gunfighter’s analysis below. This will typically be paid by captains on the back side of their careers.
I agree with you that 20% DC should be the target going forward (IRS 415(c) are based off of that).
I also believe that it should be negotiated or mutually agreed on as a group to adjust the asset class for generally better returns. The LIRKX fund is a joke and whoever made that decision needs to be talked to. Blackrock is the fund in charge of the ESG push. I don’t know why everyone seems OK with that.
Good analysis. The plan has potential, but as it stands now ~4% returns over the life of the target fund doesn’t even cover inflation over that time. A better asset mix would help, but unless someone is 58.5 years old or older, it’s a bad deal.
If we ever got DC to touch 20% then maybe it becomes even less of an issue because likely fewer would get excess, but it all depends on future pay rate growth vs. IRS 415(c) limits which are tied to inflation.
I have thirty years to go, I’m aggressive with Roth contributions and I will get excess every year (another COVID not withstanding). There’s no way I’m tying that money up in a fund that can’t beat inflation.
Fewer people get excess with a higher contribution? You’re going to have to show some math on that one.
You keep saying that the black rock fund doesn’t beat inflation, but a simple web exercise completely disproves that. The 10 year return is substantially ahead of inflation.
ESG nonsense notwithstanding (we are likely on the same page, I’ll leave it at that), the ALPA comm said that the plan assets would initially be placed in that fund. My guess, having dealt with professional management of a very large trust in another life, is that there has to be some time for assets to accumulate before professional active management makes sense. The expense ratio of the Blackrock fund is pretty modest, and of the available funds that meet the requirement for the 40/60 ratio, it actually looks like one of the more efficient ones. That said, there doesn’t seem to be anything forcing that fund to hold the assets forever, and the way ALPA worded it makes me think it will be temporary. And FWIW, the Company signing all our paychecks has gone ESG hog wild too. I’m not sure why that would influence your decision to participate in the plan, but you do you.
When I go back and re-read this thread, two themes stick out for people who believe they are better off outside the plan. (1) They want to spend the cash now, or (2) They don’t think the MBCBP returns will be adequate to overcome the opportunity cost of missing out on taxable higher returns outside the plan.
I have no words for people in (1). They have decided to raid money that is meant for retirement, and I say have at it.
What I’m trying to further understand about the guys in the (2) camp, is are you truly looking for max returns with all your investable assets? Do you really have no cash/money market/low risk assets in your portfolio, ever?
Considering the modest number of dollars that most people will contribute to this plan, it will take quite some time before it’s a large part of your retirement savings. Is a percent or two of your portfolio going to a moderate to low risk fund really the end of the world? And if you already have some allocation to a similar risk profile with a portion of your 401k, then I’m just not seeing any opportunity cost whatsoever if you rebalance the 401k to account for the MBCBP. Not being critical, I’d genuinely like to know if you guys are really putting every penny you have in higher risk/return investments.