I would possibly do it age 62 or so as long as company health looks good. Put a bit more aside and withdraw at retirement in lower tax rate.

 

what if you were to know the deferred comp was fully funded in a Rabbi trust sitting along side the current CEO and many management names from past to present. That place where the “golden parachutes” are kept….?

would that change the mindset? It may be worthwhile to look at the failure rate of deferred comp plans and why it’s normally limited to only the top brass of the company.

 

Now I have to google Rabbi trust (having a few rabbis in the extended fam)

 

While at it Google COLI that’s used to cover potential shortfalls for liquidity. Everyone who designed this program is familiar with history.

 

Everything I read about "rabbi trusts" emphasize that

• A rabbi trust does many things but it doesn't keep creditors at bay.
• If a company goes under and declares bankruptcy, the funds in a rabbi trust can be used by creditors."

For those reasons, I'm out.

 

it’s optional for a reason. When you hit 60 and have 5 years to go, it may fit very well into your financial plan.

The other place where this can be amazing is in the known reality of the last parent or in-law passes and an IRA is inherited. Secure 2.0 killed the stretch and makes a 10 year drawdown. This can very effectively kick the tax bill down the line instead of a 35-39.6 federal (assuming TCJA isn’t renewed in a bill for 2026+), plus state, plus Medicare surcharge, and potentially IRMAA @ 63. You can take that inheritance with planning and defer the income over the go-go years while delaying retirement plan withdrawal and Social security.

it’s an added lever that you CAN pull.

 

Yep, it's a great tax planning option (that WE voted for in our PWA).

 

You know you can collect Social Security at anytime after you turn 62 right? And since you wouldn’t be working after 65 because you retired, there would not be offsets

 

I like the option of the NQDC and can think of a few more applications:

1) I would never look at this as a retirement account. If you’re in your 30’s or 40’s and think you might roll income to post 65, the risk rises exponentially with time. I’m thinking the most I would plan on is about 5 years.

2) Our household routinely breaks $400k annual income causing child tax credits to phase out. What if you rolled income every other year to have a high income year and a sub-$400k-year alternating setup to capture the child tax credits at least every other year vs never? (I hear the next tax bill raises the tax credit to $2500/kid.)

2a) The “big beautiful tax bill” is floating SALT tax deductions raised from $10k to $30k. If you make over $400k, this deduction is phased out to the original $10k floor at $500k. NQDC roll your income to set up a high year/low year setup and you could capture this tax deduction and/or itemize every other year. Again, NQDC is non-protected, but even after 9/11 it took 5 years to declare bankruptcy. I think a short term roll is probably safe.

3) What if your spouse has a high income year pushing the household way high into the orbital tax brackets? NQDC could “level-ize” the family income stream for tax purposes. Realtors, business owners, farmers, etc come to mind.

4) If you decide to exit Delta pre-65, this plan would allow you to spread out income into future years to make your current year income artificially low (lower taxes), and receive future income at lower tax brackets. Other than an after tax brokerage account, there are tax consequences if you pull money out of an IRA or 401k pre-55 and pre-59 1/2. (Google for exceptions). If you and your spouse are part of FIRE, NQDC allows an optional tax-advantaged bridge income stream to these later years. (Also helps your income look low for pre-Medicare retiree healthcare plan purchases on the Obamacare exchange for subsidized lower rates)

There are probably a lot more ideas pilots will brainstorm, but these are just a few that popped in my head. Yes, long term the plan is risky, but for short term income rolls I see this as an option as an overall win for the pilot group.

 

Not a player for me close to retirement but if you're younger ^^ this ^^ Company controlled asset