401K Direction

[98tegRS]

I have a minor situation that I'm trying to figure out with a friend of mine and would like another opinion on this matter...
I friend of mine has a PT job and they will allow him to participate in the 401K program, but without the company match. He has another full time job that offers him other benefits and allows him to fund his IRA and 401K that is matched 50%. The 401K that is being questioned is for the PT position.

Will there be any issues with having two 401K accounts?
(i think not, but not 100% sure)
Is the 401K a good thing to sign up for, being that the expense ratios are so high and the company offers no matching because of the part time status?
Which investment options in the list would be best?
(wants to be aggressive)

Investment ---------------------------------------Type --------Symbol------ Price---------E/R
EQUITY/STOCK
ALLIANCEBERNSTEIN INT GRWTH A ------ Core -------AWPAX ---------$18.88 -------1.27%
AMERICAN CENTURY EQUITY INCOME -------Core -------TWEAX -------$7.44 -------1.22%
AMERICAN GROWTH FD OF AMER R3 ---------Core ---------RGACX -------$31.48 ------0.96%
BLACKROCK LATIN AMERIC A -----------------Core --------MDLTX --------$58.92 ------1.58%
BLACKROCK LG CAP CORE A ---------------- Core --------MDLRX -----------$12.17 ------1.15%
BLACKROCK S&P500 INDEX I -----------------Core --------MASRX -------- $16.85 ----0.37%
EATON VANCE ASIAN SM CO FD C A --------Core --------EVASX --------$29.32 -------2.20%
FIDELITY ADV LEV COMP STCK T -------------Core --------FLSTX --------$33.47 --------1.40%
GOLDMAN SACHS GROWTH OPP A -----------Core --------GGOAX --------$20.34 -------1.47%
GOLDMAN SACHS MID CAP VAL A ------------Core --------GCMAX--------$32.93 --------1.17%
HOTCHKIS &WILEY LRG CAP VAL A -------- Core --------HWLAX --------$19.14 --------1.22%
IVY ASSET STRATEGY FD CL Y ----------------Core --------WASYX --------$27.12 -------1.14%
JPMORGAN SMALL CAP EQTY FD CLA -------- Core --------VSEAX --------$26.69 -------1.40%
JPMORGAN SMALL CAP VALUE FD A --------Core --------PSOAX --------$17.23 --------1.36%
NATIONWIDE U.S. GROWTH LEADERS--------Core --------GXXAX --------$9.33 --------1.46%
OPPENHEIMER SML & MID CAP --------------Core -------- QVSCX--------$33.46 ---------1.14%
BOND/FIXED INCOME
DELAWARE INVSTMNT DIV INC CL A -------- Core --------DPDFX --------$8.90 ---------1.13%
FRANKLIN U.S. GOV'T SEC FUND ------------Core --------FKUSX --------$6.55 ----------0.74%
PIMCO TOTAL RETURN FUND CL A -----------Core --------PTTAX --------$10.93 --------0.90%
CASH EQUIV/STABLE VALUE
ML RET PRESERVATION TRUST --------------Core --------MLGIX --------$1.00 ----------0.60%
ALLOCATION FUNDS
BLACKROCK GLOBAL ALLOC A --------------Core --------MDLOX -------$19.48 ---------1.17%
VAN KAMPEN EQUITY & INCOME A --------Core --------ACEIX-------- $8.64 ---------0.78%


Thanks for your time...

[atomicrc11]

With no match and such high expense ratio's I would focus on putting more into his IRA and once that is maxed out, put more into the other 401k. There is no issue I know of having a 401k with two companies however.

[jlvkfyang]

Is the 401K a good thing to sign up for, being that the expense ratios are so high and the company offers no matching because of the part time status?

I would say that he should invest only in the FT 401k since it does have a matching program. This will allow him to build his retirement fund faster.

For the PT, he should only invest if there is an investment strategy that only the PT allows, ie, specific funds. I would guess that the funds from both 401k plans will be similar if not exact.

Just my 2 cents.

[jIM_Ohio]

The yearly max for 401k contributions is $15,500, with catch up provisions of $5000 for individuals over 50 years old.

The max is per person, not per employer, per job, or anything else.

The decision has massive tax implications, though, which have not been mentioned yet.

If the person looks at the full time paycheck, they will see they are taxed on all income not put into 401k. Might make it to 25% tax bracket if the amount is above $32250 (single) or $65100 (married filing jointly).

If the person looks at part time paycheck, they are probably making less at 2nd job, so more than likely the tax rate is less on that paycheck (cap for 15% bracket is $8k for single and $16k for married filing jointly).

This being stated, taxes will always even out at end of year on April 15. The issue whether OP wants a huge tax refund, or wants to avoid a huge tax penalty.

Worst case scenario- the OP's full time job, after 401k contributions leaves him just below the cap for a given bracket. Say take home is 32,549 single or 65099 married filing jointly. taxed in 15% bracket both cases, but the next dollar is being taxed at 25%.

Then make the assumption, (worst case), that part time job is maybe 10-25% of the income from full time job, and is barely taxed at all.

When adding everything up, it's clear your friend is in 25% tax bracket, but did not have enough tax withheld. There might be penalties in this case.

The 401k would lower the taxable income and increase take home more for the full time job. I would recomend this is the only 401k used, but this also makes the worst case above worse (follow that?).

My suggestion would be to
a) contribute only to 401k of full time job
b) do an estimated tax return to see if income from PT job pushes friend to higher tax bracket. If this is the case, make sure more taxes are taken from check of full time job.
c) I did NOT suggest friend quit second PT job because of taxes. The income is taxed at higher marginal rates, but friend will always have more money coming in than taxes owed, assuming expenses for PT job are low.

If you need an income tax chart, I use

Reference Room