Software engineering contract work

[Fermion]

I have been thinking about our plans and ways to keep adding to our nest egg if we sort of ER.

Since we will be in our mid 40s, I would like to continue contributing to a Roth IRA for each of us. I would like to do the following if it turns out to be possible:

Pick up a software contract position for a 6 month period, hopefully starting in Sept/Oct and ending before April. Take the next 18 months off then repeat. This should give our budget an extra $30,000 a year before taxes (assume $10K a month contract rate) and qualify both of us for a full Roth contribution each year. The 18 month "off period" would be short enough that we do not get rusty in our skills, and long enough that we could do a lot of what we want to do in retirement.

This is pie in the sky ideal scenario, but would be great if we could work it out.

 

[Retch The Grate]

Seems reasonable if you've got up to date skills and good contacts. Some portion of your 18 months off is going to be spent getting up to speed on new tech, and doing your contract searching, take that into account. I've got lots of friends who are enjoying periods of funemployment between jobs here in the bay area and it certainly hasn't presented any insurmountable job issues for any of them yet.

 

[Fermion]

Good to know. Right now we are very current on our skills and could get a j*b at Google, Apple, Microsoft, Amazon probably in less than a month (have decent contacts at all four). I would also consider smaller outfits, because they may have need of temp contract workers and maybe can't even afford full timers.

 

[Onward]

The only potential problem I see is the "gumminess" of software-contract engagements. It can be hard to find work that starts exactly when you want, and (even harder) ends when you want. This is something I dealt with over and over in software contracting. The more flexible your start + end dates, the better.

 

[Aiming_4_55]

I switched to contract work a few months ago. The scenario you mentioned is possible, but be flexible on start and end dates. It would be based on your local market unless you are willing to travel.

An additional consideration is, if you work through an agency for your assignment as an W2 employee you may have access to 401k program to shelter more $$. As a W2, when the assignment ends, I will probably qualify for unemployment.... that might force me into semi-ER for 4 - 6 months before the next assignment ;-) Then find another assignment long enough to qualify for unemployment again and repeat =) I just started research of this option... need to try scenarios on my spreadsheets.

I'm not finding many contact assignments doing 1099/c2c by me, they seem to use an agency but require W2 to limit their liability. YMMV

 

[ronocnikral]

As a W2, when the assignment ends, I will probably qualify for unemployment.... that might force me into semi-ER for 4 - 6 months before the next assignment ;-) Then find another assignment long enough to qualify for unemployment again and repeat =)

Question: If you can essentially "pick and choose" assignments, why the unemployment?

I don't know if software "engineers" require insurance, but in my line of "engineering," you need oodles of it, and it costs oodles x20. This usually forces people to run their ticket through a consulting company that dings it 15-35%.

 

[Rustward]

As a W2, when the assignment ends, I will probably qualify for unemployment.... that might force me into semi-ER for 4 - 6 months before the next assignment ;-) Then find another assignment long enough to qualify for unemployment again and repeat =) I just started research of this option... need to try scenarios on my spreadsheets.

Question: If you can essentially "pick and choose" assignments, why the unemployment?

Ron makes a good point about unemployment. I have never collected unemployment, but I understand that accepting it requires you to be actively seeking employment in your field, and accepting any "acceptable" offer.

To me, "working the system" the way you describe is an abuse of the system. What if everybody did this?

 

[Fermion]

To me, "working the system" the way you describe is an abuse of the system. What if everybody did this?

They do. All of the software contract workers I know take unemployment during their 3 month "off period", even though it has been scheduled a year in advance and well known.

 

[Aiming_4_55]

Ron makes a good point about unemployment. I have never collected unemployment, but I understand that accepting it requires you to be actively seeking employment in your field, and accepting any "acceptable" offer.

To me, "working the system" the way you describe is an abuse of the system. What if everybody did this?

"Working the system" - requirements are written in the unemployment program, one has to work so many weeks to qualify and employment needs to end not due to the worker's fault is my general understanding. I could be wrong.

I've never received unemployment yet either. When my assignment ends, I will decide what course of action I will take.

I will be selective in the next assignment considering type of work, distance, travel, length of assignment, pay, w2/1099/c2c, etc. It's nice to have an option for unemployment benefits. If I collect the benefits, I will follow the requirements, but I will not just accept anything that comes along.

If that's "abuse" cut me off, but programs were funded by the previous employer and employee's employment.

 

[Aiming_4_55]

They do. All of the software contract workers I know take unemployment during their 3 month "off period", even though it has been scheduled a year in advance and well known.

I actually became aware of this approach talking to another contractor. From what he describes is a passive approach to applying for the next assignment or job.

Why take time off unpaid during the assignment to interview when you can interview after your assignment ends as you are collecting benefits. Most interview commitments can consume 1/2 work day or longer.

He mentioned, we are given an end date, but that is generally extended 2 weeks before that date for another 1 - 2 months. His last assignment started as a 6 month project, but was extended many times and it lasted 3 years.

 

[photoguy]

An additional consideration is, if you work through an agency for your assignment as an W2 employee you may have access to 401k program to shelter more $$. As a W2, when the assignment ends, I will probably qualify for unemployment.... that might force me into semi-ER for 4 - 6 months before the next assignment ;-) Then find another assignment long enough to qualify for unemployment again and repeat =) I just started research of this option... need to try scenarios on my spreadsheets.

So if I understand correctly, instead of being an independent contractor who submits invoices/w9 forms, one works as an employee for an agency who then loans you out to another company? Does the agency get penalized for having so many workers go on unemployment insurance?

Also does the math work out better to use an agency as opposed to remaining independent and taking all the overhead for oneself? I imagine the overhead could be a very large chunk of money relative to the amount paid for the contractor.

 

[Aiming_4_55]

So if I understand correctly, instead of being an independent contractor who submits invoices/w9 forms, one works as an employee for an agency who then loans you out to another company?

Yup, that's my case and the other dozen contracts on my current assignment.

Does the agency get penalized for having so many workers go on unemployment insurance? No idea, others may know.

Also does the math work out better to use an agency as opposed to remaining independent and taking all the overhead for oneself? I imagine the overhead could be a very large chunk of money relative to the amount paid for the contractor.

Yes, the agency takes a cut. Depending on the agency, the cut can be $2/hr to 30% or whatever they can get away with! When I started exploring contract work, I was only looking for 1099/c2c for greater solo 401k options/limits, but ran into mainly w2 assignments. I guess, it's nice not to worry about the marketing/networking, invoicing, scheduling, taxes, insurance, etc.