Author Topic: High Salary - No 401k?  (Read 1796 times)

ryanht13

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High Salary - No 401k?
« on: February 23, 2016, 08:22:45 AM »
I just received an offer for $110,000, before bonus, with an employer who doesn't have a 401(k) (Foreign Company). They don't pay health insurance either. In my current role, I have a salary of $60k with ~$25k bonus. My company does offer a 401(k)- the match is very small.

How do I make this apples to oranges comparison? What's the role of a 401(k) with early retirement goals?

PhysicianOnFIRE

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Re: High Salary - No 401k?
« Reply #1 on: February 23, 2016, 08:31:41 AM »
I would call your current job ~ $85k + 401(k) match + cost of health insurance.  The new job offer is $110k. 

The lack of a 401(k) isn't a deal breaker, particularly if RE is your goal.  I would shop around to see what an equivalent health insurance policy would cost (or check your W-2 to see actual cost).

The new job offer most likely wins in terms of compensation.  Many other factors to consider, obviously.

zolotiyeruki

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Re: High Salary - No 401k?
« Reply #2 on: February 23, 2016, 08:38:34 AM »
The advantage of a 401k is that it allows you to defer paying taxes on a chunk of your income.  And since your income in retirement is likely to be significantly lower than your income now, you'll probably pay a lower tax rate on that money.  The disadvantage for those of us with ER in mind is that it doesn't become available until age 59.5, so there is likely to be a gap where you'll need to have another source of income.

neo von retorch

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Re: High Salary - No 401k?
« Reply #3 on: February 23, 2016, 08:52:46 AM »
The way to access a 401k early if you retire early is... you keep your expenses low, and while living off your "5 year stash" you convert the 401k/IRA into a Roth IRA, penalty free conversion but you pay income taxes on that conversion. As you've retired, your income is very low, so you can pay low taxes on that conversion. After 5 years, that Roth IRA money can be withdrawn without any additional taxes/penalties.

If the money you're earning net is better than what you'd end up with after tax savings with a 401k, you're still better off with the higher salary.

ohana

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Re: High Salary - No 401k?
« Reply #4 on: February 23, 2016, 09:02:58 AM »
Lack of health care is the kicker here.  Make sure you come out ahead if you need to buy your own.  A difference of 25k isn't that much if there's no health care!