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rmattox

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One of my kids called last night saying she had been offered a position with another company. Salary is $6K more. Benefits are similar. The big difference is this: Current employer will match her 5% 401k contribution with a 10% employer contribution whereas the new will match her 3% with another 3%.

The numbers are $48K with current employer vs $54K with potential employer. After doing some rudimentary math, it still seems the $54 offer is better but I am not a tax person nor am I an investment person.

We'd appreciate if anyone would share his/her views on this with us.

ram
 
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buckethead1978

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Do the math starting with the max 401K contribution that can be made. I don’t quite understand the matches but for maths sake.

$18,000 x 3% = $540

$18,000 x 10%= $1800

I doubt she is maxing her contribution so the difference gets even smaller.

I’d take the 6K raise as long as there was either room to move up or she could use the new position to gain experience and contacts that let her switch employers in a few years for another $6K bump.
 
UK_Dallas

UK_Dallas

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I believe.....the 48k job the max they will put in on the year is $4800 so that gets you to 52.8k. Still less than 54. The 54k job will put in $1800 max, so 55.8k.
 
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rmattox

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She is making the max contribution. With my math, she will have more take home pay but will it be at the expense of saving for retirement. She says the extra will help eliminate big student loan bills much more quickly, enabling her to then invest in her future. I'm of the old A.L. Williams train of thought that basically says to invest while you are young.
 
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Ukbrassowtipin

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Also she should be seeing an additional 100 or so dollars a month, i believe, in her check each month due to tax reform that she could invest.
 
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UKGrad93

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Salary 1 + benefits = 48,000 *1.1 =52,800

Salary 2 + benefits = 54,000 * 1.03 = 55,620

I have a 5/10 match at work, so this is how I do salary comparisons. Does she currently work for a university?
 
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dgtatu01

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Mathematically the new job is better, but here is the rub. She is probably going to drop her 401k contribution from 5% to 3% and the total % of her salary going into retirement is going to go from 15% to 6%. IMO (and my own experience) what a young person intends to do with extra money in their take home pay and what they actually do can be quite different. If she stays with her current employer and socks away 15% of her money for retirement she is going to be very happy in 10 years and she can still pay off her student loans.

Best option is leverage the new offer for better pay at old company. If they balk take the new offer and put that 401k at 3% for the match and another 7% in a Roth IRA or Roth 401k so she is still saving roughly the same amount. Skimping on saving makes today better at the expense of tomorrow.
 
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buckethead1978

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Ok thanks. Never really had a job with a match. I think my last 401K only did a percent match of my contribution and not a percent match of my salary.
 
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Ron Mehico

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I mean there are so many factors, if you're talking straight money and everything else is the same then I would probably lean towards current one as she can save quite a bit more as extra money she makes is not that huge of a bump, however moving to a more expensive area, benefits, ability to move up, bonuses, general workplace happiness etc etc would really need to be considered and imo what it should be based on.
 
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UKserialkiller

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ram1955 said:
One of my kids called last night saying she had been offered a position with another company. Salary is $6K more. Benefits are similar. The big difference is this: Current employer will match her 5% 401k contribution with a 10% employer contribution whereas the new will match her 3% with another 3%.

The numbers are $48K with current employer vs $54K with potential employer. After doing some rudimentary math, it still seems the $54 offer is better but I am not a tax person nor am I an investment person.

We'd appreciate if anyone would share his/her views on this with us.

ram
Click to expand...

Talked our atty acct. He said he is surprised people aren't doing SEP accts. Make way more money apparently. He's rich as **** from it.
 
Midway Cat

Midway Cat

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UKBrassowTipIN said:
Also she should be seeing an additional 100 or so dollars a month, i believe, in her check each month due to tax reform that she could invest.
Click to expand...

I think many people are forgetting that the personal exemption has been eliminated. While it's true that monthly withholdings will decrease, many people will be surprised by how little their overall tax liability is truly impacted by the recent tax bill.
 
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crazyqx83_rivals88013

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She needs to move on for the simple fact that staying in the same job too long is career suicide in the 21st century. 2-5 years max at a job. Shows you aren't running off for every offer but doesn't stifle your growth. This is close to a lateral move but not completely so tell her to move on.

Unless it is a government job where you are just milking the taxpayers.
 
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CatsFanGG24

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If she were to continue to defer the same rate, she would put away 2700(5%) of her own and get 1620(3%) = 4320 for the 54k job vs 7200 for the 48k job.

You’d also have to consider - 48000 less 5% contribution is 45600 of take home pay (not including tax, insurance etc - just to keep it simple) to get $7200 in retirement contributions.

54000 less 11% ee contribution ($5940) is 48060 of take home to get to 7560 (11% ee + 3% er) in retirement contributions.

One job may offer 10% match, which is great, but the other is a 13% raise.
 
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UKGrad93

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Based on salary and retirement, the new job is about $3000 more than the current job. I would look more into paid time off. Since she works for a university, they usually have a lot of vacation and holidays. Also there is usually a chance to take a claw or two for free. She should look at how those things compare to the new job.
 
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UKGrad93

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I don’t see what’s so hard to understand about the employer match. This seems to be a standard deal in university employment. Employee puts in 5% of their salary. The employer matches with double. In this case, the salary is $48,000.

Employee contributes $2400.
Employer contributes $4800.
 
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Lightbringer12

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Ron Mehico said:
I mean there are so many factors, if you're talking straight money and everything else is the same then I would probably lean towards current one as she can save quite a bit more as extra money she makes is not that huge of a bump, however moving to a more expensive area, benefits, ability to move up, bonuses, general workplace happiness etc etc would really need to be considered and imo what it should be based on.
Click to expand...

Good points, and I would reiterate the happiness point. If she is really happy in her current job then is $6K going to make her happier? What if she moves and really hates the new boss or they say the job is “such and such” but turns out to be way different. For $6K ish not worth the move if she really loved her job. Plus factor in at her current job if there is OT she could bridge the difference...
 
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UKserialkiller

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crazyqx83 said:
A SEP is terrible if you have employees and there is no difference in the returns vs. an IRA or 401k.
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I'll admit that I don't know much about them like I do cooking coke out of a kitchen spoon, but i work for myself and was told by the company financial lawyer that a SEP acct was best for me because i can do **** that a 401K can't
 
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DSmith21

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UKGrad93 said:
Salary 1 + benefits = 48,000 *1.1 =52,800

Salary 2 + benefits = 54,000 * 1.03 = 55,620
Click to expand...

This math is correct. However there are other factors. Does she like her current employer, boss and co-workers? If so, can she leverage the offer for a raise (note that you usually only get to do this once before your employer gives up on you). What does she know about the other employer and its work environment? I would rather work somewhere for 5% (that is what you are talking about) less where I am happy rather than a place where I was not.

As far as savings and debt, I would first put in the full employer matched 401k contribution. Next I would pay off the student loan debt. Once that was done, I would up my 401k contribution.
 
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UKGrad93

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Not a big difference in money with either job. I think there is a chance of getting either employer to offer a little more if she is willing to negotiate with them.

Another thing I thought of since she works for a university, is she on hard money (state budget) or soft money (research grants)? How secure is her job if there are cuts. I realize that this can be an issue in any field.
 
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crazyqx83_rivals88013

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Willy4UK said:
I'll admit that I don't know much about them like I do cooking coke out of a kitchen spoon, but i work for myself and was told by the company financial lawyer that a SEP acct was best for me because i can do **** that a 401K can't
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I wouldn't do it if you have employees. There are forced contributions to any full time workers.
 
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BlueRunner11

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Grass isnt always greener. Ive made the jump before for the bigger bucks and have found myself in an even worse situation that the diff in money could ever cure. ****** boss, crazy expectations, asshat coworkers, bad hours, stress, etc. Not trying to be negative, just something to consider. Many more variables than money to be considered imo. Life is short.
 
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tom*cat

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How about giving her the advice of working where she will be the most happy and the money will work itself out. I know crazy huh?
 
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rmattox

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tom*cat said:
How about giving her the advice of working where she will be the most happy and the money will work itself out. I know crazy huh?
Click to expand...
I didn't give her any advice at all. Just helped her look at as many variables as possible. Not sure what she will do, but whatever she does, I believe the Lord is with her.
 
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