Not true. The 16% DC can easily be reduced/cut and our pay rates can easily be cut again.

 

Hopefully the MEC understands how divisive a"pension" would be. I don't think they are talking about a DB as that is off the table due to PBGC laws(my understanding)

What I would like to see is an increase to the DC if
any excess (above 415C) can be used to avoid taxes ie. an annuity comes to mind. Otherwise an increase in DC helps the less senior more than the more senior because the DC excess comes in the form of straight pay and taxes take 45%(min) of the "benefit"....39% federal, 2% ALPA dues, 4% Obamacare tax above 200k, now tack on state tax of 10% and you are at 55% lost due to transaction fees. Whereas the young guys can choose to shield all of the income from taxes an get $1 benefit for $1 negotiated

 

The “variable benefit” plan currently being discussed at FDX would replace their current defined benefit, and while it is considered a DB plan has funding elements not unlike a DC for a corporation.

There’s also a “flat dollar benefit” DB plan, which is what UPS has, which also has funding elements lowering a corporation’s burden.

Pro/Con to both.

Worth noting in addition to FedEx’s 2% FAE defined benefit (130k cap) and the UPS FDA defined benefit (120k cap), both companies also have a DC plan (8% soon 9% and 12%, respectively).

Lots o’ ways to skin the retirement cat.

Back to my dirty freight dog sandbox...

 

I just can’t help it.....

Anyone who really and truly believes what you wrote, and I bolded, should be all onboard with developing another type of retirement income stream. I think you are right! It’s not guaranteed. Hasn’t there also been talk by some in Congress about the Federal Government taking over 401k’s? I know that’s rather radical but who knows what will happen in 20+ years.

Denny

 

I agree the concept of your post. Let's get the numbers correct before we build on this argument though.

The top marginal tax bracket is 37%, not 39% and that is for taxable income above 600k (married) 500k (single). Few pilots, even widebody captains will fall into this range. 400-600 of taxable income is taxed at 37%. If you are 315-400k, the marginal rate is only 32%. Keep in mind, we are talking about the marginal rate on taxable income. If you are making 450K per year as a captain, your taxable income after deductions is most likely in the 315-400 range at 32%.
Secondly, you are mis-applying the 3.8% Obamacare surtax. It is a tax on net investment income, not W-2 income.

Again, the concept is valid, but the amount lost to taxes is closer to 45% not 55%. With that tax penalty in mind, I agree we should be looking for a method of increasing retirement benefits in a tax efficient manner.

 

No way, but I'm going to budget for doing so in the first world or wherever my kids and grandkids choose to settle down.

 

Agreed. Invest in income properties with the DPSP cash.

 

Let’s not forget the real elephant in the room with 401k’s. The traditional 401k v Roth, is the real killer imo. I’ve done all I can to put away as much as I can into the Roth portions my entire career. ( yes one day soon I’ll hit that limit and won’t qualify anymore). The clowns in D.C will eventually realize that all these social programs will require more and more of our money to fund that disaster. So yes as a mid 30’s guy I’m fairly sure they will tax that at significantly higher rates than we think in present day. Don’t forget before Reagan we had as high as 90% taxes on some income brackets and I won’t be surprised if that comes to fruition one day. Our liabilities are the “real no joke” looming U.S. crisis and were just acting like it’s not a problem.
...ok and I’ll take my tin foil hat off and back to the retirement discussion

 

And merging them into the Government’s entitlement programs? Politicians and bureaucrats drool at the very thought.

 

Well, not quibbling but in 2017...
"How much is the federal income tax rate?
In 2017, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The top marginal income tax rate of 39.6 percent will hit taxpayers with taxable income of $418,400 and higher for single filers and $470,700 and higher for married couples filing jointly.

Yea....hit that 39.6% incremental rate. I know rates are coming down this year
Additionally, there is an Obama care tax of .9% on all income over 200/ 250k (single/married) and you are correct about the 4%....and truth in advertising it is not 2%ALPA dues... but close....wat? 1.6....1.7...1.8....oh eff it, close enough to 2%.... even on the DC excess

With AMT I can unequivocally say "my butt is bloody"....I take home less than 50% of each additional dollar earned