Monday, January 11, 2010

New Job, New 401K & Benefits

My readers know that after several months of searching for a job in a horrible job market, Alpaca has recently landed a new job. With a new job, comes a new 401K and other benefits. Here's a quick run down:

401K - like my own company's 401K, Alpaca's company uses Fidelity to run their 401K plan. One of the benefits of this is that Fidelity is one of a few providers out there that is Quicken friendly, something which I appreciate very much. The plan offers no matching - is it just me or are employers completely walking away from the whole matching thing? And it offers only a small number of investment options, most of which are dismal. The only good option, as in my own plan, is a low cost total market index fund. No other index options whatsoever. Because of this severe lack of desirable options, 70% of Alpaca's retirement savings will go into that index fund, with the rest split evenly between mediocre and expensive international, bond and real-estate funds. Readers take-heart, I will make the necessary adjustments to the rest of our portfolio to ensure that our asset allocation remain appropriate.

The biggest benefit in Alpaca's new 401K plan is that it offers a ROTH 401K option, which is the option that Alpaca and I chose for her. Our adjusted gross income is too high to allow us to invest in a ROTH-IRA, but through the stupidity of the government a ROTH 401K has no income limits.

Can someone explain to me why it is that the government is only choosing to give certain tax benefits to employees whose employers choose to offer a ROTH 401K option? Why should this option not be available to me just because my employer has crappy benefits?

ESPP - Alpaca's new company is publicly traded and offers an employee stock purchase plan. Alpaca signed up for this free money at the maximum amount permitted by her company, which is 10% of salary. As I previously wrote in this blog, we treat ESPP as a short term savings plan with excellent guaranteed results. We sell the stock immediately after it is purchased (once every 6 months) and pocket the minimum 15% guaranteed return.

Flex Accounts Galore - childcare flex accounts, medical flex accounts, we signed up for both at the maximum level. Once again, my gripe with the government remains. Why would the government give a tax advantage only to those employees whose employers offer flex accounts?

Generally speaking decent benefits. Regardless, it's great that Alpaca has a well paying job and even better that so far things seem to be going well for her in her new position. It's all about happiness at the end of the day.

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Anonymous said...

Great blog. It's in my RSS reader.

Keep in mind the risks of a Roth 401k (or Roth IRA). These are enumerated at The Finance Buff's blog entries, The Case Against Roth 401k.

Play around with his Roth vs Traditional spreadsheet. It was quite enlightening for me.

Shadox said...

Anon - excellent comment. Thank you for the reference to that well written article.

Indeed the whole AMT thing is something I did not give due consideration to. I need to go back and do some calculations.

I also appreciate the kind words... :-)

Shadox said...

Anon - check out the post I have scheduled for Jan 13 @ 9:00 AM PST. I think I owe you a big thank you.