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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Joel on April 08, 2017, 03:06:00 PM

Title: Evaluating new job opportunity that does not offer a 401k!
Post by: Joel on April 08, 2017, 03:06:00 PM
I've been on the job market and have found a company that appears to be a really good fit.

My current salary is around $100k. My current company matches up to 3% of my salary and it vests automatically. With my wife's income, we fall solidly in the 25% federal marginal tax bracket and 9.3% California marginal tax bracket. We currently maximize both 401ks and Roth IRAs, in addition to an HSA at my wife's employer. The new company I'm talking with does not currently offer a 401k.

In that situation, I feel like I need to account for the tax savings (and lost 401k match). Has anyone else encountered this situation? How did they account for this when comparing options? My gut says I should expect $6k more as a result of the lost tax savings ($18k * 34.3%) and $3k more as a result of the lost 401k match.

What do you guys think?

It's a fairly high level position at the company in a finance/management role such that I'm also considering explaining my dilemma to the owner and trying to sell them on starting a 401k for the company using something like ShareBuilder 401k. (it could / would likely be part of my responsibilities - think 1-2 levels below CFO for the position)
Title: Re: Evaluating new job opportunity that does not offer a 401k!
Post by: Hargrove on April 08, 2017, 10:37:26 PM
That's really strange. Everybody from Bill's Retail Sock Superstore on up is offering (often bad) 401ks, even if limited to management.

It may be worth asking why they don't have a 401k. Do they have health insurance? If they're big enough to pay 100k salaries, I would be wary of one that didn't bother to administer a 401k for their employees.

What would you really even ask for? After taxes, the 9k makeup-cost you calculated won't be 9k anymore. You'd need them to pay you about 15k more to get back the money you would otherwise be short, all else being equal. Are they likely to give you 15% more?
Title: Re: Evaluating new job opportunity that does not offer a 401k!
Post by: Hotstreak on April 08, 2017, 11:29:06 PM
Joel, you nailed it.  In addition to whatever raise over 100k you are expecting as part of the job move, you need to have additional compensation equal to the lost tax savings. 


Add those together and you have your starting number. 


Work up or down based on how much you want the job, etc.




Slightly off topic but if you are in a high level position which is also as many as two levels below the CFO, you are working for at least a medium sized or moderately large company.  It IS unusual to not have a 401k at a company this size and I imagine they either have a really good or a really bad reason for not offering it.  Is there any idea which it is, and whether they might change their minds?
Title: Re: Evaluating new job opportunity that does not offer a 401k!
Post by: bryan995 on April 09, 2017, 03:17:14 AM
I would also want to factor in the added risk with a 'small company'. Could they ever be acquired? Do you have a piece of the potential pie? No ESPP, no bonus? What sort of talent will this company be able to recruit and consequently work with on a daily basis, will that cause issues? Even if they do promise to start a 401k, still factor that in now.

100k + ~30% raise + 6%+3% lost 401k + risk%.
Title: Re: Evaluating new job opportunity that does not offer a 401k!
Post by: frugaliknowit on April 09, 2017, 05:52:02 AM
You are "losing" the match (3%) plus the opportunity to defer federal taxes and state taxes (in CA) .  That's it.  You are not LOSING anything beyond that.  Folks on this board confuse deferal with gain.

If you really want this job, then you will need to be creative, and likely less optimal.   Some possibilities:

1.  IRAs
2.  Pump your wife's plan.
3.  Pay down mortgage (might think of it as a bond allocation for you and the wife...)
4.  Debt payoff
5.  Tax managed mutual funds.

While you can ask them to start a 401K, they already know they should for competitive reasons.  They are trying to avoid the administrative costs, fees and the match costs.

My employer (small company) dropped the 401K in 2010.  It's not that unusual.
Title: Re: Evaluating new job opportunity that does not offer a 401k!
Post by: MidWestLove on April 09, 2017, 08:52:19 AM
Having been in such positions multiple times when evaluating job opportunities, I found it to be fairly simple - please remember it is a business transaction and take as much emotional experiences out of it

you, and only you, already know what you want to work for in terms of compensation and what is your lower bound. Give yourself a deep thought of what those numbers in, work towards an offer  (without an offer there is _nothing_ to talk about), and then negotiate.

If they ask on why , you can mention comparative benefits. Beyond it, your market value is what you are willing to work for and what others are willing to pay for your skills and experience.

if they can give you what you want -> take it
if they cant/wouldn't -> walk away.

as prospective job searcher, I don't really care of why company does not want to comp you the way you want to be comped (owner dealing with divorce, the moons of Saturn aligning, etc). Who cares?
 
as hiring manager, similarly I don't care about any sob stories (your dog needs a surgery and that makes you deserve higher pay, your agreement with ex wife , your children braces, your gambling debts, etc). Who cares? This is what I can pay, and the range I can use, we either meet or don't meet.

it is a business transaction , treat it as such. especially if you are going for at will employment..
Title: Re: Evaluating new job opportunity that does not offer a 401k!
Post by: Joel on April 09, 2017, 10:03:00 AM
So the company is a relatively large sized farming outfit. The founder/owner doesn't trust the 401k administrators and instead offers private stock ownership in the company as the retirement plan. There are around 10 CPAs in the group, many of which have been there since they left public accounting.

So that is the reasoning for not having a 401k. The company is very stable and not likely to disappear or be acquired for that matter.

Anyways, thanks for everyone's thoughts. It confirmed I was going the right direction on how to quantify the lost benefits. I'm very well paid for my years of accounting experience in the Sacramento area and I'm trying to make the move from internal audit into an assistant controller or FPA position. This role seems like a great fit, and is a hybrid of those two roles with a lot of opportunity for visibility to the founder himself. Needless to say, the interview went great so now I'm just left wondering if the compensation will meet what I'm looking for. Having been keeping my eyes open (and interviewing for other similar positions), I've already accepted the fact I may have to take a small paycut to get into the side if the business that I want to be. (Which will offer the long term growth I want that internal audit does not). Of course the dollar figure I had came up with assumed I had access to a 401k as I hadn't seen any companies that didnt offer one!
Title: Re: Evaluating new job opportunity that does not offer a 401k!
Post by: MidWestLove on April 09, 2017, 12:31:37 PM
"private stock ownership in the company as the retirement plan"

That seems _very_ risky to me, ask Enron or Artur Andersen. Even worse if the plan is not qualified ERISA plan. So adjust your numbers accordingly.

"The company is very stable and not likely to disappear or be acquired for that matter."

you don't know that. also, are you getting an actual employment agreement or still at will employment? if you are signing a contract, talk to your lawyer, it should all be spelled out (pay, bonus, types of termination, changes in control, changes in responsibilities/re-assignment, etc). if you are at will employee, then it is just a dollar number that matters.
Title: Re: Evaluating new job opportunity that does not offer a 401k!
Post by: Gronnie on April 09, 2017, 03:53:16 PM
You are "losing" the match (3%) plus the opportunity to defer federal taxes and state taxes (in CA) .  That's it.  You are not LOSING anything beyond that.  Folks on this board confuse deferal with gain.

It's not that simple.

All that extra money due to tax deferral would grow and compound. The deferral would also be at marginal tax rate and then funds would be withdrawn at the bottom of the tax bracket getting standard deduction, personal exemptions, some at 10%, some at 15%, etc.