gonyon

That's what I was thinking.

I too am going to max out my contribution. No reason not too. I wanna live comfy after I get done here

Qotsaautopilot

I was saying that what you are saying but I can see how it would be misunderstood as I wrote it in haste. My point is that if you are making over $200k you aren't getting the 12% on all your money. You're getting 12% on $200k and only 3% on anything after. Leaving 9% or $4500 per year of company money on the table assuming the example of $250k in earnings. Wouldn't you rather be getting that $4500 and then contribute your own money if you want? It's not just easier to calculate a in a pure DC plan it's real money.

Right now anyone making over $200k is getting nothing in retirement on their earnings over $200k if they are under 50yrs old.

Qotsaautopilot

I'm banging my head against the wall here guys!!!! You can still contribute if you want. You leave money on the table in any scenario where the match is 9% or greater and you make more than $200k

Every captain will be leaving money on the table if the rates are where they should be.

The only way a hybrid match/DC plan works is if the match goes down to like 5.5% because then you would not be leaving money on the table.

So either 16% all DC, or 5.5 match and 10.5 DC hybrid. Any higher match and it's possible to leave money on the table at certain in incomes.

Qotsaautopilot

Let's make this with clean examples.

Earnings $250,000 and a goal of a 16% contribution from spirit into your 401k

16% DC: $250,000 X .16 = $40,000 from spirit alone

You can still put in $13,000 of your own money if you like to reach $53,000 which is the max you and the company can put in combined but you aren't required to. The other $5,000 you currently put in because you max out you could put into an IRA or any other investment. Point is you didn't leave any of spirits money on the table.


9% match and 7% DC:

$200,000 X .09 = $18,000
$200,000 X .07 = $14,000
$50,000 X .07 = $3,500. (They didn't match this money because you already maxed out when you earned $200,000)

Total $37,500 from spirit. You lost $2,500.

You actually lost more because in order to get your full match on that first $200,000 you put in $18,000. $18,000 + $37,500 = $55,500. The IRS max both you and the company can put in is $53,000 so you lost another $2,500 of spirits money. A total of $5,000 less than a straight DC plan even though at face value the percentage looks like the same 16%. So you would want to contribute less to get all of the possible money you can from spirit but you can't contribute less here because you have to put in 9% to get your full match in this scenario.


5% match and 11% DC:
$250,000 X .05= $12,500 from Spirit
$250,000 X .11= $27,500 from spirit

Total $40,000 total from spirit

You got all 16% in this scenario because at a 5% match you only were forced to contribute $12,500 to get the full 5% from spirit and that didn't max you out before you earned $250,000 for the year. They also gave you the full 11% DC because you didn't hit the $53,000 combined limit (you hit $52,500). You have an extra $500 you can throw in to this account but then will have the extra $5000 like the first scenario you have to take to an Ira or blow on hookers. Point is you didn't leave any of spirits money at the table.

The more you make the lower the matching percentage must be to not leave money on the table in a hybrid plan. 5% match works at $250,000 yr earnings but at anything more the match has to be less. That's why the legacies didnt negotiate hybrid plans. They didn't want to be getting less money in retirement contributions as a result of negotiating higher rates. They also didn't want some to get the full 16% ( the lower earners) and some not get the full 16% (the higher earners) because of technicalities in our contribution rules. Better just to go with 16% of everything you make and let you decide what you want to do with your money. Invest in your 401k if you have some space before you hit $53000, put the more in an IRA, invest in real estate, buy hookers, whatever.

I understand you wanting to reduce your taxable income with retirement contributions but it shouldn't be done at the expense of leaving free money on the table. Also, it's only tax deferred. You will pay taxes on that money and everything it earned when you withdraw it in retirement. You're just delaying the inevitable is all. IMO one should use the Roth option in our 401k and pay taxes on that money now (assuming you're not close to retirement). That way you can withdraw it in retirement tax free along with everything it earned along the way. That's the real big advantage, the earnings being tax free. We can obviously speculate how tha part of the tax code could change in the future but that's how it works now. I'm also not a professional but I'm sure a financial planner would recommend the same to most people with some time to retirement.

390SetBlue

I completely agree.



Filler

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FlyingOkra

It's not like it used to be. Everybody gets the online assessment now days. You'll likely still need to attend a Job Fair.

AirbusRetard

I hear that some captains don't even contribute today to their 401k!!!! Along with new hires being to broke...

So negotiating even a 9 percent dc isn't as easy as it seems.

Anything less then 16 dc is a NO vote for me. Been at a 121 for a decade and the 50 grand in my 401k won't do much good. Speaking off, any way to roll that into my Roth so I can get some "compounding interest"?

gringo

If you're talking about money sitting in an old 401k, you can roll it over to a traditional IRA with a new custodian (Vanguard, TDAmeritrade, etc etc or a Self-Directed IRA (to invest in say, real estate or a business)) and then convert it to a Roth.

Or you might be able to convert it to a Roth while it's still sitting in your old 401k and then roll it over to a new custodian. It all depends on the 401k plan administrator, but it's typically just a form you need to fill out so they should have that capability...

Either way works.

Just be aware that you'll take a huge tax hit when you do, so if you're going to go that route make sure you do it while your income levels are low. I.e., do it as a 1st year FO, not as a 1st year Captain, as you'll be hit with whatever tax rate you're at during the year you roll it over.

As always, consult your CPA first.

bruhaha

When I was new hire, that first year I managed to put 18,000k into the Roth 401k. and then put 5,500 of the remaining 7,000 takehome into my own personal Roth IRA. But the company match was nowhere near 18,000. as 9% of 25,000 is only 2,250.

As far as your own 401k, you can't do anything with Spirit's 401k until you leave. But any other 401k from any other previous employer you can rollover into your own personal IRA / Roth IRA. If you don't switch it, i.e. 401k to a conventional IRA - Roth 401k to a Roth IRA, there should be no tax penalty as you're not touching the money. But going from 401k to Roth IRA, you'll have to pay taxes on the 401k and if you make too much money, you can't rollover to a Roth. it's best to do that while you're not making very much money, i.e. first year FO pay.

But even if you don't roll it over into your own Personal Roth or personal IRA, you should still be getting compounding interest leaving it in your old employer's 401k. You just have to keep track of where all of your retirement assets are.

emb145

The 18k you put into your Roth 401 during the first year of eligibility, does that include the company's 9% contribution also?