Airline Pilot Central Forums - Minimum Balance Plan

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Quote:

Originally Posted by Bottlen0se (Post 3530937)

I like having different pots of money to pull from at various stages of my life. Outside of my 401k and Roth IRA, I keep a brokerage account. I’d rather load up my brokerage and generate dividend income. So what if it’s taxable. I can use that money to work less perhaps later in my career.

I think the same way. My brokerage is all taxable and I am very big into dividends and pay the taxes each year as I go. Thus a large percentage of my portfolio is "post tax" money. The way I look at is all income is "taxable" its just a matter of when. I for one think taxes will be "more" in the future not less. As far as making less money after retirement and being in a lower tax bracket that is true to an extent , but in my case (and hopefully most Pilots) I will still be making enough to pay hefty taxes until I croak and then its my kids problem. :D The whole deferring all income at all costs seems to make sense to me only if your post retirement income will drop well below 6 figures.

Scoop

Quote:

Originally Posted by Bucking Bar (Post 3530917)

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Plus state. Georgia is 7%
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I am FOR the MBCBP.

Point of order. Georgia’s highest income tax bracket is 5.75%, and going down to 4.99%.

Quote:

Originally Posted by NuGuy (Post 3530969)

Even without adding in state income tax, you're looking at a 40% haircut for DPSP cash. To just get BACK to zero, it takes a 67% return. Average S&P returns over the past 20 years is about 8.5%, slightly higher over 40 years (not inflation adjusted). Let's be wild and assume the S&P returns 10% a year, which, honestly, will be on the high side. To recover the money you lost day 1, to get the 67% return, you would need 6 years just to get back to zero. And that's completely ignoring 1) The returns you have have gotten on the full amount and 2) Any capital gains you would have suffered on your S&P strategy.

And this isn't a day one math exercise. Every single year you're taking a 40% loss on your DPSP cash, which means that recovery is always rolling out 6 years in front of you. Time it wrong, and it could be much longer. And if you are in a high tax state, it's even worse. Yes, it's a conservative investment, but I assume everyone has those to at least a small degree, and it would allow you to shift whatever percentage that's there to a more aggressive plan. PLUS it would be in place if there are any future, unforeseen tax increases.

MBCBP is tax DEFERRED not TAX FREE. A proper comparison would include the after tax values of the MBCBP. Your MBCBP takes a 40% haircut after years of underperforming the market. Paying income tax and then investing in assets that produce long term capital gains with market rates of return will outperform a tax deferred account paying a hypothetical 5% return.

One sensible argument for MBCBP is simply as a short/medium store of cash near retirement where you can defer taxes for a couple years. If long term tax avoidance or deferral is your goal, get educated on other options vs imprisoning other pilot's money in an underperforming account. Not everyone needs or wants to load every penny into retirement accounts.

A significant item being overlooked is the downside of confiscating money rather than having it available to spend. Maybe I want DPSP Cash for kid's college, grandson's preschool or my new car.

Quote:

Originally Posted by Bottlen0se (Post 3530937)

I like having different pots of money to pull from at various stages of my life. Outside of my 401k and Roth IRA, I keep a brokerage account. I’d rather load up my brokerage and generate dividend income. So what if it’s taxable. I can use that money to work less perhaps later in my career.

I'm a huge fan of what you are suggesting. The income from qualified dividends is at a lower long term capital gains rate vs income tax rate. It's a shame the financially literate are a minority, likely to suffer financially from the tyranny of the majority if we vote on a mandatory plan.

The minimum plan balance is absolute crap. It was a money grab by pilots on the way out. If you aren’t here long enough to fill up account, tough sh!t. This is why we look at the baby boomers as greedy and selfish.

That being said, I am for full retro and paying everyone back pay including those that took the veop. Retro means changing the pay rate in the past. The VEOP pilots agreed to hours per month at their current aircraft rate. If we change the rate back then, it should change their pay rate also.

Quote:

Originally Posted by mikea72580 (Post 3530241)

Pay raises disproportionately benefit those who aren't forced to retire by age. Should we be giving min balances for pay raises to those who won't benefit from the full timeline of increased payrates? Of course not, so why would we front load a payout on any possible increase in DC contributions?

Any Rep that supports Min Balances is irreparably harming the pilots of Delta Air Lines by delaying a new contract. Dozens of pilots have asked the MEC to poll the support for Min Balances. THEY WONT DO IT. They know that not only will it get blasted in a poll but they themselves, would face a recall. If there was ever a shadow agenda at DALPA in my time here, it's the pursuit of Min Balances. It's probably the single greatest reason pilots don't trust our leadership, and the greatest threat to our unity.

Min Balances is a poison pill that has almost ZERO support and if by some miracle made it into our next contract, it would eat up an ENORMOUS portion of the contract cost.

Almost Zero…. You are wrong about that and if you did your research on this you’d see it as a major win for all of us rich and entitled airline pilots including you Mr Selfish.

Quote:

Originally Posted by Tailhookah (Post 3531142)

Almost Zero…. You are wrong about that and if you did your research on this you’d see it as a major win for all of us rich and entitled airline pilots including you Mr Selfish.

I agree with him.

My short summary. Let’s start a new retirement account with excess funds. For those of you retiring in the near future, we’ll guarantee a min balance since you don’t have time to build up new account. We’ll fill it up with other people’s money since you can’t fill it up with your own money. Those of you that aren’t retiring soon, you need to fill it up with your own money.

Give me a break.

Quote:

Originally Posted by Gunfighter (Post 3531086)

DPSP cash is a retirement benefit. The only reason you can take it as cash is because you can’t put it in your 401k. I am for another vehicle for tax efficiency. Options are subjective IMHO you shouldn’t have the option to take it as cash just because of IRS 401k limitations and your choice to early load. I want my retirement benefit for retirement.

Quote:

Originally Posted by notEnuf (Post 3531149)

Then lobby the government to raise 401k limits.

You will be able to have it as a retirement benefit the way things are written now. But as someone else said, others may want it for college funds, or real estate, or whatever they want. It’s our individual money.

Quote:

Originally Posted by Gunfighter (Post 3531086)

Not everyone needs or wants to load every penny into retirement accounts.

A significant item being overlooked is the downside of confiscating money rather than having it available to spend. Maybe I want DPSP Cash for kid's college, grandson's preschool or my new car.

All good examples of why folks don’t trust the narrative that a large number of active Delta pilots have inadequate retirement savings. Do folks need a min balance to supplement a tiny 401k so they needn’t sell their Park City ski condo, winter Florida beach home or the catamaran docked in the BVI?