Quote:
Originally Posted by pinseeker
I think your numbers are a little off. The most that Delta can contribute each year to a pilots 401k is $42400. If a pilot got that contribution every year (they wouldn't get the $42400 until their income reached $265K) for 25 years at a 7% ROI, they would have $2.6 million in their 401K. That's about what it costs to fund our A plan. Now they get cash over cap, which everyone talks about, but which cap? Our B plan using the same numbers would be worth about $1.6 million, $900K more than what you say their profit sharing is worth. Does the cash over cap make up that $900K?
The point is, our current plan is not worse than Delta's plan. And our $130K is guaranteed. Can you guarantee a 7% ROI? The DOW has averaged 7% since 1988, but that is using the big gains the DOW made this year.
I fully admit there are most likely flaws in my numbers. I’m just plugging in some Excel numbers that are my best guesses. Here’s my final product. Feel free to break it down…
https://ibb.co/bVqxkR
https://ibb.co/k5tiQR
As far as the Cap, I was going off the 270K for 2017 ($43,200). Once I hit that cap, I took the extra and dumped it into the Profit Sharing pot. My Excel showed their 401(k) DC to be totaled at 2.8 over the course of my career (29 years). This is compared to my number at FDX of 1.6. We basically have the same numbers here. So Delta has the edge by 1.2 as expected with their higher contribution rate vice our B-Plan.
Since we are comparing retirement, I just grew the Cash over Cap into the Profit Sharing pot at 7% for the career (this is how I would use the profit sharing anyway, albeit absent of a tax protected account). Since PS has been in play at Delta, they have averaged somewhere between ten and twenty percent. I wanted to be conservative, so I chose 7%. I felt like this would average out over the course of a career to a slightly lower number. I even dropped every fifth year to 0 PS. With the combined cash over cap and PS payouts averaging a seven percent return, the career earnings came in at just under 1.2 (500K with 0% ROI). I did amend my numbers from my previous post so that they were less optimistic with the PS returns. I used 10% last time.
Again, you can break down my numbers. My goal is just to build some reasonable numbers so I can make an informed decision. I want to be accurate. But here again, Delta has 2.4 million dollars in the account after 29 years that I do not. It’s my responsibility to reason whether or not that is a better benefit than 130K per year. Personally, I prefer the pension. But if we can't ameliorate the present product, I think it’s a dead horse at this point. There’s no point in beating anymore. I know it’s worth $130K to the guy that retires tomorrow. That is fantastic for him. He earned it (and MORE I would argue). But my reality is different. My reality is that the pension is likely worth half of that. That means when I compare my pension of 2045 dollars, I get a benefit equivalent to $65K per year (this uses the past 15 year inflation numbers back to back for the next thirty). That becomes far less palatable to my Delta peer coming in with an extra 2.4 million in his own account that he can pass on to his kids.
https://ibb.co/hDvBem
This leads me to your question, ‘Can I guarantee a 7% ROI’? Ask that question to the guy in March of 2009. I would never say I would. But would I take my chances with the market vice my eighteen year stagnating pension? Without hesitation, absolutely. Every. Single. Time. I don’t have the fear that many on these boards do. Yes, I’ve been burned. But you do the best with what you have, and I’m not going to live in fear of the worst. I’ve made the best decisions I could thus far, and that’s all I can ask for in the future.
I believe we have the best retirement there is… bar none. But it’s languishing and needs to be addressed. I want to do what is everyone’s best interest, but I just wanted to fill you in on my perspective because you asked. I’m also concerned with the guy that has ten years left with fifteen served. That is the group that needs a clear vision of what can be achieved. The guys with 25 are already set and everything else is gravy. I feel I have enough time to survive some market bumps in the road. But for those with ten left, we need to give them some security and buffer from hiccups that are most likely due. That is the component that needs to be solved. I know things are personal on here, but I mean everything with all due respect.