[USER]

He had a pension plan but was not fully vested, so his contributions over the past 2 1/2 years are being returned to us, about $5k. He opened a Roth IRA only a couple months ago and has contributed about $400 so far. His Roth IRA is invested in FZROX. He has no other savings toward retirement at this time.

He has already had several job interviews and is hoping for offers from two of them. The biggest difference between these positions is, one pays $23/hr but has no benefits, and the other pays $18/hr but has benefits (most important being health insurance and a 401k). Both of these are 40 hour/week jobs. His previous job paid about $20/hr but he worked 60 hour weeks, so any job he chooses will most likely be a drastic pay cut, which we are prepared for. He does not have a college degree, though he is planning to return to college in fall 2024 to finish his associates.

At this point our plan for the $5k is to invest it in his Roth IRA. Based on this information alone, what is your opinion on the two job prospects? If we were to take the higher paying job without benefits, he would most likely go on my health insurance. It would be $234/month for him but is truly excellent insurance (I pay $34/month for myself, but there is a $200/month spousal surcharge for spouses that make more than $15k/year). He is also about to start some serious medical treatment that requires monthly blood tests, which are 100% free on my insurance. I’m not sure what the best options would be for retirement, obviously we would try to max out his Roth IRA but I’m not sure what would be best to set up next. Maybe a brokerage account?

I appreciate you taking the time to read this, and I appreciate any insight you may have.

[Andrea]

Hold on to that money as an emergency fund. You may need it.

[Jule]

If you can cover the medical benefits for the family, I’d take the job that pays the most with no benefits.

The difference in salary is over $10k which you will not get as a match anyway.

[Susie]

Not American so I don’t know the value of the 401k but if you take the higher paying job and pay out of pocket for insurance you will be 7-8k ahead.

Don’t miss: Senior level job with lot of responsibilities vs Low-stress job

[Alison]

Take the job with no insurance and use your insurance since it’s much better. First, build a 1 year emergency fund, then finish fully funding the Roth IRA. After he gets new job, focus on contributing to 401k up to company match.

[John]

Are both jobs considered W2 or is he considered a contractor? I ask because if he’s a contractor he likely qualifies for a SEP or SoloK.

I’ll assume both are W2 jobs for now. Since you have an affordable healthcare option for him I would lean towards the higher paying job. The extra $5hr should be $800/mn. Even after $200/mn for his healthcare on your plan, that leaves him with $600/mn to invest. Put $500/mn of that into a ROTH to replace the lack of a company 401k. I believe you can still invest a certain percentage of pretax income into a tax deferred IRA if your employer doesn’t offer a 401k. If so, invest the other $100/mn in a traditional IRA. Or, if your healthcare plan qualifies for an HSA, contribute the remaining $100/mn to that.

After ALL that, he has healthcare paid for, has 6k/yr going into a ROTH, $100/mn going into other investments and is NOW at break even with the $18/hr job.

IF the lower wage employer offers an incredibly generous 401K match AND he would have sizable excess income to put in the 401K with the lower salary, the $18/hr job may be a contender. I would also consider which company has the better possibility of future wage increases and wage caps.

Explore these too: What companies might you suggest to a soon to be 18 year old HS graduate this year who just wants a good FT job?

[Author]

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