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Airline Pilot Central Forums (https://www.airlinepilotforums.com/)
-   Delta (https://www.airlinepilotforums.com/delta/)
-   -   Market Based Cash Balance Plan (https://www.airlinepilotforums.com/delta/121821-market-based-cash-balance-plan.html)

JamesBond 05-17-2019 07:12 AM
Originally Posted by Buck Rogers (Post 2821610)
R......O......T .....H

What's that spell.... ROTH.....

What's that spell ....ROTH....

ROTH, ROTH, ROTH....YAY!!!!!!!

Did I misunderstand something about roth's and mandatory distributions?
ROTH is great up to a point. And... it is a calculated gamble. At some point you are in the higher tax brackets, and paying those tax rates to do the conversion doesn't make sense. So the gamble is whether or not you will be paying more in retirement than you will now. I would say that for the bottom half of the seniority list at a minimum, it is probably a good idea to fully fund it. For those at the top... probably notsomuch.

dyodd, ymmv jmho

Gunfighter 05-17-2019 07:55 AM
Originally Posted by DWC CAP10 USAF (Post 2821798)
Your kid had earned income to start an IRA at 8 years old?
It is very easy to do with a family business. Our teenage children are funding a SIMPLE (13K) and a Roth (6k) IRA each year by working for a property management company created to manage our real estate portfolio. They can roll the SIMPLE into a Roth after being in the plan for two years. It is a great way to capture the time value of money.

Originally Posted by JamesBond (Post 2821831)
ROTH is great up to a point. And... it is a calculated gamble. At some point you are in the higher tax brackets, and paying those tax rates to do the conversion doesn't make sense. So the gamble is whether or not you will be paying more in retirement than you will now. I would say that for the bottom half of the seniority list at a minimum, it is probably a good idea to fully fund it. For those at the top... probably notsomuch.

dyodd, ymmv jmho
The lower tax brackets at retirement doesn't apply to everyone, nor does it apply in every year of retirement. A large withdrawal from a traditional IRA or 401k could put you in a high bracket. Using Roth funds sidesteps that burden. Also, if you may lose some deductions in retirement like mortgage interest, child related tax deductions, etc that keep you in a high bracket. Finally business or investment income may keep your bracket high. Paid off rental houses are one example.

DWC CAP10 USAF 05-17-2019 08:01 AM
Originally Posted by Gunfighter (Post 2821847)
It is very easy to do with a family business. Our teenage children are funding a SIMPLE (13K) and a Roth (6k) IRA each year by working for a property management company created to manage our real estate portfolio. They can roll the SIMPLE into a Roth after being in the plan for two years. It is a great way to capture the time value of money.



The lower tax brackets at retirement doesn't apply to everyone, nor does it apply in every year of retirement. A large withdrawal from a traditional IRA or 401k could put you in a high bracket. Using Roth funds sidesteps that burden. Also, if you may lose some deductions in retirement like mortgage interest, child related tax deductions, etc that keep you in a high bracket. Finally business or investment income may keep your bracket high. Paid off rental houses are one example.
I understand it’s possible....and your kids are teens.

I can’t even get my 8 year old to remember to do his chores for his allowance, never mind a “job” for earned income.

Note: he doesn’t get paid if chores aren’t done so he is learning....slowly....

tunes 05-17-2019 08:12 AM
Originally Posted by JamesBond (Post 2821831)
ROTH is great up to a point. And... it is a calculated gamble. At some point you are in the higher tax brackets, and paying those tax rates to do the conversion doesn't make sense. So the gamble is whether or not you will be paying more in retirement than you will now. I would say that for the bottom half of the seniority list at a minimum, it is probably a good idea to fully fund it. For those at the top... probably notsomuch.

dyodd, ymmv jmho
or you are super young and assume that the tax rate will be nowhere near as low in retirement in 30 years than it is now.

Gunfighter 05-17-2019 08:16 AM
Originally Posted by DWC CAP10 USAF (Post 2821850)
I understand it’s possible....and your kids are teens.

I can’t even get my 8 year old to remember to do his chores for his allowance, never mind a “job” for earned income.

Note: he doesn’t get paid if chores aren’t done so he is learning....slowly....
My wife and I grew up with ties to family farms, so child labor was very natural for us. :D We put the youngest one to work at 9, but didn't get the kids officially on the payroll for a few years until the profits started creating a tax liability we couldn't shelter with depreciation. The first year performance report would have read "Works well under constant supervision and direction" and "Do not leave unsupervised in the presence of electronic devices" By the time they were teenagers, they started to figure it out.

Gunfighter 05-17-2019 08:20 AM
Originally Posted by tunes (Post 2821861)
or you are super young and assume that the tax rate will be nowhere near as low in retirement in 30 years than it is now.
... or over 60 and expect it to be higher when the current tax cuts expire on 12/31/2025.

Trip7 05-17-2019 09:07 AM
Originally Posted by TED74 (Post 2821799)
It seems that the benefit from having this vehicle is primarily being able to put away significantly more money pre-tax than not having it. Reading literature outside Delta specifies, some folks (Physicians, Entrepreneurs, etc.) are putting 100k or 200k aside pre-tax. No matter what the return on that money was, that would be very appealing for someone with only a few years left ...who also happens to be making well over 300 or 400k.



I personally won't be setting aside nearly that much cash, and I'll not be needing what I do save for retirement for decades... so I absolutely care about maximizing returns.



I don't think this plan is for me and many others probably feel the same. So my curiosity is...does 20-30% potential pilot participation by the time this thing is ready for prime time in 2020/2021 change the negotiation? Is the company still interested at such a level? Is the juice worth the squeeze?
The big difference is those Doctors and Entrepreneurs are the one selecting the Plan Administrator. They can directly manage the manager. Moreover there is significant tax savings for their business and retirement account. In our case, DALPA/Delta would be making the decision for who is the manager for 14,000 plus pilots who will have little to no input into that decision. Good luck manager the manager with 14,000 other opinions. Furthermore, Delta has no retirement to save for so the tax savings will be minimal for the corporation.

Sent from my SM-G975U1 using Tapatalk

BobZ 05-17-2019 09:44 AM
As alredy supposed here this cbdb with a minimum balance feature is looking like the available vehicle to facilitate a sheltered lump payout to retiring pilots.

As a long term option for newer pilots it comes with all the other debated considerations.

A cbdb min balance $300k rollover goodby kiss along with tossing in a final year PS, vac, and a last 2 yr sick bank cash out would go a good ways to sending DZ pilots off in much better shape than how things stand now.

JamesBond 05-17-2019 09:50 AM
Originally Posted by Gunfighter (Post 2821847)
It is very easy to do with a family business. Our teenage children are funding a SIMPLE (13K) and a Roth (6k) IRA each year by working for a property management company created to manage our real estate portfolio. They can roll the SIMPLE into a Roth after being in the plan for two years. It is a great way to capture the time value of money.



The lower tax brackets at retirement doesn't apply to everyone, nor does it apply in every year of retirement. A large withdrawal from a traditional IRA or 401k could put you in a high bracket. Using Roth funds sidesteps that burden. Also, if you may lose some deductions in retirement like mortgage interest, child related tax deductions, etc that keep you in a high bracket. Finally business or investment income may keep your bracket high. Paid off rental houses are one example.
Originally Posted by tunes (Post 2821861)
or you are super young and assume that the tax rate will be nowhere near as low in retirement in 30 years than it is now.
Correct in both cases. That was my point.

Originally Posted by Gunfighter (Post 2821865)
... or over 60 and expect it to be higher when the current tax cuts expire on 12/31/2025.
Please don't refer to the current tax rates as tax 'cuts'. They are current tax rates. In 2025, they might be increased. Hopefully we will have another Republican pro American president that realizes it is our money not the .gov's. I refuse to surrender to a bunch of thieves.

4fans 05-17-2019 01:20 PM
Originally Posted by DWC CAP10 USAF (Post 2821798)
Your kid had earned income to start an IRA at 8 years old?
I think the general scheme here is that you pay them as an employee of your small business, instead of taking that money as profit, which changes your company's tax liability, but keeps the money in the family, so in the end, a large percentage of the dollars paid to the child would have been paid in taxes had the business not done it this way.

I have a close acquaintance that recently started a very profitable business and does the same thing. Perfectly legal. Just doesn't seem like it should be. But with a tax code as complicated as ours, you have to expect this.


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