Author Topic: New Job Offer, No 401k  (Read 524 times)

REfinAnon

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New Job Offer, No 401k
« on: July 11, 2019, 01:57:49 PM »
My wife just got offered a new job and she's finding the offer pretty intriguing. The problem is she would be theoretically moving from a Fortune 100 company to a company with less than 10 people.

Everything about the job sounded pretty intriguing...but they don't offer a 401k. Yikes! This is basically our main wealthbuilding tool currently as we both max out our 401k. $36k per year between the two of us PLUS company match on top of that. Our NW basically goes up by $50k a year just on 401k contributions as a HH. Furthermore, our HH income is too high to qualify for any other tax advantaged retirement accounts (Current Gross Income of about $300-$310k including bonuses before any potential job changes).

So...we're trying to think this all through. The offer has essentially been given to her as "let me know what you would need to make this work" so I think she'll have the opportunity to name her price within reason so I'm trying to help her find the breaking point.

My question for Mustachians is...how much of an issue is this 401k thing and how much extra would you need to make to justify it? I think she needs to be compensated for both the 401k issue as well as the additional risk of taking a new job at a smaller company as well as a few other issues such as not as great PTO, maternity leave, health benefits etc. If it's relevant her current comp is about $93k (83k base + 10k bonus).

Also...would she have any additional options in lieu of a 401k? It seems like no.



MayDay

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Re: New Job Offer, No 401k
« Reply #1 on: July 11, 2019, 02:36:43 PM »
For me, I'd want a MUCH higher salary to compensate. You are trading ~25k of tax free money (19k yours and some from the employer match) for paying ~40% tax on money that won't grow tax free. So you need perhaps 25k more in salary to make up for the lack of match and lack of tax shelter. That is a made up number by the way. I didn't do any math.

mlipps

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Re: New Job Offer, No 401k
« Reply #2 on: July 11, 2019, 02:43:55 PM »
I think at a company of 10 people and the level that would command the kind of salary you're describing, your wife wouldn't be out of line to ask the employer about any plans they have to offer a 401k. My understanding is that some types of them aren't too much work to set up & if she's a valuable hire they may be willing to commit to doing so to get her on board. My former company established one once we had had over 10 employees for about a year--we seemed to hit a tipping point where too many potential hires had turned down the offer because of it. If they're a growing company it may already be in their plans.

ETA: There are different compensation caps on the IRA/Roth IRA if you have no employer coverage. So that's something to investigate.

dandarc

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Re: New Job Offer, No 401k
« Reply #3 on: July 11, 2019, 02:48:07 PM »
I'd be wanting at least $150K, assuming the work-hours are about the same. Might settle for a little less, particularly if the job looks much better than the old job, but she almost certainly won't be offered more than she asks for, so you gotta aim high.

You both should look at backdoor Roth IRAs - the difficult thing to deal with will be if she has any traditional IRA money out there. Don't rollover her 401K if you want to do this.

Also +1 to asking for a 401K.

Kronsey

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Re: New Job Offer, No 401k
« Reply #4 on: July 11, 2019, 03:06:26 PM »
A couple of options:

1. Use this as an opportunity/tool to have the employer start a 401K plan. They really aren't that expensive any more. I recommend https://www.guideline.com/ to almost all of my small biz clients. Not the world's greatest service (more software than service honestly), but an awesome plan that is cheap with world class investments for employees and owners.

2. Shoot for a contract position. Most of the risk would be on the employer for worker misclassification. The upside would be huge for your retirement planning. She could then open a solo 401K plan. I would shoot for minimum 25% higher pay if you go this route. Not sure of other benefits involved, but if it is just about the 401K plan it is worth considering.

 

JLee

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Re: New Job Offer, No 401k
« Reply #5 on: July 11, 2019, 03:11:10 PM »
I think at a company of 10 people and the level that would command the kind of salary you're describing, your wife wouldn't be out of line to ask the employer about any plans they have to offer a 401k. My understanding is that some types of them aren't too much work to set up & if she's a valuable hire they may be willing to commit to doing so to get her on board. My former company established one once we had had over 10 employees for about a year--we seemed to hit a tipping point where too many potential hires had turned down the offer because of it. If they're a growing company it may already be in their plans.

ETA: There are different compensation caps on the IRA/Roth IRA if you have no employer coverage. So that's something to investigate.

I believe if an employee's spouse is covered by a workplace retirement plan, the compensation caps remain in place.

bacchi

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Re: New Job Offer, No 401k
« Reply #6 on: July 11, 2019, 03:23:26 PM »
I think at a company of 10 people and the level that would command the kind of salary you're describing, your wife wouldn't be out of line to ask the employer about any plans they have to offer a 401k. My understanding is that some types of them aren't too much work to set up & if she's a valuable hire they may be willing to commit to doing so to get her on board. My former company established one once we had had over 10 employees for about a year--we seemed to hit a tipping point where too many potential hires had turned down the offer because of it. If they're a growing company it may already be in their plans.

ETA: There are different compensation caps on the IRA/Roth IRA if you have no employer coverage. So that's something to investigate.

I believe if an employee's spouse is covered by a workplace retirement plan, the compensation caps remain in place.

It goes way up.

MFJ, MAGI has to be <$193k:

https://www.irs.gov/retirement-plans/2019-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-not-covered-by-a-retirement-plan-at-work


MayDay

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Re: New Job Offer, No 401k
« Reply #7 on: July 11, 2019, 03:44:53 PM »
Good point that they might be willing to add one. I worked for a company with 4 employees and we had one.


JLee

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Re: New Job Offer, No 401k
« Reply #8 on: July 11, 2019, 03:47:35 PM »
I think at a company of 10 people and the level that would command the kind of salary you're describing, your wife wouldn't be out of line to ask the employer about any plans they have to offer a 401k. My understanding is that some types of them aren't too much work to set up & if she's a valuable hire they may be willing to commit to doing so to get her on board. My former company established one once we had had over 10 employees for about a year--we seemed to hit a tipping point where too many potential hires had turned down the offer because of it. If they're a growing company it may already be in their plans.

ETA: There are different compensation caps on the IRA/Roth IRA if you have no employer coverage. So that's something to investigate.

I believe if an employee's spouse is covered by a workplace retirement plan, the compensation caps remain in place.

It goes way up.

MFJ, MAGI has to be <$193k:

https://www.irs.gov/retirement-plans/2019-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-not-covered-by-a-retirement-plan-at-work

Oh damn, that's a big jump.  MFJ with retirement plans is $101k.

CindyBS

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Re: New Job Offer, No 401k
« Reply #9 on: July 11, 2019, 03:55:05 PM »
No retirement plan at all or just no 401(k)?  Might be worth her clarifying. 

What about a SIMPLE IRA?  I work for an extremely small company and we have one.  It may be cheaper for the company to set one up than to keep offering bigger salaries in lieu of retirement contributions.  It does have a mandatory 3% contribution from the employer, but an outside company (Big financial services company that you have heard of) manages the whole thing.  We just fill out a form and send a check once per month.

https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-simple-ira-plan 

REfinAnon

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Re: New Job Offer, No 401k
« Reply #10 on: July 12, 2019, 01:23:08 PM »
Thank you for all the feedback so far.

I have now learned that they DO offer a Simple IRA but no 401k. I'm starting from zero here as I have zero familiarity with this. Is this much worse than a 401k?

dandarc

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Re: New Job Offer, No 401k
« Reply #11 on: July 12, 2019, 01:32:00 PM »
Thank you for all the feedback so far.

I have now learned that they DO offer a Simple IRA but no 401k. I'm starting from zero here as I have zero familiarity with this. Is this much worse than a 401k?
Has lower contribution limits but is not otherwise fundamentally worse than a 401K. Will depend on your specific plan - what investments are available and so on.

One potential "Gotcha", which if you have zero familiarity with this topic is probably not on your radar. A SIMPLE IRA is a traditional IRA and will gum up the works if you have any backdoor Roth IRA plans.

REfinAnon

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Re: New Job Offer, No 401k
« Reply #12 on: July 12, 2019, 01:43:14 PM »
Given that it's an IRA? Does it not cause a concern that we are over the IRA income limits?

I have no immediate plans to do a backdoor Roth but might consider it in the future.

CindyBS

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Re: New Job Offer, No 401k
« Reply #13 on: July 12, 2019, 01:57:51 PM »
I'd recommend poking around on this site.  https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-contributions for more information.

dandarc

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Re: New Job Offer, No 401k
« Reply #14 on: July 12, 2019, 02:13:07 PM »
Given that it's an IRA? Does it not cause a concern that we are over the IRA income limits?

I have no immediate plans to do a backdoor Roth but might consider it in the future.
Wasn't clear about that - the "is an IRA" thing is specifically an issue with conversions. For contributions, you can still do the full SIMPLE IRA and regular IRA contributions.