I agree. Especially with SCOPE challenges we face. The latest AMJV info is chilling, and we haven't really even unwrapped all the KAJV issues going forward, let alone potential Chinese airline partnerships. If we go into C19 even thinking there's going to be some massive retirement paradigm shift, we'll be stuck negotiating with ourselves. Best case it just drags out a year or two more than it would. Worst case we end up paying for our own compensation by selling more jobs.

 

Increasing the DC doesn't help guys with only a few years left. We need more than that to meet expectations. Something not linked to market volatility. Maybe a choice. But something for the FNG too.

 

I think I have a solution. C2019 $304,000 signing bonus. Old guys and FNGs get the same.

Option 1: Use all of the money to buy your own annuity (Or let ALPA or Delta broker one for us). At a 5% rate of return that will give you $2000/mo for 20 years in retirement.

Option 2: Take that signing bonus, pay tax on it now, and optionally fund a Roth 401k or just save it to self fund the $18k personal contribution to DC/DPSP every year for the next 16-17 years.

Both options have equal present value.

Option 1 carries little risk, but low return. Returns are traded for security. Issuing insurance company takes big fees and high commissions.

Option 2 carries market risk, but arguably higher returns. (Joe pilot at 45 years old invests the $304,000 in a low fee index fund, leaves it alone for 20 years, makes a conservative 8% annual returns, and would have $1.5 million at age 65... PLUS all the other retirement from the 16% DC).

If the $304,000 signing bonus times 15,000 pilots seems like a reach for our NC, maybe it is. My point is jump starting a DB-like-annuity is incredibly expensive, even a modest $2000/mo for 20 years.

Even $1000/mo for 20 years under the same assumptions would need to be a $152,000 signing bonus.

Im open for R and I's presentation, but I dont see how even a modest DB is going to get started now.

 

It amazes me when educated professionals pay money for an annuity. There is a saying, "Annuities are always sold, never bought"

A friend who recently retired told me he purchased an annuity when he retired, from the unscrupulous "advisor" he hired.

The look on his face when I told him he already had a~ $3500/mo. annuity ".....it's called social security.

 

Fully agree, the commissions and fees destroy the value of annuities. I like Planetrain's signing bonus idea, with a 3rd option to remove the funds entirely from the market and invest in real estate. That is the worlds best annuity, especially when smartly leveraged into a $1,000,000 portfolio.

 

OK, $304K signing bonus? I'm in but not holding my breath on that. Annuities, you pay for the insurance (peace of mind) of a steady income stream with the annuity. Lots of people simply need the income or get tired of watching the S&P yo-yo around and need to "preserve" what they have. Purchasing from your local insurance agent is the most expensive way of obtaining one. There are products thru Vanguard and the like with way lower fees and simple products. Some offerings are wildly complicated and I'd completely avoid them. Buying an annuity and later deciding you want the $ back is gonna cost you dearly. A retiring pilot should have adequate assets to construct their own annuity. With Soc Sec and PBGC I already have 2 annuities that I don't completely trust. At least an annuity you purchase would be insured thru a different agency. Hmm, may be a lesson there. Thanks for the work R & I and its always a good day to distrust your financial advisor. OFG

 

I'm no expert, but I'm pretty sure with annual compensation north of $300k, you are way above the income limits permitted to contribute to a Roth.




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Income limits only apply to a Roth IRA. No income limit on a Roth 401(k).


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There are no income limits for making Roth 401k contributions. Although in most cases it probably makes more sense for a high earner to make pre-tax contributions. An exception might be a young pilot with a long horizon that is interested in mitigating the impact of RMDs, but that’s a looooong game with lots of assumptions.

You’re probably thinking of Roth IRAs, which do have income limits for contribution eligibility. Those limits are circumvented fairly easily using the Backdoor Roth technique (google it)

If you like Roth money, you may also be interested in the Mega Backdoor Roth technique, (also easily found via google) which our DPSP allows for.

 

I’d be good with the idea of a $304K signing bonus but to actually receive $304K, you’d need about $420K......

Denny