Pompous and condescending is always a winning strategy.

 

There is a gray zone for those in the mid 50s earning over the IRS cap or those who don't expect to exceed the cap until then (ie hired at 40+)

I've spent too much time thinking about this, when it won't move the needle either way. I'm tempted to opt in in search of a tax arbitrage "win" and ALPA dues wash with in service withdrawals. The time horizon to 59 1/2 is just a little further than I'd like. Once we have more answers on the in service withdrawal mechanics, I'll make a decision.

 

Get out of your feelings and look at the math.

 

The math may be quick but all the assumptions along the way is not. Assumed future tax rates, assumed returns, assumed desire to access excess cash prior to 59.5, lots of assumptions prior to getting to the simple math.

 

Agreed. This plan is definitely targeted for that demographic that has better visibility of their retirement tax bracket and rate

 

I agree that there is some simplicity to the math.
Invest $100 at a low-ish rate vs invest $65 at whatever rate you pretend you're going to get for perpetuity. Then multiply by size of $$'s and years to go..

 

Don't forget to subtract income tax from the $100 and all gains at withdrawal. The $65 investment won't be subject to income tax. If invested in a tax efficient vehicle (VOO or BRK.B comes to mind) you just pay LTCG on the gains. Still simple math, but there are a few more steps.

Bonus Level
-Never pay taxes because you only access the money tax free via a low interest margin loan instead of a sale. Your assets get a stepped up basis at death and your heirs don't pay income tax on mandatory withdrawals from the MBCBP.

 

Expand, please? That's my demographic. I'm inclined to go for the MBCBP (i.e., not opt-out), but I fear that may have more to do with my lifelong habit of pursuing tax-advantaged retirement accounts. I don't want to do this out of "habit," I want to make the best choice.

So... I'm very interested in your thoughts on this, if you can spell out what you see as the "gray zone." Thanks for any further info!

 

The in service withdrawal option over 59 1/2 reduces the sting of a low rate of return over a long period. The money is never really "trapped" if you are over the cutoff. Every year removed from the age limit is more lost control of the money. That could be good or bad. I figure mid 50s is a reasonable trade off between loss of long term control and income tax arbitrage opportunity. If you don't have income outside of Delta (ie spouse, business, real estate) the near term tax arbitrage is limited. If you have those external sources, you could draw down the MBCBP in a down year where you take substantial deductions. If you are close to or over the age cutoff, you could take a withdrawal every year with a guaranteed 1.8% ALPA savings.

Another aspect that has yet to be mentioned is the Ultra Mega Back Door Roth IRA (copyright Gunfighter), where you fund the MBCBP with the intention of converting to a Roth IRA. It could be a vehicle for stuffing even more money into Roth accounts, especially if it can be done via in service withdrawal. I'm waiting on plan details before getting too excited about that option.

Opportunity cost is the biggest risk, and that cost is minimized the closer you are to 59 1/2. It is also the toughest risk to quantify.
-Could you miss out on a 10x real estate deal because you had $100,000 invested in MBCBP over the next 5 years?
-Did you pass up on that ecommerce business because you were stuffing an extra $5,000 into retirement accounts the last quarter of the year?
-Did the quest for a tax deferred cash pile rob you of vacations you could have taken with friends and family?
-Are you tracking a Miata when you could have bought a sports car?
or
-Did you save your retirement from bankruptcy when an unexpected event scrambled your personal finances?
-Were you able to withstand the 5 year market downturn that started the day you retired because you had been saving cash for the last decade?

 

Excellent! Thank you.