Author Topic: 24hrs to make a decision, Please HELP!  (Read 1501 times)

Bootlip

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24hrs to make a decision, Please HELP!
« on: July 13, 2017, 08:39:34 AM »
My wife has 24hrs to decide if she wants to take a new job at another employer. Our concern is her 401K now vs what her 401K would be at the new employer.

Current employer
Employer matches 2% of her gross automatically
Employer matches dollar for dollar up to 3%, then 50 cents on the dollar for the next 3% up to 6%
She is 100% vested

Potential new employer
She has to work 1.5yrs before becoming eligible to contribute to their 401K plan
Once eligible, they match dollar for dollar up to 5%
In addition, every year they get a profit sharing bonus that's usually 3-5% or her yearly gross
To be 100% vested she'd have to wait 5 years after becoming eligible, (1st yr-20%, 2nd yr-40%, 3rd yr-60%, etc.)

Now the fund options are nearly identical. Good funds, low ER's. What scares us the most is the vesting wait. She is 29yrs old, I'm 31yrs old. We are currently fully funding our 401K's and IRA's. Our goal is to reach FIRE in 9-10yrs, and we're right on pace. So the fact that she wont be fully vested for 6.5yrs is a little scary. That and the fact that outside of her IRA she'll only be able to invest in a taxable account for the next 1.5yrs means we wont get the tax benefits like we would if she was in a 401K.

She is exactly 50/50 on staying or going, she likes her job now(just not her boss). But she also feels like its time for a change. Ill add that both jobs pay the same. So if I'm missing something, good or bad, on the 401K differences. That may be enough to sway us in one direction or another.

Thank you for any input!

therethere

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Re: 24hrs to make a decision, Please HELP!
« Reply #1 on: July 13, 2017, 08:47:21 AM »
As a two income professional couple, the 1.5 year waiting period would deter me. In the 25% bracket I need all the tax deductions I can get! Even if its the same salary, she is effectively taking a paycut for the first 1.5 years by not being able to contribute to a 401k. Does she have time to max out the 401k for 2017 at the current employer? The matching and vesting is pennies compared to the tax savings in my opinion. If she decides to switch I'd negotiate a higher salary to account for your losses.
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Roboturner

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Re: 24hrs to make a decision, Please HELP!
« Reply #2 on: July 13, 2017, 09:09:49 AM »
what's the difference in salary?
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FINate

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Re: 24hrs to make a decision, Please HELP!
« Reply #3 on: July 13, 2017, 09:10:36 AM »
Just to be clear (maybe you already know this), vesting only affects the employer match, not employee contributions.

She is exactly 50/50 on staying or going, she likes her job now(just not her boss). But she also feels like its time for a change. Ill add that both jobs pay the same. So if I'm missing something, good or bad, on the 401K differences. That may be enough to sway us in one direction or another.

Well, if it's exactly 50/50 as far as the job is concerned then the clear answer is to stay put. Why would she switch employers for the same job, same pay, uncertain boss (you never know what the new boss is really like until you get there) for LESS total comp (losing out on 401k and match for 18 months)?

IMO she should negotiate more with the company making the offer. No harm in doing this, just explain why she's on the fence, which is very common sense. Maybe they can sweeten the pot or make an exception to their 401(k) rules. If not, politely decline the offer.

Bootlip

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Re: 24hrs to make a decision, Please HELP!
« Reply #4 on: July 13, 2017, 10:26:28 AM »
Does she have time to max out the 401k for 2017 at the current employer?
If she stays yes she has time. If she changes jobs, no.

what's the difference in salary?
Same salary

Just to be clear (maybe you already know this), vesting only affects the employer match, not employee contributions.
Yes I did know that. It would still be 1.5 yrs before she can invest anything in their 401K though. So its a long time before she can reap the rewards of a dollar for dollar match up to 5%, but an even longer time before she "lock" in those rewards.

Thanks for the help and please keep the comments coming!

L. WereBear

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Re: 24hrs to make a decision, Please HELP!
« Reply #5 on: July 13, 2017, 10:52:36 AM »
Does her current job give the 2%, then match her first contributions up to her contributing 3%, then the next 3% at .5 for a total of 6.5% or is it only 4.5% because the initial 2% counts toward her first 3%?
I'd assume it is the first but I have encountered the second.
Assuming the first, total compensation at her current job would be her salary +6.5% per year  for a total of +39% of her salary over 6 years (no raises for simplicity)
At the new job for her to get to fully vested (six years) she would have +25% total. The bonus would vary obviously but projecting the minimum of 3% it would then be 18% over the six years getting to 43%. At 5% the total would be +55%. Take into consideration how certain are the bonuses? I also assumed she would get them her first year.
Which doesn't take in tax considerations. Honestly those numbers are close enough I say that emotional considerations probably outweigh the financial considerations. Also how likely does past job history suggest that your wife stay at the new job for five years?
« Last Edit: July 13, 2017, 10:54:40 AM by L. WereBear »

Proud Foot

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Re: 24hrs to make a decision, Please HELP!
« Reply #6 on: July 13, 2017, 11:03:59 AM »
IMO there is not enough of a difference in the new 401k to be a big pull there.  With pay being equal but not knowing any other benefits I would turn this offer down. Since you stated she feels like it is a time for a change keep on looking for other jobs and find something with a higher base pay.  I personally would not change jobs in the situation you described for equal pay unless the other benefits at the new job were significantly better (lower insurance premiums, more PTO, more flexible hours, etc)

kenaces

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Re: 24hrs to make a decision, Please HELP!
« Reply #7 on: July 13, 2017, 11:14:06 AM »
Seems like the "human capital" side of the equations has to be more important than 401k difference?

- more/less future career opportunities- $, experience, learning, contacts....

- if new company wants here and the pay is same seems like easy way to ask them for more $, benefits, or hours.....

- also hard to measure the impact of 401k differences without knowing your income level

PizzaSteve

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Re: 24hrs to make a decision, Please HELP!
« Reply #8 on: July 13, 2017, 01:50:09 PM »
As a finer point, consider that she can make deductable IRA contributions during the 1.5 year period she is not covered by the 401k, then roll those into her IRA, if the plan supports it.

Does one or the other plan support mega backdoor Roth? ( after tax contr plus roll over of fter tax portion, in plan)?  Backdoor roth is worth a lot.
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Roboturner

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Re: 24hrs to make a decision, Please HELP!
« Reply #9 on: July 13, 2017, 03:17:00 PM »
Rather than deny the offer outright, she should use this opportunity to ask for 10% on top of their offer - hopping jobs is the time to increase pay, i'd site the 401k differences and perhaps do a little sleuthing on the interwebs for avg pay. The worst they can say is 'no', at which point you politely decline.
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Woody Viet

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Re: 24hrs to make a decision, Please HELP!
« Reply #10 on: July 13, 2017, 03:24:30 PM »
This will come down to, what, potentially a couple of extra months of work? The new 401k is definitely weaker, but aren't there bigger issues at stake?

Lady SA

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Re: 24hrs to make a decision, Please HELP!
« Reply #11 on: July 13, 2017, 03:55:39 PM »
With the same salary and relatively same level of interest from your wife and the same funds/fees and pretty much the same matching, the only difference is the outrageous 1.5 year wait for contributing to her 401k. That is a HUGE con, wtf? My employer you have to wait 6 mos. after being hired to contribute but that's because we have a lot of seasonal employees, and I thought that was stupid. There is no excuse for a 1.5 year wait.

I'd push the new job for a higher salary just because I could, then turn around and see if I could get my current employer to match it and I would NOT go to the new job. Seems like there's no difference between the two roles besides the setback with taxes with the new one, and there's no increase in salary to cover what you will lose to taxes because of that bullshit.

If she doesn't like her current boss, is there a possibility of her moving to a new team within the same company?
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Bootlip

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Re: 24hrs to make a decision, Please HELP!
« Reply #12 on: July 14, 2017, 01:15:16 PM »
Thank you all for your input. She has declined the job offer. She did a little more soul searching and let that guide her to her decision vs using the 401K differences as the determining factor. Which was the right thing to do. However after reading everyone's input about the 401K stuff it has help her feel more confident in her decision. Thanks again!!

PizzaSteve

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Re: 24hrs to make a decision, Please HELP!
« Reply #13 on: July 15, 2017, 09:47:59 AM »
With the same salary and relatively same level of interest from your wife and the same funds/fees and pretty much the same matching, the only difference is the outrageous 1.5 year wait for contributing to her 401k. That is a HUGE con, wtf? My employer you have to wait 6 mos. after being hired to contribute but that's because we have a lot of seasonal employees, and I thought that was stupid. There is no excuse for a 1.5 year wait.

I'd push the new job for a higher salary just because I could, then turn around and see if I could get my current employer to match it and I would NOT go to the new job. Seems like there's no difference between the two roles besides the setback with taxes with the new one, and there's no increase in salary to cover what you will lose to taxes because of that bullshit.

If she doesn't like her current boss, is there a possibility of her moving to a new team within the same company?
Depends on the industry.  It does reduce labor costs and in some areas there are a large number of people who leave within 2 years, costing firms a lot.  For example, this is common in accounting partnerships, which are employee owned.

Outrageous or con seems too strong a description.   Dont like it, dont take the job.  No one is entitled to a specific company benefit and each company designs their benefits package.  Some offer no 401k at all, many have a time limit to join, especially small employers with a lot of turnover or young people who dont even want a 401k, like restaurants.
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Texconsin

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Re: 24hrs to make a decision, Please HELP!
« Reply #14 on: July 15, 2017, 01:26:00 PM »
If one of the 401(k) plans had a Roth option and the other didn't...especially, at your age.