Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Retirement savings options for W2 contractor?
Old 03-04-2008, 09:19 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Retirement savings options for W2 contractor?

If someone is a W2 contractor without access to any of the employer's benefits, what retirement savings options are available? Can someone like this set up a solo 401k? Anything else?
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-04-2008, 09:22 AM   #2
Thinks s/he gets paid by the post
free4now's Avatar
 
Join Date: Dec 2005
Posts: 1,228
Ira
free4now is offline   Reply With Quote
Old 03-04-2008, 09:25 AM   #3
Confused about dryer sheets
 
Join Date: Feb 2008
Posts: 1
I think if you rcv. a W2 instead of a 1099 you are considered an employee and are limited to Traditional or ROTH IRAs.

The good news is with a W2 taxes are withheld and your employer pays SS and Medicare.
napasam is offline   Reply With Quote
Old 03-04-2008, 10:10 AM   #4
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: west bloomfield MI
Posts: 2,223
Read IRS pub 590 and similar- there are many options which include IRA (SEPP and SIMPLE), solo 401k and even a few less common ones.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 03-04-2008, 11:36 AM   #5
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,856
Quote:
Originally Posted by brewer12345 View Post
If someone is a W2 contractor...
I'm not up on employment vocabulary or definitions, but that sounds just plain oxymoronic.
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Old 03-04-2008, 12:00 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Quote:
Originally Posted by Nords View Post
I'm not up on employment vocabulary or definitions, but that sounds just plain oxymoronic.
W-2 contractor: you is an employee/indentured servant for all practical purposes, but you get no benefits and you have few of the protections the law affords to actual employees.

1099 contractor: the company has hired you as a vendor.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Old 03-04-2008, 12:04 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 2,020
Don't they usually open up an 'opportunity' to purchase into group medical at the w2 employee + employer rate?

And, as an added bonus, as a w2 contractor, you don't need to manage your own books since they handle tax witholding for you.

Is changing to a 1099 or corp-corp billing an option at this point?
Marquette is offline   Reply With Quote
Old 03-04-2008, 12:37 PM   #8
Full time employment: Posting here.
Kronk's Avatar
 
Join Date: Aug 2005
Location: Philly 'burbs
Posts: 547
I've been a W2 contractor for years. The contract is really between the consulting firm and the client. I've had a 401k through the consulting firm for a number of years.

As of the beginning of the year, I switched over to 1099 consulting, primarily for the 401k advantage. My Fidelity solo 401k should be set up now, so I'll be able to contribute $15,500 plus 25% of my salary there. Of course, my firm still needs to pay me for January before I run my first payroll anyhow...

There isn't much you can do if you are a W-2 consultant, except try to convince whoever is writing your paychecks to start up a 401k plan.
Kronk is offline   Reply With Quote
Old 03-04-2008, 12:54 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
IRA and HSA are your only options.
eridanus is offline   Reply With Quote
Old 03-04-2008, 12:58 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
OK, so it sounds as if a W2 contractor is limited to either IRAs or trying to get their employer to convert them to a 1099 contractor. Assuming that the employer is the only "client," my understanding is that it would be tough to get 1099 status and be considered legit by the IRS, right?
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Old 03-04-2008, 01:12 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
Much of the burden is on the employer. They can't treat you like an employee and generally they can't deny you from working for other clients, as long as any NDAs are honored of course. I know of no IRS guideline that states that you need more than one client/1099 in a given year. I worked for a single client in 2005 and 2006.

Of course, I'm not a CPA or tax attorney.
eridanus is offline   Reply With Quote
Old 03-05-2008, 05:45 AM   #12
Full time employment: Posting here.
Kronk's Avatar
 
Join Date: Aug 2005
Location: Philly 'burbs
Posts: 547
Here is a pretty good article (disclaimer: looks fairly accurate skimming through it). There are a set of questions that the IRS apparently uses to determine if someone is violating consultant/employee.

http://www.comptroller.ilstu.edu/dow...ontractors.pdf

It is a very gray area, and even though I'm doing it I can't pretend to be able to give advice.

One other possibility for retirement savings is to see if whoever is providing the W2 is willing to start up a 401k or a SIMPLE IRA plan.
Kronk is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Flexible retirement options for military FlowGirl Young Dreamers 9 03-05-2006 06:12 PM
2 Retirement account Options earlybird FIRE and Money 6 10-25-2005 09:52 AM
Help Re Options for Retirement Monthly Payouts Ginger Other topics 14 08-05-2005 12:41 PM

» Quick Links

 
All times are GMT -6. The time now is 11:37 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.