FedEx 401K
 

Does anyone know the name of the company, I think out of Dallas, who has had success in assisting in managing the FedEx retirement plans for some crewmembers. In the past I have heard of good things about this company but have misplaced my contact info. Thanks for anyone who might know and who might have first hand experience with them. Cheers.

Rhoads Lucca Capital Management (888) 895-1212

Airline Pilots | 401k Autopilot Program | Retirement

I've been very happy with them. PM me if you would like to.
fbh

Does FedEx have a Roth 401k or just traditional? If no Roth, do you know if it's part of your contract openers? I can't imagine that adding the Roth option would cost the company too much...

Just traditional!

Roth 401k?? :confused: Did I miss something, would'nt be the first time.:D

Thanks, MD11Fr8Dog!

fly2ski - Yes, the Roth 401k was introduced in 2006. Just like Roth IRAs, you put in after-tax dollars, let your investments grow for a few decades and then extract your money with no capital gains or other taxes. Pretty sweet deal for the younger crowd. The 401k limit is $16,500 this year, so if you and your spouse each have a Roth IRA ($5000 each) in addition to the Roth 401k, you could conceivably invest $26,500/year to then grow tax free for your retirement. Not too shabby! (Note: I cannot invest $26,500/year, hence the word "conceivably.")

Chef, Thanks I looked it up after posting, again not a first. I could see that for the younger and or more junior crowd that would be nice. Wish it was 16.5k in addition to the conventional 16.5. Truth is most guys around here need the tax reduction aspect, good luck to you in your career. Hopefully it won't be too long before the Roth 401k does'nt apply to you:D

Pretty tough to be eligible for a Roth 401K for upper wage earners. If you make more than $177k joint filing or $121K single, you are not eligible for the Roth - these numbers might be a bit off.

Hey Tuck,

FYI, the AGI limits for Roth IRA's don't apply to Roth 401K's. Everyone is eligible for contributions up to 16.5K for a Roth 401K, regardless of income. The only caveat being that a Roth 401K plan must be available.

For high(er) income earners, a Roth 401k is not necessarily the great option it appears to be considering it is after tax dollars.

Rather than contribute the max to a Roth 401K, a blend of elected deferrals to both a traditional 401K and Roth 401K (up to a total of16.5K) may be a better option when one doesn't qualify (due to high AGI) for contributions to a separate Roth IRA.

YITSMV. (Your individual tax situation may vary.)

JS-

Good point. That issue wasn't even on my radar. That's a good "problem" to have! And yes, hopefully it won't be too long :) On a side note, initially I read your screen name not as a winter sport reference, but a Russian name (Fly Twoski). I'm not too smart sometimes.

FDX has an "after-tax" plan. Contributions are allowed up to 20% for non highly compensated, and up to 5% for highly compensated employees.

It is part of the PRSP, Pilot Retirement Savings Plan. And, used to be called the OSP, Optional Savings plan. But, they changed it to a much more confusing name: "After Tax Contribution Account".

roth 401k
 

IMHO, you should still look at a roth 401k even if you are a high earner. If you anticipate tax rates in retirement to be higher than they are today, that is one way to shelter some of your retirement savings from uncle sam.

YMMV

Pilot7576

It seems to me that the beauty of a Roth IRA is that when you actually start withdrawing monies from it, they are all tax-free. Not just the money you put in along the way, but any growth your fund may have experienced. That is the real advantage. You pay NO tax on any withdrawals. As well, you don't have to start withdrawing your money when you reach 70 & 1/2, which you do with a conventional IRA. As well, I believe that you can pass the entire Roth IRA to your children, and they too won't have to pay any tax when they withdraw funds.

While a Roth seems like a no-brainer, which it really is, if you're heavily invested in a conventional IRA, it will cost you a good amount of money to convert the conventional IRA to a Roth, because you have to pay all the tax, or capital gains your funds have made, since your initial investment. So if you're at the beginning of your career, put as much as you can afford into a Roth, but if you're at the middle or getting toward the end, you might be better off just leaving your money in the conventional IRA. However, you need to realize that taxes will probably go up (to pay for everything our government is spending money on) and so taking a long, hard look at paying the tax and moving to a Roth might be the way to go. Just my opinion.

JJ

I tend to agree with you, jetjok. Also there's a lot to be said for the less tangible aspects of retirement, such as peach of mind. Speaking only for myself, I would love to have a bunch of money in Roth accounts when I retire. I could truly enjoy withdrawing money without the strain of handing over a significant percentage to the government.

Must be a Georgia thing:D I looked into converting my traditional IRA to a Roth, but just couldn't get past giving the government so much money. But now is the time to make the transition, because I think you can split the capital gains over the next couple of years.....I'm thinking out to 2012.

JJ

Aren't there some income limits for contributing to a Roth IRA? Also, above a certain income level don't you lose the pre-tax contributions for a regular IRA?

Vanguard has a calculator that helps you decide about keeping your traditional 401k or converting to the Roth. JJ is pretty much spot on. I looked at it (less than 10 yrs to retire) and it was close to a wash on converting in my case. It's recommended to pay the tax when converting from funds outside the 401k; it's a lot of dough. If you're young and Roth is available; go for it.

Life's a peach!

What the? "H" isn't even that close to "e" on the keyboard. I must've been hungry.

PUB 590, page 2

http://www.irs.gov/pub/irs-pdf/p590.pdf

If you are REALLY interested, start digging into Chapters 1 and two :)

Everyone has access to a Roth nowadays with the new tax law conversion limits, even high earners, even if you do not have access to a Roth 401k at work. So if you prefer to contribute to a Roth, you and your spouse can dump in 10 grand per year. If you and/or the spouse are 50 or older, you can put an extra grand in for each of you that meet that age requirement. So that's 12 grand for when you get older. Since most people don't even save that much for retirement anyway (yes I realize YOU do but most don't) not having a Roth at work is a moot point.

There was some discussion earlier in the thread about whether to contribute to a deductible vehicle (401k for example) or a Roth. Consider this scenario:

Pilot A is in the 25% tax bracket and plans on being a good saver and anticipates being in the 25% tax bracket when he retires.
Pilot B is in the 25% tax bracket and plans on being a good saver and anticipates being in the 25% tax bracket when he retires as well.

Both pilots have 10K in pretax dollars to contribute to their retirement plan in year 1 and make no further contributions (to keep things simple). Both pilots earn 10% annualized on their investments every year. Pilot A invests entirely in a deductible 401K. Pilot B invests entirely in a Roth 401k. After X years, they retire and cash out their 401k's to buy a boat to attract a hot, young twinkie (both pilots divorced in this example). Who will be able to buy the bigger boat and therefore get the hottest trophy wife? The answer may be surprising. It goes to show that it is difficult to determine which investment vehicle is best without a crystal ball or the benefit of hindsight.

Let's say X is 10 years in this example.

Pilot A puts in the full 10K in his deductible 401K because no taxes are deducted. After 10 years he has $23579.84.

Pilot B puts in only $7500 into his Roth because taxes come out first ($10K * (1-.25))= $7500. After 10 years he "only" has $17684.61. Pilot A wins, right?

Nope. They both are cashing out to buy that boat. Uncle Sugar has to be paid by Pilot A. Pilot B owes nothing more in taxes.

Pilot A will owe 25% on that 23K+ balance. ($23579.48 * (1-.25))= $17684.61

So who gets the bigger boat? Neither! They both end up with the same exact after tax balance no matter what value is assigned to X. Fortunately for them both, the hottest trim in town are twins, they all live in rural Arkansas so a boat only worth 17K is impressive to these hot young women, and they both live happily ever after. The End.

I guess the point is that unless you know what tax bracket you're going to be in the future compared to now (crystal ball anyone? Will taxes 10 or 20 or 30 years from now be higher or lower for you?), the decision between Roth and deductible plan can get a bit fuzzy.

It's too early to verify your logic and math, but your humor sure got me!

2 funny!

Goose17

When can new hires contribute to the 401k? Just curious...didn't see any info about it and a buddy of mine at FDX thinks one can't do it for the first year.

Go to the FEDEX pilot web site. Look under the Contract Administration tab. You will find the tab for Pilot Benefit Book. Then look under Retirement. It will list the requirement for each plan.

Hawkeye,
I don't think he works for us yet - so that's not going to work for him.

I'm pretty sure you can start making contributions to the 401K after 6 months of employment.

Enrollment in the B-fund and the 7% company contributions start after 1 year (unless you have significant time off like Mil leave or something else).

Pilot Benefit Book
Retirement: Pilots’ Retirement Savings Plan (PRSP): Eligibility for Plan Participation

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Eligibility for Pre-tax/401(k), After-tax, and if Eligible, Catch-up and Rollover Contributions -- If you are employed by FedEx Express, you can begin making Pre-tax/401(k) contributions, After-tax contributions, and if eligible, Catch-up contributions and Rollover contributions on your Plan Entry Date. Your Entry Date is the first day of the month coincident with or next following:

Your attainment of age 21; and
Your completion of 6 months of employment with FedEx Express or another Controlled Group Member. (For a list of Controlled Group Members, see "Scope and Guidelines")
Eligibility for Employer Matching and Employer Sick Bank Contributions -- If you are employed by FedEx Express, you are eligible to receive Employer Sick Bank Contributions and Employer Matching contributions on your Pre-tax/401(k) contributions on the first day of the month coincident with or next following:

Your attainment of age 21; and
The first anniversary date of your employment if you are credited with at least 1,000 hours of service during your first year of employment. If you do not complete 1,000 hours of service during your first employment year, you may do so during any Plan Year starting with the first Plan Year beginning after your date of hire; you are eligible to receive Employer Matching and Employer Sick Bank contributions on January 1 next following the Plan Year during which you were credited with at least 1,000 hours of service.
Hours of Service -- Hours of service include each hour that you are paid or entitled to pay by FedEx Express, including time off for vacation, holidays, medical absences, jury duty or military duty as required by law.

Hours associated with non-taxable amounts paid from a Pilot's Occupational Illness/Injury Sick Bank shall be counted as hours of service for eligibility, vesting and benefit accrual.

This does not include hours you are paid or entitled to pay just to comply with:

Unemployment compensation laws,
Disability insurance laws,
Payment made for medical expense reimbursement,
Service during hours of family medical leaves (except for the first 501 hours, which may be used to prevent a one-year break in service).
Hours credited by the Payroll Department are used in determining credited service while actively at work. The Payroll Department credits active pilots with 95 hours per pay period.

Pilots receive credited service for periods of disability which are calculated as follows:

Days of Leave ÷ 7 Days x 45 Hours = Total Credited Hours per Leave

If you are an individual who, on or after June 1, 1992, first becomes eligible for a disability benefit under the terms of the Federal Express Corporation Short Term Disability Plan or the Federal Express Corporation Long Term Disability Plan (as such plans may exist from time to time) or who becomes entitled to receive Workers' Compensation benefits, hours of service shall be credited to you as if your hours of service had been continually credited during the period of such benefit entitlement up to your normal retirement age, or if greater, and to the extent required by law, for the period for which you qualify for such benefits.

Pilot Benefit Book
Retirement: Pilots’ Money Purchase Pension Plan (PMPPP): Eligibility

--------------------------------------------------------------------------------
If you were a pilot on May 30, 1999, you automatically became a plan participant on June 1, 1999. Otherwise, you automatically become a plan participant on the first day of the month coincident with or next following:

Your attainment of age 21; and
The first anniversary date of your employment with a Controlled Group Member, if you were credited with at least 1,000 hours of service during your first year of employment. See listing of Controlled Group Members and "Hours of Service," below. If you do not complete 1,000 hours of service during your first employment year, you may do so during any plan year starting with the first plan year beginning after your date of hire. You enter the Plan on the first day of the month coincident with or next following fulfillment of the required 1,000 hours of service.
If you are classified by FedEx Express as an independent contractor or leased employee, you are not eligible to participate in any benefit plans sponsored by FedEx Express, even if such person is later determined by a court or administrative agency having competent jurisdiction to be a common law employee of the employer.

Hours of Service -- Hours of service include each hour that you are paid or entitled to pay by FedEx Express, including time off for vacation, holidays, paid medical absences, jury duty or military duty as required by law.

Hours associated with non-taxable amounts paid from a Pilot's Occupational Illness/Injury Sick Bank shall be counted as hours of service for eligibility, vesting and benefit accrual.

This does not include hours you are paid or entitled to pay just to comply with:

Unemployment compensation laws,
Workers' Compensation laws*
Disability insurance laws
Payment made for medical expense reimbursement or
Service during hours of family medical leaves (except the first 501 hours are used to prevent a one-year break in service).
Hours credited by the Payroll Department are used in determining credited service while actively at work. The Payroll Department credits active pilots with 95 hours per pay periods.

Pilots receive credited service for periods of disability* which are calculated as follows:

Days of Leave ÷ 7 Days x 45 Hours = Total Credited Hours per Leave

*If you are an individual who, on or after June 1, 1992, first becomes eligible for a disability benefit under the terms of the Federal Express Corporation Long Term Disability Plan or the Federal Express Corporation Short Term Disability Plan (as such plans may exist from time to time) or who becomes entitled to receive Workers' Compensation benefits, hours of service shall be credited to you as if your hours of service had been continuously credited during the period of such benefit entitlement up to your normal retirement age, or if greater, and to the extent required by law, for the period for which you qualify for such benefits.

...and that's why the benefits JetJok pointed out (...no mandatory withdrawls at Age 70 1/2 and the ability to pass the account on to your heirs at a stepped-up tax basis) make the Roth a better deal, when the tax rates, time horizon, and rate of returns may make two options very similar / fuzzy.

Thanks for the info guys!

When first starting out, the Roth is always a better deal. However, when thinking of converting from a conventional IRA to a Roth, it becomes much more difficult to determine the correct path. Just like life in general.

Personally I think the key to life is being debt free (I'm not because of house debt but working on it). If I had a bunch of money to put in a Roth I'd make sure I didn't have any credit cards or car loans first (then stay that way and don't rack them up again). I'd also pay off any debt that had a variable interest rate like HELOCs considering the Qe that is going on the $$ will be worth about half in the not so distant future compared to the beginning of the century. You will not want to get stuck with anything that has a variable rate when massive inflation takes hold. If your house has an arm get the lowest fixed rate you possibly can now while they are at record lows and the asset should appreciate with inflation as long as the economy doesn't completely tank. Then continue to hammer away at that home debt. Remember that FedEx puts 7% of your earnings in a retirement account regardless of what you contribute to your 401K ($500 match only). This is no small chunk of change especially if you reach the point where the sick bank money goes in as well. Hopefully we continue to be a healthy company well into the future and the 2%x25 A Plan remains intact for our retirements. If not it will be the fact of having no debt when you retire that will allow you to live comfortably with a smaller (or larger) nest egg and that will allow you to pull money out of a taxable IRA at a reduced rate putting you into a lower tax bracket certain years if you desire. Final note: don't take financial advise from a pilot ;-)

Enter Content

Not really true because of the Required Minimum Distribution that's associated with all traditional IRA's, which require you to make calculated withdrawals on an annual basis, once you reach (I believe) 70&1/2 years old. So in effect, depending on how large your IRA has grown to, you could actually find yourself in a situation where your taxable income could be higher than it was when you were actually working, thereby increasing your tax bracket, and of course then increasing the taxes you pay.

That's another reason for starting out with a Roth IRA, because (again, I believe) you aren't hindered by having to ever withdraw funds, if you don't want to, and if you do withdraw, it's tax free, both for you as well as your heirs. A real cool deal.

The best way to retire comfortably is to: 1) stay married to the same spouse (no matter how much it hurts:D; 2) regardless of what house you own, pay off the mortgage as quickly as you're able; 3) eliminate all other debt, starting with credit card debt, then going on to student loans, etc, etc, until you're completely debt free; 4) Unless you're living hand-to-mouth, make sure that each and every month you pay yourself first... that's to say you should be saving as much as you can by contributing to your company's 401K plan, using payroll deduction, so you don't miss those monies; 5) Review your financial situation every 5 or 6 months, making sure that you're invested in a way that allows for some growth as well as preservation of assets, but that also allows you to be able to sleep at night; 6) If an investment sounds too good to be true, it probably is.

If you are a FDX Widebody Captain making 250K+/yr. and are debt free at retirement with about 1.5M in your Vanguard account at age 65 with 130K/yr - (spousal annuity fees) coming in for life from the A plan. I am not sure the amount, but I would guess you would not be forced to take out an additional 130K/year from your tax differed retirement putting you in the same tax bracket you were in when you retired. Let me know if I'm wrong, but the max you can even contribute to a tax differed retirement per year is somewhere in the mid 40K range. Not to mention that you are probably in the highest tax bracket anyway, and it is very likely that it will only go up with how broke the government is right now putting you in an even higher tax bracket when you retire with the same income level. Not much control over that anyway however I think we agree that if you are dangling around a bunch of frivolous debt deal with that first.

You can wait until 70.5 before taking an RMD.

Dude ... with solid advice like that, will you please be my personal financial planner. :D

Remember Never take financial advise from a pilot!

Good thinking... I'm sure you are more comfortable hearing from your advisor, "go all in, it's a sure thing", "trust me, I've good information", etc. ;)

And don't forget this priceless jewel of wisdom from your financial adviser (when your portfolio has dropped 70%) "Let's stay the course, things will turnaround." Yeah, right.