iPhone typing will do it to you every time.

But the typical ROT on drawing down your savings in Retirement is 4%. Goal is to not withdraw funds so quickly that you bleed your principal to 0$ to early.
Monte Carlo gaming has that as something like an 85-90% chance of the same, inflation adjusted of course, level of spending for 30 years of retirement.

If you're only planning to live for a year, then all you truly need saved is 130k. Would be a huge shift in your lifestyle if a Medical Miracle added another 29 years to your life though.

So, 3.25M * .04 = 130k.

In Practice, rather than a hard and fast rule, better way to budget things is to evaluate how your savings did over the past year and spend a bit more or ratchet things down a bit.
Year by year

 

Answers
1. Too early to say. Depends on who better chooses what to do with the money they have been given and if they end up with 3 ex-wives, but Pilot F has more money at the starting line. He uses some of the money he doesn't have to put into his 401K to pay the taxes of converting some of his previous savings to Roth to avoid taxes on the back side and prevent required minimum distributions. If the government doesn't change the rules before he retires, this too might help him.
2. Pilot K buys the bottle because his buddy told him that $200 bottles of champagne are great and he took his word for it....and he bought the mega millions lotto ticket.
3. Neither should be in this predicament. We really do have first world problems so let's not kill each other in the circular firing squad. Hopefully we can negotiate something that helps us all without messing things up too badly in the process.

 

Oh I see, you want to keep your savings in your home vault, or under a mattress, or some other place that it can't make any returns.

I see why you are such a big fan of the VB plan now.

 

No, he didn't. He said:I should have used an uppercase A between the last pair of parentheses, but other than that ...


BLOB responded by talking about the "the IRS income cap", but that's not what I referenced. (Do you think I have "(c)(1)(A)" memorized? I looked it up (IRS News Release IR-2017-177, Oct. 19, 2017 "IRS Announces 2018 Pension Plan Limitations; 401(k) Contribution Limit Increases to $18,500 for 2018") before I quoted. )



For the record, I'm not opposed to raising the "B" Fund percentage, and I'm a proponent of Cash over the Cap. However, I do not believe it can replace the value of a 50% Income Replacement valued "A" Fund. Furthermore, I'm not willing to settle for only an improvement in the "B" Fund as a way to halt the Variable Benefit scheme train.

• Abandon the Variable Benefit nonsense.
  
• Raise the FAE Cap on the "A" Plan.
  
• Raise the contribution percentage of the "B" Plan, and include Cash Over Cap.
  
• Implement a Cost of Living Adjustment for the "A" Plan.

That should be our path forward.







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Which pilot is wearing a high-visibility vest?


Pilot F is obviously better off working for Company F because nepotism will yield intangible benefits which transcend money.








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I agree, this is what we need to do.

 

Good lord, it would not be the first or the last.

Sorry I've been flying this week and just forget to hit the gripe and whine forums. I've gone back and watched most all the videos again. Still very confused, but I still think my explanation is correct. I'll get to that shortly.

This section with Mr Reardon is where I cannot for the life of me follow where he got from point A to point B. I understand the simple math he is using to get to his solution, but I don't think he is either explaining this correctly or there's a huge leap of faith somewhere.

In the videos they are using two different descriptions when they talk about a "floor benefit". One time when they refer to the floor is when they reference a floor return rate below the 5% hurdle rate. The other time is in the explanation Tony is referencing, where Greg gets to his 2% "floor" benefit for an income of $275,000 discussion to arrive at a pancake. The first "floor" or a guaranteed 2% minimum rate of return I can understand. That makes since from a watch the dollar, see it grow over time concept. The second "floor" does not compute at all.

First, the $275 limit only applies if we are changing from a non-qualified DB plan to a qualified DB plan. I did hear in the videos that the VBP is a qualified plan. I'm not sure how that affects us, but here is a quick snapshot of the differences: Qualified and non-qualified retirement plans are created by employers with the intent of benefiting employees. The Employee Retirement Income Security Act (ERISA), enacted in 1974, defines qualified and non-qualified plans.

Qualified plans are designed to offer individuals added tax benefits on top of their regular retirement plans, such as IRAs. Employers deduct an allowable portion of pretax wages from the employees, and the contributions and the earnings then grow tax-deferred until withdrawal.

Non-qualified plans are those that are not eligible for tax-deferral benefits. Consequently, deducted contributions for non-qualified plans are taxed when income is recognized. This generally refers to when employees must pay income taxes on benefits associated with their employment.

I think we currently are in an unqualified plan which is why we do not have an IRS mandated cap instead we have a contractual cap. IF we are changing to a qualified plan it seems that the money is now coming to the plan instead of to us as pay.???? Why the change? Is this why the $275 cap keeps coming up? Does it really apply? Assuming that the cap applies, I have no idea what Greg is doing with the 2% floor that he multiplies by $275. Where did 2% come from? IF that is a "floor" benefit then that would seem to imply that we should expect to see regular benefits in excess of that "floor". There are several times in different videos where speakers say that if you earn more then you get more. Or they also say that your earnings for comparison are uncapped. I don't know if some of those phrases changed over time as I was jumping around searching for the pancake explanation as I watched videos so they were not in chronological order as I watched.

To summarize, if I understand Tony and others trying to break it down for me; the company will pay a "known" amount every year that is a percentage of total payroll. (the annual amount will increase or decrease if total payroll increases or decreases for the year) That total amount will be allocated among each pilot based on how much they earn. Each pilot might be getting a pancake valued at 2% of their annual earnings (maybe capped at $275). All these funds are pooled and invested by professionals and they will try to earn 5%. If they earn 5% then you will get ZERO increase in the value of your pancake. If they earn more than 5% then the percentage over 5% will be the increase in the NAV of your share for the year. IF the pot earns less than 5% then your NAV decreases by the difference below 5%. Now there is another 2% minimum rate of return that guarantees as return floor. Either way you are guaranteed that the value of your pancake will NEVER drop below the original value of 2% of your cap ($275)

There's a whole bunch of math I'd like to throw out here, but I'm going to make sure we are all on the same page before we add math to the mix.

 

1st, NC recent message implies discussion of Stabilization...which is mentioned in passing, but not modeled in anyway shape or form. (There's a discussion of taking some of the excess gains in Good years and using them to fill in the gaps for bad years)

Qualified Plans simply refer to IRS limits. When our 1st CBA was signed, the 260 salary cap was in excess of the qualified limits. Thus the discussion in our PBB of receiving Pension payments from the Qualified + non-qualified assets to reach a pension value of 130k. As time has marched on, our 1999 theoretical Pension has moved into the fully qualified realm. (2018 Qual Pension is 220k)

The discussion of using the DC limit is solely self imposed. It is not an applicable limit. Perfect world we would use the DB limit equivalent to a 50% payout, which would put the earnings limit at 440k.
Or go with TonyC's min desired of 1000* WB Capt.

The pancake discussion is discussing a Benefit. Each year you would accumulate a Pension benefit equivalent to 2% of your earnings for the year. That 2% is translated into notional Share's of our Group\Combined Pension assets. Over time, value of those assets would increase or decrease in value.

Value of our accumulated Pancakes would be the Highest of Actual Value or the 2% running floor of your earnings.

EG.
100k = 2k floor
150k = 2k + 3k floor = 5k pension benefit, more than likely + a little bit.

 

It's not as simple as a table might look, so you might have to watch it several times, and pay very close attention to the calculations he explains clearly, and the ones he speeds through without much fanfare.

The plan's performance is used to establish the price of a share (pancake) each year. That's all. There's a minimum (if negotiated), and a maximum (if negotiated), and the adjustments to the share value depend on the performance relative to the hurdle rate.


YOUR benefit each year is computed by multiplying your annual earnings times 2%, then dividing that by the share price. That may be the 2% that's confusing you.

He is very good at mentioning the IRS Annual Earnings limit because it DOES apply. If the limit is $275K and you made $300K, your benefit is computed on the $275 earnings limit.



Our "A" Plan IS most definitely a qualified plan. One reason given to delay raising the FAE Cap in the 2006 CBA was the requirement to "REqualify" the plan if we changed the FAE Cap. Since few people would be affected anyway, and we did other things to improve retirement (VEBAs), we agreed to raise the FAE Cap during "the next contract" and then go through the process of requalifying the plan then. (The "next" contract was a bridge to nowhere.)

The IRS Defined Benefit limit DOES apply -- we just can't reach it with our CBA FAE Cap.



They are not very disciplined about including the caveats, especially when the caveats are limits, which they'd like you to believe dont exist. Every dollar counts (until you hit the IRS limit).



No. Each pilot gets an annual retirement benefit equal to 2% of their annual earnings, subject to the IRS limit. That annual benefit, divided by the new price of pancakes (which is determined by the performance of the fund) yields the number of pancakes the pilot can add to his stack. Lather, rinse, repeat every year -- add pancakes to the stack. When the pilot retires, he takes his stack of pancakes, multiplies that number times the new price of a pancake, and that's his retirement benefit.

If the pilot is not happy with the price of pancakes, he can leave them in the oven and try to find a mixing bowl or spoon with pancake batter to lick while he waits for things to get better.






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If I'm not mistaken, the IRS limit when our first CBA was signed was $130,000 -- exactly the same as the maximum benefit a pilot could earn with the "A" Plan formula. Of course, when we signed there were no pilots who could max out all of the components of the "A" Plan formula. Fully qualified, and a primary reason for unionizing and breaking out into a separate retirement plan.






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