Personal Finance Advice

Your friend’s rationale is absolutely stunning and more than a bit offensive. She obviously has learned nothing from hanging around with you and/or following your blog. She is truly one of the clueless.

People never cease to amaze me.

Of course I would not turn down the job! (Of course, I have never been offered a bonus plan – I couldn’t imagine being so choosy if I was offered one).

My current employer did deposit 10% of my paycheck into my retirement plan, for about a decade. This was quite simply, awesome. The reason he does so is for the tax breaks, and the opportunity to far more heavily fund his own retirement. We get tax-free income. What is there not to like? I couldn’t imagine turning down the job because 10% of my income went to retirement (tax-free) instead of into my checking account.

I had never thought much about it, but now that you mention it, I do see how the average person would be turned off by the *delayed gratification.*

At heart, I am a control freak when it comes to money. I would always prefer to be able to choose what to do with the money coming to me – even bonuses. Just because it’s not something you can count on, doesn’t mean you shouldn’t still be able to allocate it however you like. If you’re trying to get rid of a crushing amount of debt, you’d rather be able to throw a bonus at that pile wouldn’t you? If you don’t like the investment options in the company’s 401k or they’re particularly bad, you would rather be able to sock away that money in an investment or retirement vehicle of your choice wouldn’t you? If a family emergency coincided with the release of the bonus, wouldn’t you like to use this windfall to deal with it?

Basically, there are lots of good reasons why you’d want to control ALL of the money coming your way.

That said, I would have still taken that job – especially after a year of unemployment. If literally everything else was good, then this would be a minor issue for me.

@ Monkey Mama – do you mean that he takes 10% off the top of your paycheck for a 401k contribution or does he make a contribution equal to 10% of your salary? The former would make me crazy (see above comments for why) but the latter would be fantastic!

Wow, I think your friend made a very foolish, short-sighted choice. I hope she is doing OK on unemployment.

@JaimeB – My employer makes a contribution equal to 10% of my salary. Of course, is like a bonus. No longer the case with this economy, but I enjoy the tax-free (tax-deferred) bonus when times are good.

I admit I had no control over the amount was invested (the plan has since been closed and rolled into an IRA), but people stay so little at jobs these days, seems that is a moot point. Since you can withdraw or rollover these things when you change employment.

I’m pretty young, but I used to make $36 a year and that was a lot for just me, without any dependents. I used to get an occasional bonus from this company and it would surprise me every time. It was like money from heaven! I wasn’t expecting it and I never knew how much it was going to be. I just couldn’t believe that a company would willingly give me extra money just because they were doing well and wanted to share the wealth. Like you said, it’s a BONUS, and it’s not something they HAVE to do. So in any form that it comes, how can you not be grateful?

Fast forward to 2008, right after my husband and got married and made a big move. He had been making as much as me and then we both ended up unemployed for the better part of a year. We had to put our pride in check and go back to retail jobs like Starbucks and Home Depot, making minimum wage just to try and keep a roof over our heads. How anybody could turn down a good job with great pay and benefits in this economy is completely beyond me and more than a little offensive. She needs to get her pride in check and face reality just like we did.

Monkey Mama brings up a very good point in that with the bonus going into each employee’s 401(k), this helps ensure the company meets the Minimum Standard of Coverage Tests which, in turn, allows the more highly compensated employees to contribute more to their own 401(k)s. I suspect that this reasoning plays a big part in the company making the decision to offer the bonus via each employee’s 401(k).

I’m genuinely curious — are the stories you tell about “my friend” actually true?

Whenever I read one of them, I can’t help but think they’re invented to make a point (valid though the point may be).

phr3dly — These stories are true. Sometimes I use the term “friend” for friends of friends, family members, coworkers, people from organizations that I belong to, or other people that I know or am connected to in some way.

It’s just easier sometimes to say, “My friend” than it is to say, “The lady from my book club that I only see once a month but who constantly complains about her finances and her deadbeat ex-husband while we’re supposed to be talking about books.” (And yes, there is such a person.) So while “my friend” doesn’t always mean my BFF’s, these are real people that I know at least on some level and whose stories I’ve heard. I just keep my ears open and listen for money talk. There’s a lot to hear.

Not taking it because they want cash to take a sweet vacation is one thing.

Not taking it because in some industries (high tech, finance, etc) bonus programs make up a large part of your overall compensation – and you want the freedom to use that money in more ways besides retirement (maybe paying off your house or investing?) might be a reason I would turn down this job. Especially if comparable jobs in the same industry have a similar bonus plan without restrictions.

I think your ‘friend’ is crazy, but that’s just my opinion. Though I can see that it might be preferable to have a choice on how to spend your bonus money, it’s a JOB, with a BONUS! I’d take it in a heartbeat. You can always keep looking and maybe find a different job when the economy is better. In the meantime, you have a JOB with a BONUS! To me, that’s a no-brainer.

If I was looking for a job for over a year and an opportunity such as the one described presented itself, I would jump on it. I would never base a decision on how I would get my bonus per se. I mean if this person has five job opportunities knocking down their door and all are equal in all aspects except for how the bonus gets distributed then yea, I guess you can base a decision on that. In this economy who can really afford to nit pick a darn good job opportunity?

What company is this? I want my employer to put my full bonus into 401k but I’m limited to 50%.

Does anybody know of other companies with this benefit?

Are you kidding? What about all these elderly people who are living on a fixed income? When that bonus goes into your 401K, it raises the amount of money you will “earn” in retirement. Salary is usually much bigger than retirement, so the money shouldn’t really be needed now. Why would you turn down a chance to live more comfortable in your later years?

Your friend is pure nutz! I’ve never had a job that paid a bonus although once the nursing home where I worked gave us all $20 from donations from the residents families (big whoop). My son gets a bonus at his job $300, the last couple of years. Stuns me as he works at a grocery store and I was an RN that at times worked for corporate hospitals. You never know when you might get a bonus and to turn down a job because they want to pay it into a person’s 401K account is crazy, especailly since every other aspect of the job was good. I could see turning it down maybe if it was underpaid, bad benefits and this on top of it, but then after a years unemployment I would even take a job offering that.

I DEFINITELY do not think that this is a reason to turn down a job. However, I can see it as being a factor that you totally disregard when trying to choose between multiple jobs, instead of a fantastic thing. I currently have a contract for 10 months, and get benefits for 8 of them. The benefits include 3% match in my retirement plan, and I was told that sometimes they’ll give an extra percentage in bonus money. But the money from the employer is not vested at all until 2 years of employment, at which point it is vested at 50%, and then it doesn’t reach 100% until after 4 years. Even if my contract is renewed (has to do with funding availability from outside sources), I’m not sure I’ll hold my position that long. So the match money and any extra bonus money into my retirement account isn’t really something I consider myself as getting. But, as I said, I CAN’T see it as a reason to turn down a job, especially if one has been unemployed.

You are all Sheepeople! Wow no way would I take a job like that. Let’s not forget if you are dead before you are 65 then the money means nothing! Ask George Harrison of the Beatles he died with a 100 mill in the bank at well before 65! Stop letting them dictate your lives for money you fools!!! That’s why your world sucks a little more every day!