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Airline Pilot Central Forums (https://www.airlinepilotforums.com/)
-   Delta (https://www.airlinepilotforums.com/delta/)
-   -   MBCBP implementation announced… (https://www.airlinepilotforums.com/delta/143005-mbcbp-implementation-announcedo.html)

notEnuf 05-26-2023 07:53 AM
We are only talking about overages also. Personally my overages have been in the less than $2K per year range as I manage my contributions. Anyone making $330K+ (a lot of us with "retro") this year will have some but below that should be fairly manageable.

mispoken 05-26-2023 07:54 AM
Quote:
Originally Posted by notEnuf (Post 3641933)
That's a difficult one to answer and each individual will be different. My example would be to maximize a withdrawal to keep me in a tax window with regular income tax brackets and capital gains. I have both tax deferred and tax prepaid funds that will be managed to achieve the goal.
if you can make an assumption on tax rate of 40% for opting out of the the MBCBP, you should be able to make an assumption, on average, for retirement as well. Let’s say, 25%? Just a guess and will be subject to lots of debate. I really don’t have a clue, everyone’s RMD will be different and thus everyone’s tax rate different. My assumption (based on nothing other than my imagination) is that in 15-20 years tax rates across the board will be higher. But don’t you agree in both scenarios, taxes must be taken into account? You can’t simply ignore the taxation upon withdrawal that will happen. To me that changes the picture quite a bit. Just assume another 20% off the top of the MBCBP over the withdrawal span in yours retirement?

notEnuf 05-26-2023 07:59 AM
Quote:
Originally Posted by mispoken (Post 3641951)
if you can make an assumption on tax rate of 40% for opting out of the the MBCBP, you should be able to make an assumption, on average, for retirement as well. Let’s say, 25%? Just a guess and will be subject to lots of debate. I really don’t have a clue, everyone’s RMD will be different and thus everyone’s tax rate different. My assumption (based on nothing other than my imagination) is that in 15-20 years tax rates across the board will be higher. But don’t you agree in both scenarios, taxes must be taken into account? You can’t simply ignore the taxation upon withdrawal that will happen. To me that changes the picture quite a bit. Just assume another 20% off the top of the MBCBP over the withdrawal span in yours retirement?
We can use any assumption, and yes the total returns will be lower but so will the risk. These funds should be used to replace any low risk portion of an existing portfolio to manage overall risk/return. These funds will be more likely to be available upon retirement than the higher beta choices an individual would pick.

Trip7 05-26-2023 08:07 AM
Quote:
Originally Posted by tennisguru (Post 3641941)
I mean yeah, you're correct, but once you get into retirement tax rates everything pretty much a crap shoot. I simply wanted to look at overall account balances as I would tend to assume that when a person has a balance of X dollars, they will be withdrawing that at roughly the same rate whether the money is in in the MBCBP or not. As I said any withdrawals from the non-MBCBP would be taxed at long-term capital gains rates, which theoretically would be lower than the earned income rates of the MBCBP. But with the non-MBCBP you're also paying some taxes each year if your personal portfolio has turnover or earns dividends. In a broad sense that probably comes close to washing out the difference between that and the income taxes you'd pay on the MBCBP withdrawals, hence why I just stuck to a basic look at overall account balance as a comparison.

In the end there's just a whole ton of personal variables that each one of us will have in retirement that will have huge affects on our tax situation and how much each person needs to draw down each year from their various accounts. Roth accounts vs traditional, real estate income, military or other pensions, a working spouse, etc.
I think you summed it up well. In essence, a pilot with a long time horizon signing up for the MBCBP would be giving up control of their money for a targeted 5% return (IMO will likely be worse than that due to rising interest rates decreasing bond prices) for a tax crap shoot in the future. I would much rather take the known(current tax rate) pay that, and control my own destiny with Real Estate Partnerships and Value investing. If I had 5ish years or less left I'd definitely look into the MBCBP. JMHO... DYODD... YMMV
​​

mispoken 05-26-2023 08:21 AM
First Break mentioned the concern about the gutterment changing the rules mid game. It’s possible! But, what’s more likely? The govt changing the retirement rules or black rock screwing their clients? Before you say that’s not possible, history tells us it is. Black rock is massive, for sure, but even more massive institutions have gone under due to mismanagement. Black rock has even stopped redemptions of their funds in recent history (like, this year). Let’s assume black rock is a yet to be seen woefully mismanaged company and they stop withdrawals of their funds at some point, what recourse to we have then?

I honestly can’t say which institution I trust less, the government or a fund company which is sad.

Now, I believe the two scenarios are VERY unlikely, but plausible and wouldn’t make a decision based on either. But, when living in the land of “worst case” that has to be considered as well.

Jughead135 05-26-2023 08:25 AM
Quote:
Originally Posted by mispoken (Post 3641929)
“At retirement, pilots can (1) elect to roll the accrued balance into an IRA, (2) take the balance as a taxable lump sum, or (3) take it as a tax-deferred annuity.”

2 of those options are taxable and not controlled by you. The IRS will figure that one out for you. Option 3 is further deferral if you choose.

That assumes any rollover to an IRA (option 1) is to a Roth IRA, does it not? Why would a rollover into a (traditional) IRA be taxable?

mispoken 05-26-2023 08:29 AM
Quote:
Originally Posted by Jughead135 (Post 3641969)
That assumes any rollover to an IRA (option 1) is to a Roth IRA, does it not? Why would a rollover into a (traditional) IRA be taxable?
not exactly. You could roll to a Roth and that would be taxable. But even if rolled into a TIRA, it would hit RMDs eventually and be taxed. Eventually they get their cut (except an HSA, of course)

Jughead135 05-26-2023 08:33 AM
From the MEC email announcing the MBCBP:
Quote:
Originally Posted by NN 23-17
Going forward, the PWA requires that the plan must maintain a 40%/60% equity/bond investment ratio with very specific investment guidelines.
Where does the PWA require that? I can find no such reference....

Anyone having insight into how these things work: Does that imply that that the plan could potentially change with each contract cycle? (Perhaps to include different options within the plan?) I know we have to deal with the information we have at hand, but as a thought experiment: Would that change anyone's mind?

First Break 05-26-2023 08:33 AM
Quote:
Originally Posted by mispoken (Post 3641967)
First Break mentioned the concern about the gutterment changing the rules mid game. It’s possible! But, what’s more likely? The govt changing the retirement rules or black rock screwing their clients? Before you say that’s not possible, history tells us it is. Black rock is massive, for sure, but even more massive institutions have gone under due to mismanagement. Black rock has even stopped redemptions of their funds in recent history (like, this year). Let’s assume black rock is a yet to be seen woefully mismanaged company and they stop withdrawals of their funds at some point, what recourse to we have then?

I honestly can’t say which institution I trust less, the government or a fund company which is sad.

Now, I believe the two scenarios are VERY unlikely, but plausible and wouldn’t make a decision based on either. But, when living in the land of “worst case” that has to be considered as well.
The way I read it, the Blackrock fund is a placeholder at the start of the plan but there will be contractual requirements on how assets must be managed going forward. This has been negotiated and I remember a notepad from awhile back that talked about the investment strategy being a big win in negotiations at the time. I’ll try to dig it up. I’d also assume there needs to be a minimum pile of money before any professional fund manager is able to actively manage plan assets, which is likely the reason they are initially putting it in a low overhead fund which matches the 40/60 negotiated requirement.

Jughead135 05-26-2023 08:34 AM
Quote:
Originally Posted by mispoken (Post 3641973)
if rolled into a TIRA, it would hit RMDs eventually and be taxed. Eventually they get their cut (except an HSA, of course)
Yes, of course. But the act of rolling it over would not be a taxable event (which is how I read the original list of options).


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