Author Topic: New Job - More money, but no 401k!?!?!?  (Read 2575 times)

SunshineAZ

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New Job - More money, but no 401k!?!?!?
« on: January 29, 2016, 05:56:51 PM »
Ok this is my first new thread and I am really confused. 

I currently work at as a contractor at a company that I really don't like because they treat their employees poorly, although they recently lost the contract to another company that I don't know anything about, so things could get better, I could lose my job or things could get worse.  However, through contacts with another agency I just received a new job offer for a very similar job from a small government contract for about $11,000 more a year.  But earlier when negotiating with the agency I told them that I needed more than that and they said it wasn't a problem.  Also, I found out these things about the company:

1.)  No 401k (ACK!!!)
2.)  Only pay 50% of medical (not a huge issue since I am currently covered by DH plan)
3.)  Offer dental and vision, but don't contribute any money  (again, not at issue at this time, but could be if DH loses job)
4.)  They do offer 3 weeks PTO, which is not too bad.

So I ran the numbers:

                                    Current                Proposed          Proposed w/401k
Base Salary              $54,000.00          $65,000.00     $65,000.00
401K contributions    $14,000.00          $         0-               $14,000.00
IRA contribution          $5,500.00            $5,500.00       $5,500.00
Taxable Salary              $34,500.00          $59,500.00     $45,500.00
Personal Exemption        $6,300.00            $6,300.00       $6,300.00
Fed Taxable income      $28,200.00          $53,200.00     $39,200.00
Fed Tax bracket                 15%               25%              25%
Fed Taxes owed*        $3,855.00     $9,100.00     $5,600.00
         
Total compensation    $50,145.00     $55,900.00     $59,400.00
Total Retirement     $19,500.00     $5,500.00     $19,500.00
Net income            $30,645.00     $50,400.00     $39,900.00

Sorry I can't get the columns to line up better.  Anyway, I would end up losing $5,245.00 of that raise to taxes and not be able to add to my 401k balance.  :(

I do have a taxable account that I could put money in, but the taxes from that if the market makes a good comeback might be substantial.  So I am trying to figure out how to be able to put more away in a tax protected account or what else I can do to make this work better financially. 

Has anyone had this problem before? 

(I am getting ready to go out, but I will answer any questions when I return.)

Thanks!! 

Thinkum

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Re: New Job - More money, but no 401k!?!?!?
« Reply #1 on: January 29, 2016, 06:01:31 PM »
You can always open an IRA and contribute $5500/year. That would lower your tax liabilities. Do you already have one and that is why you didn't mention it?

MDM

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Re: New Job - More money, but no 401k!?!?!?
« Reply #2 on: January 29, 2016, 08:08:41 PM »
Various thoughts:
 - Table formatting (although yours is fine): http://forum.mrmoneymustache.com/forum-information-faqs/how-to-formatting-a-table/
 - how to be able to put more away in a tax protected account: contribute the allowed $18K instead of $14K to your 401k
 - Fed Taxes owed.  You mentioned DH.  Do you file as Married Filing Jointly?  If so you'll want to calculate your taxes together with DH's income.
 - Personal Exemption $6,300.00.  That amount is the standard deduction for 1 person.  Exemption amount is $4000/person.

See the spreadsheet downloadable in http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228, or www.excel1040.com for some examples you might use in developing your own.  Developing your own, by the way, is a great idea - enjoy!

SunshineAZ

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Re: New Job - More money, but no 401k!?!?!?
« Reply #3 on: January 29, 2016, 08:26:49 PM »
You can always open an IRA and contribute $5500/year. That would lower your tax liabilities. Do you already have one and that is why you didn't mention it?
Yes, I already max out my IRA, and plan to continue to do so.  But losing access to a 401k makes that the only tax advantaged account I will have. 

SunshineAZ

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Re: New Job - More money, but no 401k!?!?!?
« Reply #4 on: January 30, 2016, 10:16:44 AM »
Various thoughts:
 - Table formatting (although yours is fine): http://forum.mrmoneymustache.com/forum-information-faqs/how-to-formatting-a-table/
 - how to be able to put more away in a tax protected account: contribute the allowed $18K instead of $14K to your 401k
 - Fed Taxes owed.  You mentioned DH.  Do you file as Married Filing Jointly?  If so you'll want to calculate your taxes together with DH's income.
 - Personal Exemption $6,300.00.  That amount is the standard deduction for 1 person.  Exemption amount is $4000/person.

See the spreadsheet downloadable in http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228, or www.excel1040.com for some examples you might use in developing your own.  Developing your own, by the way, is a great idea - enjoy!

I was just trying to do a quick comparison of what the basic tax implications were for the new job with no 401k.  It was not supposed to be completely accurate.  I just wanted to see what the basic worst case scenario was. 

As for putting more money in my 401k, the new company does NOT have a 401k, which I really have a problem with.  I am trying to figure out a way to deal with losing access to a 401k.  Oh and did I mention this year is the first year I can do catchup contributions?  So, yeah, losing that is a big deal to me.  I really want to retire sooner, rather than later.  At the beginning of 2015 I was approaching 500k, but after all the market downturns, I was really hoping to at least put in enough to reach that milestone this year.  Ugh!!!  I am so upset about the whole thing.   I want the new job, but losing the 401k seems like a huge downside to me. 

Thinkum

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Re: New Job - More money, but no 401k!?!?!?
« Reply #5 on: January 30, 2016, 11:20:39 AM »
Besides the increase in salary, is there anything else positive about this new job? Decreased commute, better hours, more stable, etc? Perhaps if you broaden your focus, the loss of 401K contributions, isn't really that bad. Just a thought.

SunshineAZ

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Re: New Job - More money, but no 401k!?!?!?
« Reply #6 on: January 30, 2016, 12:23:19 PM »
Besides the increase in salary, is there anything else positive about this new job? Decreased commute, better hours, more stable, etc? Perhaps if you broaden your focus, the loss of 401K contributions, isn't really that bad. Just a thought.

There are advantages and disadvantages:

Pros:
More money
More work from home
Less driving
Similar work, but possibly more interesting

Cons:
Possibly more travel
No 401k



Frs1661

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Re: New Job - More money, but no 401k!?!?!?
« Reply #7 on: January 30, 2016, 12:48:35 PM »
Would you be a 1099 contractor at the new company, out a w2 employee? If you are a 1099 you can open a solo 401k or sep ira.

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Thinkum

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Re: New Job - More money, but no 401k!?!?!?
« Reply #8 on: January 30, 2016, 01:50:14 PM »

There are advantages and disadvantages:

Pros:
More money
More work from home
Less driving
Similar work, but possibly more interesting

Cons:
Possibly more travel
No 401k

Looks to me like the positives might outweigh the negatives. Working from home would cut your automotive related costs significantly. Depending of course on how much your currently drive.

etselec

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Re: New Job - More money, but no 401k!?!?!?
« Reply #9 on: January 30, 2016, 02:41:35 PM »
You may also be able to convince the new place to start offering a 401k. If you can do the research and show them it's relatively little cost and paperwork, they may be willing to take the plunge. (Look into other options, too. My own small company has a SIMPLE IRA, which is not as good as a 401k contribution limit is around $12k but certainly better than nothing and it's apparently a lot less hassle for them.)