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Originally Posted by Scoop
(Post 3644170)
I personally think 401K wealth in the future will be too irresistible for politicians to keep their hands off of. It will probably start out like a 1% annual fee on accounts over 5 million or something that the average voter does not see affecting them and then will conditionally adjust downward. Where and how far it goes is anyone's guess. Is this a valid reason not to invest in tax differed accounts? No - we have to operate within the "system" as it is now - I am just pointing out a concern that I have.
The income tax itself was unconstitutional. In pitching the tough ammendment process to allow it, the people were sold on the lie that it was just a tax on a tiny percent of uber high earners and the vast majority of people would never pay it. The first iteration topped out at a 7% rate and even that was only for dollars earned over the 11 Million per year (in today's dollars) mark. They absolutely will sell the public on this by doing exactly what you suggest, then "progressively" and rapidly expand it, plus overlapping means testing, taxing unrealized gains, a "wealth tax" and all the rest. And 51% of the electorate simply will not care that "milliionaires" are finally being made to "pay their fair share". |
Originally Posted by Trip7
(Post 3644192)
Under $10 million in assets 20% returns annualized are not difficult. Between Real Estate and Small Cap stocks there are tons of opportunities. And it doesn't require some high level of intelligence. Just basic ability to read financial statements, 4th Grade level math, and emotional stability.
-Reading financial statements requires a combination of education and desire to learn. -4th grade math is a cake walk for pilots as long as it's not common core math, that stuff is nuts -Emotional stability is the cryptonite in the equation. It's surprising given our profession's demonstrated ability to act under pressure. When you objectively look at western world fiscal policy it is easy to see the long term trends. Within the long term trends identifying top performers further amplifies the returns. 20% returns on 7 figures is like the insta captain phenomenon. Anyone over 1 year could be a captain unless everyone over 1 year wanted to be. |
Originally Posted by crazyjaydawg
(Post 3643633)
If we ever got DC to touch 20% then maybe it becomes even less of an issue because likely fewer would get excess, but it all depends on future pay rate growth vs. IRS 415(c) limits which are tied to inflation.
Originally Posted by Gunfighter
(Post 3643681)
Can you explain how that would reduce the number of pilots getting 401k Excess? My understand is the earning limit generates excess until the DC exceeds 20%, then it becomes the contribution limit that triggers excess.
Originally Posted by First Break
(Post 3643881)
Fewer people get excess with a higher contribution? You’re going to have to show some math on that one.
I think I was articulating that going off of 16% DC, when pilots hit the income limit ($330,000) then they're getting spill money unnecessarily, with 4% of $330k being about $13k I was thinking along the lines of $13k that should be in a 401(k) and not in spill/MBCBP. I articulated my thought poorly and as it was written is just wrong. Sorry about that.
Originally Posted by First Break
(Post 3643881)
You keep saying that the black rock fund doesn’t beat inflation, but a simple web exercise completely disproves that. The 10 year return is substantially ahead of inflation.
Originally Posted by First Break
(Post 3643881)
ESG nonsense notwithstanding (we are likely on the same page, I’ll leave it at that), the ALPA comm said that the plan assets would initially be placed in that fund. My guess, having dealt with professional management of a very large trust in another life, is that there has to be some time for assets to accumulate before professional active management makes sense. The expense ratio of the Blackrock fund is pretty modest, and of the available funds that meet the requirement for the 40/60 ratio, it actually looks like one of the more efficient ones. That said, there doesn’t seem to be anything forcing that fund to hold the assets forever, and the way ALPA worded it makes me think it will be temporary. And FWIW, the Company signing all our paychecks has gone ESG hog wild too. I’m not sure why that would influence your decision to participate in the plan, but you do you.
When I go back and re-read this thread, two themes stick out for people who believe they are better off outside the plan. (1) They want to spend the cash now, or (2) They don’t think the MBCBP returns will be adequate to overcome the opportunity cost of missing out on taxable higher returns outside the plan. What I’m trying to further understand about the guys in the (2) camp, is are you truly looking for max returns with all your investable assets? Do you really have no cash/money market/low risk assets in your portfolio, ever? I’d genuinely like to know if you guys are really putting every penny you have in higher risk/return investments. For the comment regarding the (2) camp; yes I am trying to maximize my returns while I am at a young age. Right now I have lots of doors that I'm trying to open/keep open so that as I get into my 50s and later, I will have options. I don't want to rely solely on Delta for a paycheck until retirement, I don't want to rely solely on the market conditions and I don't want to rely solely on my real estate. I think that Delta is my most conservative source of income right now, followed by real estate and eventually DoD pension. My equities are the riskiest part of my income portfolio now and into the future. I believe that I have some pretty good back ups that allow me to be riskier at this point in my life. Certainly I will tamp down the risk as I get older, but right now I have nothing but time on my side. |
Originally Posted by Tailhookah
(Post 3643915)
The Blackrock fund is a balanced and very conservative fund, with lots of bonds and other securities that don’t fluctuate too much and has a 10 year return of around 4.5%. Doesn’t sound like much. But when your money goes in tax free and Alpa dues free, you’re saving over 25% and for the high earners potentially much higher…. As high as 35-37%. And the company will plus you up to keep your account at no lower than what you’ve ever invested into the MBCBP. So with the tax savings, you’re already 25% ahead of what you’d pay to invest that money post tax/Alpa dues.
You all need to make up your mind what’s best for you, but I hope I’ve helped some of you make a more informed decision. Assumptions that I have starting 2023:
2053 balance LIRKX at 4.3%: $1,935,000 | Value after taxes (30%): $1,354,500MBCBP at 5%: $2,098,000 | Value after taxes (30%): $1,468,000 Brokerage at 7%: $1,634,000 | Value after taxes (15%): $1,388,900 Brokerage at 8%: $1,894,000 | Value after taxes (15%): $1,420,000 Brkge VOO at 11.5%: $3,273,000 | Value after taxes (15%): $2,782,050 --> Honestly the brokerage accounts will actually be worth more because the LTCG is only applied to the gains and not the cost basis, but for simplicity sake I applied 15% to the entire value. I think it's pretty obvious that anyone with any amount of runway will get a much better value from investing the excess if they get even modest returns. 7% is about the break even point for me and that is not hard to achieve. God forbid someone takes an annuity buy out on the MBCBP then they will really be getting pennies on the dollar for their excess but I digress and won't even go there. Keep in mind I forecast a total inflation of 225% over that time frame. So $1.35 million in 2053 is like $600,000 today. |
I'll be in and let it ride. I will probably minimize my excess to control the amount in the MBCBP. I'll take the tax and dues savings now in the hope that 100% helps me hit my number sooner than 60ish%. Either way this won't be a huge impact and I'm already rebalancing the 401k to be more agressive which will help with the timeline. (I hope at least) I'm targeting total beta rather than alpha and value hunting in my brokerage account.
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Roth lol.
If you think the pols will ignore that ripe fruit in 20 years you're delusional. That will be taxed before 401k's are means-tested. Equity. |
Originally Posted by crazyjaydawg
(Post 3644230)
Let me provide a counter point for those on the sidelines. As always DYDD, YMMV, etc. Here is my analysis below:
Assumptions that I have starting 2023:
2053 balance LIRKX at 4.3%: $1,935,000 | Value after taxes (30%): $1,354,500MBCBP at 5%: $2,098,000 | Value after taxes (30%): $1,468,000 Brokerage at 7%: $1,634,000 | Value after taxes (15%): $1,388,900 Brokerage at 8%: $1,894,000 | Value after taxes (15%): $1,420,000 Brkge VOO at 11.5%: $3,273,000 | Value after taxes (15%): $2,782,050 --> Honestly the brokerage accounts will actually be worth more because the LTCG is only applied to the gains and not the cost basis, but for simplicity sake I applied 15% to the entire value. I think it's pretty obvious that anyone with any amount of runway will get a much better value from investing the excess if they get even modest returns. 7% is about the break even point for me and that is not hard to achieve. God forbid someone takes an annuity buy out on the MBCBP then they will really be getting pennies on the dollar for their excess but I digress and won't even go there. Keep in mind I forecast a total inflation of 225% over that time frame. So $1.35 million in 2053 is like $600,000 today. |
Originally Posted by notEnuf
(Post 3644247)
I'll be in and let it ride. I will probably minimize my excess to control the amount in the MBCBP. I'll take the tax and dues savings now in the hope that 100% helps me hit my number sooner than 60ish%. Either way this won't be a huge impact and I'm already rebalancing the 401k to be more agressive which will help with the timeline. (I hope at least) I'm targeting total beta rather than alpha and value hunting in my brokerage account.
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Originally Posted by Nantonaku
(Post 3644418)
Just not contribute any of your own money to the 401k? How much do you figure that will end up in the MBCBP every year?
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Originally Posted by Planetrain
(Post 3644388)
Add in the ALPA dues headwind and recompute.
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