Author Topic: Weighing Two Job Offers  (Read 7616 times)

serpentstooth

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Weighing Two Job Offers
« on: March 10, 2014, 12:50:58 PM »
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« Last Edit: May 17, 2016, 07:13:12 PM by serpentstooth »

Tyler

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Re: Weighing Two Job Offers
« Reply #1 on: March 10, 2014, 12:59:15 PM »
Congrats on the two offers.

My first impression -- $1400-$1500/month seems really high for health insurance for two healthy young people (my assumption since you're looking to have kids in a few years).  Have you tried shopping around not necessarily for "comparable" coverage but for "reasonable" coverage?  With more affordable (but perfectly reasonable) coverage the income delta may be larger than you think.
« Last Edit: March 10, 2014, 01:01:24 PM by Tyler »

Cheddar Stacker

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Re: Weighing Two Job Offers
« Reply #2 on: March 10, 2014, 03:23:14 PM »
A the new job, buying my own health insurance will cost $1,376/mo for a comparable plan. When I take into account the health insurance cost, my current job earns me $40,440/yr, and this new job would earn me $53,488.

1. I really like my coworkers at my current job, and I worry about spending all day in a basement office, which I would at the restaurant. There's a substantial language barrier with most of the staff. At my current job everyone is really smart
2. I have no formal accounting training. My boss at the restaurant doesn't care, but I'm worried that if/when this job ends, I'm going to end up unqualified to do my own job and won't be able to get another position. I guess I could always go back to a temp agency and get work as a secretary; it worked really well this last time.
3. I suspect the restaurant will be a better job when he hopefully have kids in a year or two, owing to a private office and relatively flexible schedule.
4. I won't have access to a 401k at the restaurant. We're already maxing out two IRAs and had the budget room to max my 401k this year. My husband and I both freelance, and I earn $5,200/annum from that, which I could shunt into a 401k. We were also planning on stuff as much of my husband's earnings into a 401k as well. I guess we could use taxable investments?
5. I have some worries I won't be able to do the restaurant job. I'm smart and learn fast, but I've never done a p&l before, etc. Is this one of those "Lean In" moments that lady in the news talks about?
6. Both employers have long-time very happy employees, and the restaurant in particular has shockingly low turnover for the industry. People who work at both places are happy and tend to stick around.

So, people, tell me your thoughts, ask me questions, and help me figure this out.

Congrats on the job offer.

I emphasized a few things above to highlight them in my comments.

I also left that first part in your quote because I think you should take this calculation a step further and calculate the benefit of 401K (tax deferral) plus estimated dental. Calculate all the financial pros/cons and come to your true annual wage (net of taxes) for both jobs. Based on the facts you provided, the 2 jobs might be closer in pay (considering all benefits/taxes) than you think and I'd hate to see it influence your decision more than it should.

I've seen you mention smart co-workers before. Based on your writing it's obvious you are smart as well, and I get the impression it's important for you to have good dialogue with intellectually equivalent people. I think the language barrier might prevent you from doing this at the new job, and it could lead to great frustration. Maybe I'm not reading you correctly, that's just my take, and I think it's a very important consideration.

In regards to the formal accounting training and doing a P&L, you'll be fine. As I said above, it's clear you're smart. I learned more in the first 3 months on the job doing bookkeeping and taxes than I did in 5 years of college. Once you get the hang of things the day to day becomes easy but you will have a few challenges to keep you sharp. QuickBooks does the P&L for you. You have to get the data in the correct place, but you don't have to create the reports so I think you'll be fine.

I don't have any great epiphany for you, just wanted to emphasize the things I think are the most important considerations for you. Good luck!

Bank

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Re: Weighing Two Job Offers
« Reply #3 on: March 10, 2014, 04:00:12 PM »
4. I won't have access to a 401k at the restaurant. We're already maxing out two IRAs and had the budget room to max my 401k this year. My husband and I both freelance, and I earn $5,200/annum from that, which I could shunt into a 401k. We were also planning on stuff as much of my husband's earnings into a 401k as well. I guess we could use taxable investments?


If your husband is self-employed, you have a lot of retirement plan options.  I would look into a SEP or a Individual 401(k).  They will provide him with the means to shelter most of his income while the two of you live on and contribute to your IRAs with your salary.


However - if you are already maxing out a plan for him (I'm not sure how to read the bolded part, exactly), well, as Miss Emily Litella would say  --- "Never mind."


Modified to say:  Good luck with the decision!!
« Last Edit: March 10, 2014, 04:05:10 PM by Bank »

Cheddar Stacker

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Re: Weighing Two Job Offers
« Reply #4 on: March 10, 2014, 04:10:40 PM »
4. I won't have access to a 401k at the restaurant. We're already maxing out two IRAs and had the budget room to max my 401k this year. My husband and I both freelance, and I earn $5,200/annum from that, which I could shunt into a 401k. We were also planning on stuff as much of my husband's earnings into a 401k as well. I guess we could use taxable investments?


If your husband is self-employed, you have a lot of retirement plan options.  I would look into a SEP or a Individual 401(k).  They will provide him with the means to shelter most of his income while the two of you live on and contribute to your IRAs with your salary.


However - if you are already maxing out a plan for him (I'm not sure how to read the bolded part, exactly), well, as Miss Emily Litella would say  --- "Never mind."


Modified to say:  Good luck with the decision!!

Good point but I'm confused by your use of the word most. Admittedly I'm not as familiar with the individual 401K, but the SEP is limited to 20% of SE income. This would take nearly 100K in SE profit to replace the $17,500 tax deferral OP already has access to in the 401K. If SE earnings are very high, or if individual 401K rules are better than I'm aware of, this could provide you with a much bigger tax deferral vehicle.

GregO

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Re: Weighing Two Job Offers
« Reply #5 on: March 10, 2014, 04:17:44 PM »
I've already talked to my current employer about the situation, and they're working on a raise/increased responsibilities offer which may include bringing some of the bookkeeping in-house. I should know that by Wednesday/Thursday, since I have to give an answer re: the temp job offer by Thursday night. At a minimum, I know they're going to pay for me to get Quickbooks certified.

It sounds to me like you have the potential to make the best of both worlds.  If your current employer wants to make an effort to keep you, than it sounds like you have some room to negotiate for what you want.  If I were you, I'd really prepare for your meeting with your current employer.  I'd make a list of the positive things the new job offers you (higher salary, more responsibility, flexible schedule, etc) to present it to your current employer (keep the negative things to yourself, they don't need to know those ;-) ).  I personally think one of the most important things to think about is the potential to improve your resume and career path.  It sounds like your new job currently 'wins' there, but that's something that your current job could meet just by giving you some training, a new title, and responsibility. 

Then, for your use, decide what you would like your 'perfect job' to look like if you combined the best of both jobs and prioritize what's most important to you.  I'd also put together the numbers so you know what is the value of each job perk.  How much tax savings does the 401(k) provide, commuting cost differences, etc.  The hardest ones to put a number to will be insurance costs, but you can still put a good guess on it.

In your meeting, you can present the things that are important to you with the new job.  While your current employer will probably only be willing to raise your salary a set amount, you may be able to get a bunch of intangibles that don't 'cost' them nearly as much.  Things such as formal training, a title change, and flexible working schedule don't cost the company a lot but may be worth a lot to you.

I doubt it'll happen all in one meeting, but you should be prepared in case it does.  In the end, the employer will offer some package meeting some of your demands.  You can compare it to your 'priority' and 'value' list to see if they provide enough incentives to make your current job more worthwhile.  If the salaries are really as close as you think they are, it seems like you're in a position to get a significant pay bump and may be able to get some other incentives as well.

GregO

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Re: Weighing Two Job Offers
« Reply #6 on: March 10, 2014, 04:27:09 PM »
I'm looking at the gold plan. In theory we could drop all the way down to bronze if we wanted. In the past we paid $473/mo for a $10k per person deductible plan, but that option makes me leery long term; I'd be tempted to just give up insurance at that point.

Digging around on ehealthinsurance, it looks like for about $850/mo I could get an Empire BCBS plan with a $5,000 deductible. That's a silver plan with an HSA, which might help ease the blow of no 401k.

I don't know your financial situation, but having a high deductible plan is not a bad thing at all if you are able to save enough money every month.  And don't underestimate the value of an HSA either: it provides $6550 of tax-shelter from income tax, social security, and medicare.  Here are a couple of articles I found helpful about insurance: 

http://www.mrmoneymustache.com/2012/11/01/our-new-237-per-month-health-insurance-plan/
http://www.caniretireyet.com/when-should-you-self-insure/

MDM

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Re: Weighing Two Job Offers
« Reply #7 on: March 10, 2014, 07:41:51 PM »
Quote
3. I suspect the restaurant will be a better job when he hopefully have kids in a year or two, owing to a private office and relatively flexible schedule.

That's one of the highest likely medical expenses people in their 20s will have.  Before you go for a high deductible plan (which many people never get to), check with local hospitals and OB/GYNs on typical "new baby" costs.

Add 1 vote here for CheddarStacker's advice:
Quote
you should take this calculation a step further and calculate the benefit of 401K (tax deferral) plus estimated dental. Calculate all the financial pros/cons and come to your true annual wage (net of taxes) for both jobs.

Nice to have a choice - good luck!

Bank

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Re: Weighing Two Job Offers
« Reply #8 on: March 11, 2014, 06:54:44 AM »

Good point but I'm confused by your use of the word most. Admittedly I'm not as familiar with the individual 401K, but the SEP is limited to 20% of SE income. This would take nearly 100K in SE profit to replace the $17,500 tax deferral OP already has access to in the 401K. If SE earnings are very high, or if individual 401K rules are better than I'm aware of, this could provide you with a much bigger tax deferral vehicle.

Well spotted, CS.  I had forgotten about the percentage of income limitation  on a SEP (I have a SarSEP, which is 100% of income, but they ain't makin' those no more).  I think the SEP limitation is 25% of income for 2014.  The individual 401k seems more flexible, although I don't have any personal experience with it.  Links below.

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/SEP-Contribution-Limits-(including-grandfathered-SARSEPs)
http://www.irs.gov/Retirement-Plans/One-Participant-401(k)-Plans

Cheddar Stacker

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Re: Weighing Two Job Offers
« Reply #9 on: March 11, 2014, 09:08:58 AM »
Interesting calculation.

So real quick question on Solo 401K - Can you defer up to $17,500 if you're not covered or up to 20% of SE income if you are covered by another 401K? That's how I read your calculation.

One error I noted that could have a big impact - In your "tax scenario in the new job" tab, under Husband's freelance income you deducted Health Insurance and HSA. These amounts are page 1 deductions, not Schedule C deductions. This means they reduce your federal taxable income, but not your SE earnings. This is good and bad. Bad because more SE tax, but good because more SE income to put in your husbands 401K. I think this will increase your real wage on the offered job by a few thousand dollars.

Also, you deducted your full HSA contribution from the real wage of the offered job. Do you expect to spend that entire amount? What was your typical out of pocket expense (co-pays/meds/deductibles) under your old insurance plan? I think these should both be considered in the equation. Your out of pocket costs should be a deduction on the current job if the HSA will be a deduction on the offered job.

If you think the entire $6,500 HSA will be spent, I think deducting it in the real wage calc makes sense, but if you think some will be leftover it would become tax deferred savings. I would only deduct what you think you will spend in a year from the real wage calc.

Good luck with the decision!

Cheddar Stacker

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Re: Weighing Two Job Offers
« Reply #10 on: March 11, 2014, 09:33:53 AM »
Line 14 of the Sch C can be used for health insurance, but it's intended for employees of the business not owners/proprietors. SE health insurance belongs on line 29 of the 1040 and should not affect SE earnings. If you choose to put it on the Sch C you might get away with it, but it wouldn't hold up under an IRS audit.

In this specific scenario since you have the ability/desire to save as much as possible in tax deferred accounts, I think it's to your benefit to move it off the schedule C anyway, but maybe not. You'd have to pay SE tax on the amount, so maybe around $1,500, but you can defer much more from federal taxes. I don't know, it actually might be a wash the more I think about it. Your federal taxes will likely go down by the same amount your SE tax goes up.

Cheddar Stacker

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Re: Weighing Two Job Offers
« Reply #11 on: March 11, 2014, 09:47:02 AM »
In the real wage tab cell c10 you deducted c6 twice.

GregO

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Re: Weighing Two Job Offers
« Reply #12 on: March 11, 2014, 11:31:04 AM »
That's one of the highest likely medical expenses people in their 20s will have.  Before you go for a high deductible plan (which many people never get to), check with local hospitals and OB/GYNs on typical "new baby" costs.

Yes, I would expect that it'd make more sense to be on a low deductible plan when you are planning on having a child.  But until that time comes, I think a high deductible plan makes sense.  And I don't know, it might still make more sense even if you're having a child.

As for your impressive spreadsheet, I do have one comment.  I think you are overestimating the costs of health insurance.  The plan you mentioned has a $5000 deductible.  So even if you do have a child on that plan, you're still only going to be out ~$6000.  And that's only for one year.  The rest of the time you have that job, you wouldn't expect to be using all of your HSA every year.  We have a high deductible plan with a small child, and we have typically been using around $1-$2k for dr appointments, dental, etc.  And the other side of that coin is that I'm sure you still have medical expenses even with your current health insurance.  So your calculation is assuming that you will be spending $6500 more on health care every year than you will with your current plan.  I don't know your specific situation, but that seems like a lot. 

pachnik

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Re: Weighing Two Job Offers
« Reply #13 on: March 13, 2014, 07:30:30 AM »
Good to get that resolved and my congratulations to you.

I like that you have trust in the temp agency owner too.  That's a great connection to have.