Originally Posted by DWC CAP10 USAF

And just to be clear since the Min Balance and the MBCBP are two separate entities, you asked these questions regarding the MBCBP aspect and not the min balance aspect, correct?

Based on the responses you posted, I don’t understand how on one hand the they say the IRS has to approve of the plan, but they don’t have approve the optional part of the plan? So they (IRS) only approves the other parts of the plan?

Color me confused

Originally Posted by DWC CAP10 USAF

My point could have been based on poor reading comprehension on my part (wouldn't be the first time), but it the gist I got from your post was
1) Optional is part of "the plan"
2) IRS has to approve "the plan"
3) IRS doesn't have to approve the optional part of "the plan"

Those three statements don't seem to go together, so I'm legit confused.

As to one of your follow on posts, it apppeared to me (again reading comprehension) that you were stating the Min Balance and "The Plan" were tied together and couldn't exist with the other.....the response I got from the R&I makes me think that is not correct, hence why I posted it.

Agreed we will have to wait and see how it was actually proposed in our opener.

Thanks for the civil back and forth!

Originally Posted by SparkySmith

I think another important piece of this is that many of those availing themselves of the MBCB plans are small business owners, like physicians and attorneys. They offer this brand of defined benefit plan to all of their business’s employees, including themselves. They get the tax benefits (whatever they end up being) and the business accrues any excess earnings from the plan investments. If the investments outperform the ROU target, the excesses accrue to the owners—themselves.

We are in a different situation as non-owner employees.


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Originally Posted by bugman61

Because until your expected tax bracket in retirement is the same or higher than your current tax bracket, there is an advantage. At some point because of RMDs, other income, or your predictions of future tax policy the advantage disappears and becomes a disadvantage.

In your 70s, RMDs ranger from 3.6% to 5.1%. At age 75 it’s 4.37. For someone currently in the 24% bracket you would need a balance of less than $3.8 million to benefit (and that doesn’t include social security or other taxable income). Not hard to do for people with full careers of 401ks. And the numbers get worse as you age.

Originally Posted by bugman61

As for your insistence that there is a compounding benefit. If you invested 10k pretax, after 20 years of 8% growth it will be worth $49,268. If you pay 24% on that you are left with $37,443. If you paid up front 24%, you have $7600. After 20 years of 8% growth that’s worth the same, $37,443. Deferring taxes only helps if the taxes you pay are lower.

Originally Posted by DWC CAP10 USAF

My point could have been based on poor reading comprehension on my part (wouldn't be the first time), but it the gist I got from your post was
1) Optional is part of "the plan"
2) IRS has to approve "the plan"
3) IRS doesn't have to approve the optional part of "the plan"

Yes to all three. My interpretation of what was in the email is that the optional part is based on a negotiated agreement between the Union and the Company. Not IRS approval. In other words the approval by the IRS should not be affected by whether toe plan is optional or not.

Those three statements don't seem to go together, so I'm legit confused.

As to one of your follow on posts, it apppeared to me (again reading comprehension) that you were stating the Min Balance and "The Plan" were tied together and couldn't exist with the other.....the response I got from the R&I makes me think that is not correct, hence why I posted it.

They are tied together in the sense that they are both part of the same proposal by the union. They certainly can be separate.

Agreed we will have to wait and see how it was actually proposed in our opener.

Thanks for the civil back and forth!

Originally Posted by ERflyer

Why not be for the MBCBP and then later switch to a 401a when you cross that tax disadvantaged threshold?

Originally Posted by bugman61

There are two factors at play. In a world where I could control what my money in the MBCBP was invested in, I absolutely would participate. And I would do so probably to the point where I projected my retirement income to get into the 32% bracket (that’s just a WAG). Basically I would use it until o didn’t see a benefit for deferring taxes. I don’t see risks with the “notional account” or bankruptcy risks significant enough to not use it.

Unfortunately we have no control over what it’s invested in, how conservatively/aggressively, or what fees are associated with management or the funds they purchase. And because of that I’m not inclined to use it. The tax issue is close to a wash for me now. And there’s no reason to pay fees to get a substandard return with no guaranteed rate.

You may love the plan. I would like you to be able to use it. But it’s not for everyone and it’s not as you have said the best option for the vast majority of us.

Originally Posted by Trip7

You have the 401k for tax sheltering. Why do you need more vehicles for sheltering money? Are you holding your 401k 100% bonds/safe money?

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Originally Posted by Planetrain

What am I missing?



If I max out my 401K, my only other option for retirement investment is a taxable account. (I have no desire to invest in rental properties.) I pay tax now and all my dividends and interest are annually taxed until retirement withdrawal. If I make any investments swaps, I get hammered with capital gains tax too.

Originally Posted by Planetrain

What am I missing?

Originally Posted by Planetrain

What am I missing?

If I max out my 401K, my only other option for retirement investment is a taxable account. (I have no desire to invest in rental properties.) I pay tax now and all my dividends and interest are annually taxed until retirement withdrawal. If I make any investments swaps, I get hammered with capital gains tax too.