[OT] Retirement, 401k, Subcontracting

[darose at darose.net (David Rosenstrauch)]

When I contracted in the past, I have my own corporation and so would 
have the agency pay me that way - corp-to-corp.  It was then my 
(technically, my corporation's) responsibility to pay myself via 
payroll, carry my own health insurance plan, my own 401k plan, etc.  (As 
far as the 401k, BTW, I used an SEP-IRA from Fidelity.)

I'm sure it sounds like this is a more expensive route to go, but it's 
not that much more expensive than you think:

1) as a corporation, you can easily expense numerous things - books, 
ISP, cell phone, some travel and meals, etc. - which can really add up 
to some tax savings

2) you can tweak the methods of your compensation a bit more to your 
financial advantage.  e.g., I used to pay some, but not all of my 
compensation as salary, and some as profit distribution from the 
corporation to the stockholder.  There's some financial benefits to 
being able to decide what your salary is going to be.

3) you get to pick the health plan that you want, not one that's given 
to you by your employer.  Same with your choice of retirement plan.

So there's a number of advantages to working this way.  But there's some 
disadvantages too:  need to pay an accountant, need 2 checking accounts, 
need to maintain a set of books for the corp, need to file corporate as 
well as personal tax returns, etc.


Hope this information is helpful.  I'm not sure what to advise you if 
you *don't* go the corporate route, though, since you as an individual 
can't open your own 401k or SEP-IRA.  Maybe a Roth IRA instead?

Anyway, HTH.  Feel free to email back if you need me to clear any of 
this up.

DR

Scott R Ehrlich wrote:
> Hello to all:
> 
> I have been subcontracting for a few years now via placement agencies, and my
> current agency does NOT have a 401k plan.   If my contract is renewed, and I am
> not taken on as a direct-hire, what have people done for their retirement
> investments?
> 
> I am also saving for a house (my wife works f/t as well).   My paycheck is going
> towards a house, and hers for paying bills.   I am in my mid 30s, if that makes
> a difference.
> 
> Thanks for any insight and ideas.
> 
> Scott