Originally Posted by Dorn

The medical plan we have now has the HSA fund. That is 100% tax free front and back end. That’s my money that I can use for virtually anything (in the medical sphere) which is very lose. And it’s investible so you can save up to $7100 max contribution per year. That’s easily 200k if you start and have years to go. (Or at least a very healthy chunk of cash pending on your retirement date) Plus worse case if the medical system goes public well it’s still 100% your money. Kind of hard to turn that down.

Originally Posted by PilotWombat

Ok, so I've been going through the numbers. Of course I have to make a lot of assumptions:

• No state tax, 24% tax bracket during your career, 22% in retirement, 15% capital gains tax rate
• 5% interest in the MBCBP, 8% return on your own investments
• Buy an annuity with the MBCBP total, returned at 6% per year
• Distributions on your own investments at 4%

With those assumptions and more, it will take 28 years for your own investments to provide more income than the MBCBP. At a 9% return, 22 years. Those numbers stretch are 31 and 24 years respectively with a 5% state income tax.

So I guess if your retirement horizon is more than 30 years out, then it's in your best interest to not have the MBCBP. If it's sooner than that, the MBCCBP is the better option.

Originally Posted by Trip7

I like the concept of the VEBA. Now a 5% return on a VEBA I'll take because very very few investors can beat a triple tax advantaged account with a taxable one. Petitioning the IRS to allow pilots to limit the amount of DPSP Cash that goes into the VEBA would be a big win. Although VEBA funds do not pass on to your estate, I think it's a good trade-off for tax free dollars going towards the largest expense for most retirees

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Originally Posted by Tailhookah

True. I was talking about in years when the S&P is in the red. Misunderstood that I meant long term average.



If if there’s a better alternative to it let’s hear about it.



What I don’t understand the pushback to a plan that will essentially give us a 9% raise (in addition to a raise in pay rates) but masked in a retirement vehicle that is in addition to our 401k. While our 401k is maxed, anymore DC is fruitless, so we need something additional. While not as good as 401k rules, I’ve not seen where there is something that not only is available but what can be negotiated due to tax write offs for Delta on the MBCBP.



We are are at the limits. The MBCBP May be all we have available that works for both sides and is negotiable.

Originally Posted by Denny Crane

Prove it. Where have you read/seen that stated as fact? That is a complete assumption on your part.



Denny

Originally Posted by Planetrain

The medical VEBA would have been a really great plan. At about $1/flt hour input ($1000/year... $25,000 in a 25-year career), it would have been relatively low cost, but the forums killed it over the issue of its estate-ability. So strange. The tax savings aspect was huge. If I die, my wife gets it; if we both die, dependent kids get it. If all of the above die before completely exhausting the balance (these funds could be exhausted early in retirement well before tapping into HSA balances), the Delta pilot group gets the remainder. What I think is misunderstood, is that most people on their deathbed in the hospital would use up their VEBA fund. Estate-ability issues would realistically apply to very very few.

Originally Posted by Gunfighter

There are so many reasons this is wrong. Thank You for once again proving pilots should not be financial advisers. Please don't take my suggestions below as advice, rather use my commentary as a basis for forming your own conclusion. Furthermore it may be a basis for a rational discussion with a real financial advisor...



-At the end of the MBCBP you gave it a 6% annuity and only 4% distributions on the self directed plan. WTF? Both avenues have an option to purchase a similar annuity in the market place, the MBCBP isnt a prerequisite for an annuity. Talk about apples and oranges. What if you did a 4% withdrawal rate from the MBCBP and purchased a 6% annuity with the self directed funds? Talk about misleading.



-You have not shown any math behind the assumed final value of the two plans. In the ignorant cries to "Avoid TAXES", you are leading the uneducated masses into a plan that will handicap them with Income Taxes on retirement money. Wealthy individuals pay LT Capital Gains Taxes, not Income Taxes.



-There is a better option to pay income taxes now and then pay LT Capital Gains taxes on the growth via a simple ETF.



Consider the following...

IVV, a plain vanilla S&P 500 EFT has a 15 year return of 8.94%. It has an After Tax return of 8.44%. "That's impossible" cry the MBCBP, fee generating, income confiscators. Nope, its real. IVV or other tax efficient ETFs generate most of their returns by Long Term Capital gains. The dividends, which represent only a small portion of the total return are taxed annually, The bulk of the return is taxed as a long term capital gain at the time of the sale.

iShares Core S&P 500 ETF (IVV) Fund Tax Analysis



Here is my math.

$20,000 annual contributions (calculated at the beginning of the year), 5% MBCBP return, 25% Income Tax paid on distribution.

$13,600 annual investment ($20,000-32% income tax), 8% after tax return in an ETF, 15% LT CG tax



MBCBP Value after taxes

5 years - 87,000

10 years - 198,000

15 years - 340,000

20 years - 521,000



MMIC Plan (My Money, I Control) Value after taxes

5 years - 83,000

10 years - 201,000

15 years - 370,000

20 years - 612,000



DYODD, YMMV, Etc. And please for the sake of your financial future don't take financial advice from anonymous pilots like me who have no vested interest in your financial future. Also weigh carefully the advice of those who may have something to gain from promoting the MBCBP.

Originally Posted by Trip7

I agree with you for the most part. I think the biggest reason why VEBA was killed was the inability of a pilot to restrict how much DPSP Cash went into the VEBA. Also it would have killed off the viability of the Mega Backdoor Roth.

If we can get a VEBA that is solely company funded or allows the pilot complete control of how much of their funds go in it would be a big win for the pilot group.

Originally Posted by Trip7

I agree with you for the most part. I think the biggest reason why VEBA was killed was the inability of a pilot to restrict how much DPSP Cash went into the VEBA. Also it would have killed off the viability of the Mega Backdoor Roth.

Originally Posted by Richard Head

I will throw my vote in for NO. I also have several friends here who would be a firm NO as well. In fact the one person that I’ve met in the last six weeks who wanted it was so misinformed on it that I couldn’t even comprehend what he was saying. I almost wish they would put their four retirement options out there for a vote and let the results speak for themselves.