Evaluating job offers

[Zoomastigophora]

401(k)s, matched or not, are one of the few remaining licenses to steal in the US tax code. The money goes in pre-tax and the distributions (starting at 59.5 and mandatory by 70.5) are taxed as ordinary income when withdrawn. If you switch jobs, a previous 401(k) is fully portable into the 401(k) at your new job. There's a few tricky bits, but whoever administers your plan can easily guide you through them.

If your company matches, put in the max subject to match. If they don't match, put in at least 6% of your pay. You 20-somethings always look at retirement as something to be funded tomorrow. I'm 48 and am nowhere near where I need to be for retirement even if I wait until 68, let alone putting a kid through college, mainly because I spent my 20s and half my 30s spending money on all the wrong things. Even in today's crappy market 40 years of compound interest will have an effect.

How do 401(k) contributions affect tax withholding? Does my federal and state withholding decrease to match my gross after 401(k) deduction, in terms of per-paycheck? When it comes time to file yearly tax returns, how do 401(k) contribution factor in? Sorry for potentially derailing this thread, but I'm starting to pay a lot more attention to how income tax works now that I have to file taxes this year due to my income from my summer internship.

[thegleek]

If you switch jobs, a previous 401(k) is fully portable into the 401(k) at your new job. There's a few tricky bits, but whoever administers your plan can easily guide you through them.

I've switched jobs almost 4-5 years ago and still have a separate 401k in tact. Is it easy to move over or dump it or combine it with my current job, or convert it into a Roth IRA?

If your company matches, put in the max subject to match. If they don't match, put in at least 6% of your pay.

They do match. I max it out (have been since the start). They match up to 6%, so let the good times roll.

You 20-somethings always look at retirement as something to be funded tomorrow.

Yeah I can only wish I did the same... Oh well. In 20 more years all the oil will be gone and we'll be living like cavemen again. lol

I'm 48 and am nowhere near where I need to be for retirement even if I wait until 68, let alone putting a kid through college, mainly because I spent my 20s and half my 30s spending money on all the wrong things. Even in today's crappy market 40 years of compound interest will have an effect.

Yar, you're almost a decade ahead of me (JBI too), so I can relate. Oh wait, no I can't. Never had any kids! lol and i still spend all my money on the wrong things! (mainly beer) doh!

In short: The day you walk into the employment world is the day you need to start your retirement planning. Don't let anyone tell you it's wasted money.

agree++

[Captain Ned]

How do 401(k) contributions affect tax withholding? Does my federal and state withholding decrease to match my gross after 401(k) deduction, in terms of per-paycheck? When it comes time to file yearly tax returns, how do 401(k) contribution factor in? Sorry for potentially derailing this thread, but I'm starting to pay a lot more attention to how income tax works now that I have to file taxes this year due to my income from my summer internship.

What you deposit each paycheck in a 401(k) is not assessed for withholding taxes, nor does it show as taxable income on your W2. You won't pay income taxes on your 401(k) contributions and the associated investment income until you withdraw the money at retirement age.

[druidcent]

401k's are basically a basket of stock/mutual fund plans that you are expected to leave your money parked in. (I believe the advantage is that money comes out of your paycheck pre-tax). Some companies match your contributions up to a point, which is good. If you can afford to start putting money away, even no match is fine. 401k's with at least $5000 will follow you, but you can always roll it over into an IRA or another 401k. Under $5000, I believe companies have the option to cash you out and cut you a check.

401(k)s, matched or not, are one of the few remaining licenses to steal in the US tax code. The money goes in pre-tax and the distributions (starting at 59.5 and mandatory by 70.5) are taxed as ordinary income when withdrawn. If you switch jobs, a previous 401(k) is fully portable into the 401(k) at your new job. There's a few tricky bits, but whoever administers your plan can easily guide you through them.

If your company matches, put in the max subject to match. If they don't match, put in at least 6% of your pay. You 20-somethings always look at retirement as something to be funded tomorrow. I'm 48 and am nowhere near where I need to be for retirement even if I wait until 68, let alone putting a kid through college, mainly because I spent my 20s and half my 30s spending money on all the wrong things. Even in today's crappy market 40 years of compound interest will have an effect.

In short: The day you walk into the employment world is the day you need to start your retirement planning. Don't let anyone tell you it's wasted money.

Totally agree.. But these days most companies offer some sort of 401(k) or IRA program, even if there is no matching. But deciding on switching a company based on the 401(k) is silly...

[Captain Ned]

If you switch jobs, a previous 401(k) is fully portable into the 401(k) at your new job. There's a few tricky bits, but whoever administers your plan can easily guide you through them.

I've switched jobs almost 4-5 years ago and still have a separate 401k in tact. Is it easy to move over or dump it or combine it with my current job, or convert it into a Roth IRA?

If your current employer offers a 401(k), you can easily arrange a direct transfer from the old plan to your current plan. The key is that the funds in the old plan never touch your hands as if they do, you'll pay a 10% (of the total value in the old plan) early withdrawal penalty. That said, 401(k) plan administrators are hip to this and transfer assets between plans on a daily basis, so it's easy.

[xtalentx]

I have an army of kids so it changes what I look for in a job:

1) Base salary
2) Quality of health insurance
3) Vacation time and an actual ability to take it
4) Flexible work schedule (work from home days)
5) Training - send me to classes to keep my MS certs current
6) Short commute time
7) Added perks like gym, daycare, discounts to local services

Some of these things may not matter to you now but if you have kids you will probably adjust what you need from a job.

[kamikaziechameleon]

401k's are basically a basket of stock/mutual fund plans that you are expected to leave your money parked in. (I believe the advantage is that money comes out of your paycheck pre-tax). Some companies match your contributions up to a point, which is good. If you can afford to start putting money away, even no match is fine. 401k's with at least $5000 will follow you, but you can always roll it over into an IRA or another 401k. Under $5000, I believe companies have the option to cash you out and cut you a check.

401(k)s, matched or not, are one of the few remaining licenses to steal in the US tax code. The money goes in pre-tax and the distributions (starting at 59.5 and mandatory by 70.5) are taxed as ordinary income when withdrawn. If you switch jobs, a previous 401(k) is fully portable into the 401(k) at your new job. There's a few tricky bits, but whoever administers your plan can easily guide you through them.

If your company matches, put in the max subject to match. If they don't match, put in at least 6% of your pay. You 20-somethings always look at retirement as something to be funded tomorrow. I'm 48 and am nowhere near where I need to be for retirement even if I wait until 68, let alone putting a kid through college, mainly because I spent my 20s and half my 30s spending money on all the wrong things. Even in today's crappy market 40 years of compound interest will have an effect.

In short: The day you walk into the employment world is the day you need to start your retirement planning. Don't let anyone tell you it's wasted money.

^+1 This is true.

Also as others have said inquire about overtime, and don't be afraid to ask for vacation days inside your first year. Many companies are stingy or will require atleast 6 months of work before honoring vacation days. Don't start without 2 weeks of paid vacation your first year, TRUST ME. memorize all the small things in your contract, like personal/sick days per year, lunch and break time etc.

[emorgoch]

Canadian here, so we have RRSPs, rather than 401(k)s. But I'm curious about one aspect of the taxation:
With Canadian RRSP's, you have a limit on how much to can put into your RRSP each year, and any unused space can be carried forward.
There is one school of thought that very early in your career, it's better to wait on making contributions into your RRSPs as, in general, your entry level salary will be far lower than your income 5-10 years later, and you'll eventually move up to a higher tax bracket.
Once you move up, then make start making those contributions, as you'll receive a larger tax benefit being in a higher tax bracket.

Obviously there's a lot of discussion and ways that the numbers could work out, but could the theory be applied to 401(k)s as well, ie. you have a defined contribution space, and unused space can be carried forward?

[Captain Ned]

Canadian here, so we have RRSPs, rather than 401(k)s. But I'm curious about one aspect of the taxation:
With Canadian RRSP's, you have a limit on how much to can put into your RRSP each year, and any unused space can be carried forward.
There is one school of thought that very early in your career, it's better to wait on making contributions into your RRSPs as, in general, your entry level salary will be far lower than your income 5-10 years later, and you'll eventually move up to a higher tax bracket.
Once you move up, then make start making those contributions, as you'll receive a larger tax benefit being in a higher tax bracket.

Obviously there's a lot of discussion and ways that the numbers could work out, but could the theory be applied to 401(k)s as well, ie. you have a defined contribution space, and unused space can be carried forward?

There's no carry-forward on US 401(k)s. The school of thought that argues for not fully funding from Day One should be taken out back of the woodshed and shot as a rabid dog. Like I said above, I lost 15 years of income compounding because I was the typical 20-something. Don't be that typical 20-something. Put as much as allowed into your RRSP (living but 45 miles from the border and having CBC & CBMT on the telly I'm jiggy with Canadian advertising) and when you reach retirement age you can laugh at your colleagues who waited until their mid-late 30's to start retirement planning.

[AMD Damo]

I'd like to know what "rights" an American citizen has when it comes to jobs over there, for instance over here, if you work full time:

- Minumum 9% on top of your yearly wage goes into super-annuation for when you retire.
- Minumum 4 weeks a year paid annual leave, with 17.5% leave loading, so you get paid 17.5% higher on holidays
- Minumum 8 days a year paid sick leave
- 38 hour working week is normal for paid by the hour workers.

Plus some other stuff I can't remember off the top of my head.

We have a minumum wage of like $15.50 an hour, but because I'm an apprentice I get paid less because "I get paid to learn".

[Captain Ned]

I'd like to know what "rights" an American citizen has when it comes to jobs over there, for instance over here, if you work full time:

The Federal minimum wage is $7.25/hour ($6.89 AUD at today's exchange rate). States are free to set their own, higher, minimums and many have. Here in Vermont it's $8.46/hour ($8.05 AUD). The standard work week is 40 hours.

The rest of your "rights" simply don't exist here.

[TurtlePerson2]

I don't think that's entirely true Ned. For example, he mentioned that 9% goes into retirement money, but 6% on top of your salary is paid by your employer into social security. From where I'm sitting, that's pretty much the same thing.

[Captain Ned]

I don't think that's entirely true Ned. For example, he mentioned that 9% goes into retirement money, but 6% on top of your salary is paid by your employer into social security. From where I'm sitting, that's pretty much the same thing.

I was interpreting his 9% in the light of 401(k)s or private defined-benefit pension plans, not gov't social welfare plans.

EDIT: http://en.wikipedia.org/wiki/Superannua ... _Australia

As I thought. This isn't the Aussie version of Social Security, it's a mandatory 401(k) with the assets held and invested privately and, most importantly, owned directly by the employee/investor.

[AMD Damo]

I'd like to know what "rights" an American citizen has when it comes to jobs over there, for instance over here, if you work full time:

The Federal minimum wage is $7.25/hour ($6.89 AUD at today's exchange rate). States are free to set their own, higher, minimums and many have. Here in Vermont it's $8.46/hour ($8.05 AUD). The standard work week is 40 hours.

The rest of your "rights" simply don't exist here.

The minimum wage there seems low, but the cost of living over there is a lot lower, prices on everything seem lower too.

I guess America would be the best place to live if you already had some money, because there seems to be more "freedom" and money goes further there rather than trying to live paycheck to paycheck.

Because of the stupidly strong AUD everyone over here is going nuts buying car parts and anything/everything from Amazon USA haha. I can get a pair of Caterpillar Endure work boots landed for around $130, where trying to buy the same thing in a store here is on "sale" at $250-$270.

[tanker27]

Congrats on the degree and here's hoping the offers are good!

First off, I would almost completely discount any retirement benefits. Unless you're looking at civil service positions, retirement plans are being de-funded at nearly every employer in the country. The companies, particularly those in tech, know that their money is better spent on current business. Most employees fully expect to change jobs several time in their careers, and companies which recognize this and shift benefit dollars to something employees actually plan to use will end up with better talent. And why be handcuffed to a job you don't like by a retirement plan that may not actually be there when you're ready to leave? There's not many companies that actually have "retirement" plans anymore, other than the standard 401k and (often) some level of company match.

Consider a company that offers benefits that you would actually use. A standard package of health benefits could be useful if you're often sick, but one of the things companies love about college hires is that they rarely use the medical plan. If you sense some flexibility in this area, maybe someone's willing to offer LASIK, full orthodontia, and other perks that might be more valuable to you. Discuss it at the last meeting when the actual offer is on the table.

My first job was with a company that had a full company match on dollars spent by the employee on company stock, up to a cap. For me, this amounted to an immediate 12 percent raise on my base pay. Take a good look at benefit like that, as it can be a significant perk, even if all you do is exercise and sell immediately. If you hold the stock and it's value increases, so much the better.

Options can be iffy. The typical plan has a 25/25/25/25 vesting schedule over a 4-year span. Any options you plan to exercise are immediately taxable as regular income in the year that you exercise. Any gains you make on the sale price versus the strike price are taxed as normal stock sales, which means you have to hold it for a year or be taxed at the short-term capital gains rate. If the options and the company are attractive, I'd recommend a tax attorney to help you sleep at night and to stay out of the IRS's crosshairs.

Sluggo is partially right but there are those companies that DO take care of their employees. My company not only has a a rocking 401K with matching plan on T.Rowe Price it ALSO offers a pension for those that achieve the Rule of 80. (The Rule of 80 is where your combined years of work plus your age equal 80).

Companies like mine are rare and looking at the Fortune 200 list there are only 5 (mine included) that offer these benefits.

IF you get a job offer from one of these I would tell you outright to seriously accept it. Even if in 5-10 years you do decide to job hop you will be in a good position retirement wise.

Speaking of retirement. As I learned early on, you are young and need to save the max EACH year. The first 5-10 years are critical when it comes to your retirement. I know a nice paycheck looks good now and you can finally afford things but I strongly suggest you skimp now and save and then when you reach 40, have a family, etc you can skimp a bit.

Save, save, save! You'll be in a better position in the long run.

Touching on other benefits, we don't really know what effect ObamaCare will have on medical expenses. (Trying not to get too political) I can forsee a lot of companies dropping a health care plan and just giving their employees some sort of lump sum and tell them to go find their own. But again we don't really have a clue as to what is going to happen.

Lastly, Bonuses both signing and yearly bonuses. While both of these are quite attractive usually they are the first to go when a company decides to tighten its belt. so take them with a grain-of-salt. Yearly bonuses are only good if they do a company wide one and not a performance one. If everyone in the company gets a Christmas/year end bonus its usually good.

Some other things to look at are Company paid equipment. Phones, computers, etc. In this day and age a lot of companies are switching to a BYOC (Bring your own computer) to work to cut costs. Some companies even give a lump sum for a computer of your choice with their recommended specs. You go buy the computer/laptop and buy a service plan along with it. This is a meh issue. It has its ups and downs

thats all that comes to mind right now but if I think of anything else I will post.