Changing to No-401(k) Employer Could Cost This Worker Dearly

Q: I am changing jobs to a company with no 401(k) plan and a $1,500 yearly contribution to a SEP-IRA. My previous employer had a 401(k) with a 3% matching contribution. Are there any choices out there with pretax benefits to save for my retirement?

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A: Yuck. Start looking for a new job.

Here’s a little math to help you launch your search. If you had stayed at your old employer, contributed the $10,000 maximum to the 401(k) and gotten a 10% average annual return, you would have $2.1 million after 30 years.

At your current job, you would have about $246,000 after 30 years. Is what they’re paying you worth giving up $1.8 million in potential retirement benefits?

If you’re a regular employee--in other words, if you get a W-2 from your new company--you don’t have many other options. Because your employer is already contributing $1,500 to a simplified employee pension IRA, you’re considered an active participant in a retirement plan, which precludes you from deducting contributions to your own IRA.

Unless this new job pays enough for you to save plenty on your own, strike now, while the job market is hot, and find an employer who knows that a decent retirement plan is a requisite for finding and keeping good people.

Rejected for a Lower-Rate Card

Q: We recently applied for a credit card with a lower interest rate with the intention of transferring our balance from a higher-rate card. We were denied by the bank because the credit report showed two negative things. The first was an erroneous rent-collection filing that originated in 1989 and that I have tried unsuccessfully over the years to get taken off my credit report. The second was what the bank said was a high ratio of revolving balances to revolving credit limits. What is this? Is there a magic line in the sand that we should not cross? How can we resolve this and get the card?

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A: I can tell you all sorts of ways to improve your credit rating, but it’s probably not going to matter to this company.

It sounds as if you were applying to one of those credit card companies that prides itself on an 80% to 90% rejection rate. These lenders offer low rates, but only to people with absolutely spotless credit. In short, they’re looking for ways to say no.

Most lenders would ignore a 10-year-old blemish; in fact, it probably shouldn’t still be on your report at all. You should contact Experian and the other major credit bureaus to remind them that collection actions, like lawsuits, judgments, tax liens and other negative information, should be expunged after seven years. (The limit is 10 years for bankruptcies.) Experian’s number is (800) 682-7654; Trans Union is (800) 916-8800; Equifax is (800) 685-1111.

The second reason the company gave for turning you down is just a fancy way of saying you’re carrying too much debt, at least for this company’s taste. What’s considered too much varies by the lender. Generally, people who are using much or most of their available credit--say, 75% of their credit limits--are seen as higher risks than people who use only 25% of their limits.

Generally, credit counselors will tell you that spending more than 20% of your take-home pay on credit cards, car loans and other non-mortgage debt is too much. The smartest consumers pay off their bills in full every month.

If you want to improve your credit rating, start diligently paying off the debt you have. You can check https://www.cardweb.com for a list of lower-rate cards. I’d look for one in the 9.9% range. You could also try calling your current credit card companies and see if they’ll lower the rate.

No Tax Break for Filming

Q: I understand that homeowners are exempted from paying taxes if their house is used for filming for a short time. Does this exemption also apply to businesses? Recently a film company used my place of business for two days of shooting. Do I have to claim this money as income for the business?

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A: Yes, sorry. The exemption you refer to allows homeowners to rent out their homes for two weeks or less and not have to include the income on their tax returns. Businesses get no such break.

Liz Pulliam is a personal finance writer for The Times and a graduate of the certified financial planner training program at UC Irvine. She will answer questions submitted--or inspired--by readers on a variety of financial issues in this column. She regrets that she cannot respond personally to queries. Questions can be sent to her at [email protected] or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.