When would you take a large pay cut?

[rubato]

I'm applying for a job which would be a major cut in pay; no patent bonuses, no employer 401k match and a big cut in the base pay as well; > $20,000 yr. I know why I'm doing it and why I'm still interested but I'm wondering what other people think about this.

The 'bottom line' for us is the ability to max out the 401k each year. (plus some deferred income).

yrs,
rubato

[dales]

Do it.

You only live once.

[Sue U]

I would take a pay cut in a trade-off for guaranteed retirement benefits. If I didn't have to save for retirement -- and the potential costs of long-term care/assisted living -- I'd need substantially less income now.

[oldr_n_wsr]

If it makes you happier.

[Jarlaxle]

I would take a pay cut in a trade-off for guaranteed retirement benefits. If I didn't have to save for retirement -- and the potential costs of long-term care/assisted living -- I'd need substantially less income now.

I'm seriously considering stopping contributions to my 401k...there isn't a chance in hell I will ever see any of it.

[rubato]

I would take a pay cut in a trade-off for guaranteed retirement benefits. If I didn't have to save for retirement -- and the potential costs of long-term care/assisted living -- I'd need substantially less income now.

I'm seriously considering stopping contributions to my 401k...there isn't a chance in hell I will ever see any of it.

Health problems?

yrs,
rubato

[Joe Guy]

The 'bottom line' for us is the ability to max out the 401k each year. (plus some deferred income).

I don't know your situation but anything that you can afford and that will help increase your retirement benefit is worth pursuing.

[Joe Guy]

I'm seriously considering stopping contributions to my 401k...there isn't a chance in hell I will ever see any of it.

Unless you can't afford it you should continue contributing to your 401K for your wife's benefit.

Either that or withdraw it and spend it all now on an expensive new car that you really can't afford...

[Gob]

Ok, what's a 401?

[Joe Guy]

Ok, what's a 401?

A tax deferred contributory retirement plan offered by employers. Some will match your contribution. There are limits to your annual contribution.

Although they've been around for a long time, it's pretty much going to take the place of pensions here in the U.S.A.

[Gob]

Cheers Joe, I went to Wiki also

The 401(k) account is the common name in the United States for the tax qualified defined contribution pension plan account and takes its name from subsection 401(k) of the Internal Revenue Code (Title 26 of the United States Code).

401(k) are "defined contribution plans" with annual contributions limited to $17,500 as of 2013. Contributions are "tax-deferred"—deducted from paychecks before taxes and then taxed when a withdrawal is made from the 401(k) account. Depending on the employer's program a portion of the employee's contribution may be matched by the employer.[2] They are not the only type of employer-provided defined contribution pension plans; 403(b) and 401(a) defined contribution plans also exist yet have higher mandatory limits.

We have these;

Superannuation in Australia refers to the arrangements which people make in Australia to have funds available for them in retirement. In Australia, superannuation arrangements are government-supported and encouraged, and minimum provisions are compulsory for employees. For example, employers are required to pay a proportion of an employee's salaries and wages (currently 9%) into a superannuation fund, but people are encouraged to put aside additional funds into superannuation. The minimum obligation required by employers is set to increase to 12% gradually stepping annually from 2013 to 2020.

An individual can withdraw funds out of a superannuation fund when the person meets one of the conditions of release contained in Schedule 1 of the Superannuation Industry (Supervision) Regulations 1994

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

Hen, who has been paying into one since age 19 has a massive fund.

I've been putting into one, at the top rate, since I moved out here.

In the UK this is the norm;

Pensions in the United Kingdom fall into three major divisions and 7 sub-divisions; State Pensions (Basic State Pension and State Second Pension (S2P)), Occupational Pensions (Defined Benefit Pension and Defined Contribution Pension) and Indiviual/Personal Pensions (Stakeholder Pensions, Group Personal Pensions and Self-Invested Personal Pension). Personal accounts, automatic enrolment and the minimum employer contribution will be new policies joining these from 2012.

The state provides basic pension provision intended to prevent poverty in old age. Until 2010 men over the age of 65 and women over the age of 60 were entitled to claim state pension; from April 2010 the age for women is gradually being harmonised to match that for men. Longer-term, the retirement age for both men and women will rise to 68 by no later than 2046 and possibly much earlier.

http://en.wikipedia.org/wiki/Pensions_i ... ed_Kingdom

[Joe Guy]

Does that 9% Superannuation contribution requirement apply to all employers?

Does the employee have any control over where the money goes?

With a 401K you have varying levels of risk stock market options and most have interest paying accounts with no risk and you can divide your contribution into as many options as you want.

Unlike a defined benefit plan, the amount you end up with at retirement is based on your own decisions on how to invest the money.

[Gob]

I'm no expert Joe, I leave that to Hen

How much your employer should pay

If you're eligible for super guarantee contributions, at least every three months your employer must pay into your super account a minimum of 9% of your ordinary time earnings, up to the maximum contribution base. These payments are classified as employer contributions so will count towards your concessional (before-tax) contributions cap.

All employers must use ordinary time earnings to work out their contributions for you. Ordinary time earnings are generally what you earn for ordinary hours of work, including over-award payments, commissions, allowances, bonuses and paid leave. It excludes things such as annual leave loading and reimbursement of expenses and will generally exclude overtime. For example, if your ordinary time earnings for the quarter are $20,000 your employer must pay $1,800 into your super account.

If you receive super contributions under an award, your employer's contributions must be enough to satisfy both the award and the super guarantee requirements.

If you're a contractor, the minimum super amount should be calculated on the labour component of your contract, if it's possible to separate it out. Otherwise it should be calculated on the total amount.

Since 1 July 2005, many employees have been able to choose the super fund or retirement savings account (RSA) that will receive their super contributions under the super guarantee law. The ability to choose a super fund was also extended in July 2006 to include employees working for corporations under former state awards.
Am I eligible to choose a super fund?

Most people can choose the super fund they want their employer contributions paid into, as long as it's a complying fund. A complying fund is an Australian super fund that receives concessional tax treatment because it's regulated under the relevant super legislation and hasn't been issued with a notice of non-compliance.

You will generally be eligible to choose a super fund if:

your super is paid under a federal award or a former state award, now known as 'notional agreement preserving state award'
you are employed under another award or agreement that doesn't require super support
you are not employed under any award or industrial agreement (including contractors paid principally for their labour).

[rubato]

Cheers Joe, I went to Wiki also

...

401(k) are "defined contribution plans" with annual contributions limited to $17,500 as of 2013. ...

$23,000/yr if you're over 50 years old.

yrs,
rubato

[rubato]

The 'bottom line' for us is the ability to max out the 401k each year. (plus some deferred income).

I don't know your situation but anything that you can afford and that will help increase your retirement benefit is worth pursuing.

It will decrease the retirement but it is a question of how much. As long as I can put $23,000 yr into the 401k I can forgo the additional post-tax savings I'm doing now.

yrs,
rubato

[Joe Guy]

Then I don't see the benefit. There's obviously more to your story than I know.

[dales]

Ask his wife.

[Big RR]

rubato--one thing to remember about 401Ks is that the maximum amount for tax deferred contributions can be capped below that $23000 figure based on plan participation of others in the company. As I recall, the ratio of contributions from highly compensated individuals to lower compensated individuals must be bellow a certain amount or the maximum tax deferred contributions for the highly compensated persons will be capped at a lower amount. Depending on your compensation, and the size of the company, this may or may not be a problem, but it's something you should consider if maxing the 401K contribution is a major goal. You may want to consult a financial advisor to be certain.

[Joe Guy]

People who can participate in a 401K plan should max out on their contributions before investing after-tax money. Especially if the company adds or matches the employee's contribution.

(Just my tax deferred 2 cents on the subject)

[Gob]

Why do you always make things so complex? It's an endearing, if baffling, trait.