What, exactly, will pass at 80%? Your optimism is admirable, but there’s no way that any TA is going to meet the sky high expectations of the pilot group to an 80% pass rate. Expectations that are increasing daily.

 

I share your pessimism on the eventual “optionality.” If the treasury does mandate participation, then the MBCBP no longer meets the requirements of LOA 20-04 and cannot be implemented without another LOA. FWIW when I last spoke with the R&I committee they said that the company will not move forward unless there is full unconditional approval from the treasury for the plan as designed.

 

OK, I'll expand. Income producing real estate in red states is where you should put your money.

Passive investments in class B/C multifamily that employ cost segregation and bonus depreciation (standard practice) will generate a 60-75% passive loss (tax deduction) on the investment in year 1. Cash flows are generally in the 4-8% range annually and paid out quarterly. A cash out refinance in year 3-7 returns 50-100% of the original investment while maintaining ownership and cashflow from the asset. A sale in that same time frame generally returns 150-200% of the original investment (50-100% gain), but you lose the cash flow. In either case keep rolling the equity into more property to increase the cash flow.

Direct investment in single family or multi family investments will produce higher returns but require a more active role from the investor because of property management responsibility. This doesn't mean you are the property manager, just that you are responsible either individually or by hiring/contracting a property manager.

Direct investment in self storage is a great avenue as well. Tax deductions aren't as generous because it is a 39 year asset vs 27.5 year asset. Storage also has a higher land component, which is non depreciable. On the plus side, management of storage is much easier. In one example, we manage $30k of monthly RV storage revenue with one part time employee (8 hours per week), a call center and a couple hours per week from an in home office.

Mobile home parks and RV parks are also on the list with higher cash flow and less depreciation because they are mostly land investments.

If residential or storage isn't your style, you can buy a Dollar General store with 25% down and finance the balance. Landlord responsibilities range from limited to non-existent. In a typical lease you are responsible for "4 walls and a roof", plus anything outside. That means mowing the lawn and HVAC replacement, not changing filters or routine service and maintenance. Other NNN investments like medical office, dental and retail are also good investments once you have more experience and capital to work with.

Farmland is not my area of expertise. If I get bored after my current project, I may research it a bit.


Inflation is the biggest risk to the MBCBP. 5-6% guaranteed returns would have been a guaranteed loss for the last two years. The wealthiest people in the world profit from inflation.

All of the real estate examples above have a natural inflation adjustment. Properly leveraged you will profit from inflation as opposed to losing money to inflation like the MBCBP.
25% down, 75% leverage with 3% inflation will increase the value of your asset by 3% but represents a 12% gain on your investment.
As rental income rises with inflation, so do your expenses, but the debt service remains constant. A $200-$300 rent increase generally comes with a $100 increase in expenses. The additional $100-$200 becomes additional cash flow. This is how cash flow from real estate can double in just a few years even though the rents and valuation have only increased by 10-20%

 

True, but regionals making big bucks is a favorable environment to increase gains. Mesa now makes more than us on a CASM basis, which is what airlines base their costs on.

 

MBCBP- not sure why folks are up in arms over this. Non-partisan, non-judgemental, just overall let’s talk this through. What we are doing is not new overall, but groundbreaking for the career. MBCBP’s are normally for doctors and lawyers (and associated fields) that have great incomes, yet use a great majority of their younger years to pay off the business debt and later years to accumulate wealth. We are looking to do the end stage, contractually, in this contract. Run your number scenario of what the “dollars” do when you actually hit the “normal retirement”
limits and get your 16% excess vs a higher DC and a massive amount into a MBCBP. Only math that says a problem is a trust fund, massive inheritance, current divorce proceeding, or unwillingness of money “in your name” to be managed outside of your control. In terms of retirement buckets- wow, this works well for anyone saying “I lost my pension”. Out of the mbcbp- you can do a lump sum, annuity, or traditional IRA transfer. You can’t do tax differed in ANY other way with your current income to avoid taxes now.

 

Without a min balance, MBCBP does almost nothing for the lost pension crowd.

So the fund is being managed by an outside firm..what is their take? What is the expense ratio? What is the target growth? If it's 3% as explained on another post, I'd honestly rather just take my excess as a cash, thanks.

 

Ok, let’s talk. I’m nowhere near retirement by decades so my fight is not WITH those who lost there pensions. Point of order here. I fly with many in that group, and hear everyone’s version- regardless of asking.

Next, a plan is managed by a fiduciary. Not the company and not ALPA. With the potential size of 14+k, any of the major houses will actually bid a competitive offer on pricing. Historically a MBCBP is based on the age of participants. With guys/gals/folks retiring yearly, but demographically sooner it would be a conservative portfolio and likely performance. The question becomes what is a 9% increase to the 401K, and a mbcbp? And tax, and growth, and other hands….. run the damn numbers. How it makes less sense for anyone down the line will blow the minds of financial professionals, accountants, lawyers, doctors, etc.

MBCBP- those are the folks that created what we want….

 

This is my problem with it. I don’t want anyone else in control of my money, and I especially don’t want to pay anyone else to be in charge of my money.

If it’s optional, fine, I don’t GAF. But I want nothing to do with anything that takes away my control of my own money.

 

Which is a big deal, and is a legitimate gripe. There are no guarantees that an MBCBP will make 5% in perpetuity, and even then, 5% is a loss in times of high inflation.

Just let me manage my own money. Being FORCED into something against my will should be a non-starter for everyone. **** you (anyone advocating for MBCBP if it’s mandatory) you don’t get to tell ME what I can and can’t do with my compensation.

 

If you only want to use the money for retirement, and your main goal is tax deferral, the MBCBP gives you a vehicle to get a conservative return with small pension related risk factors. That’s great for some people, but not me.