Aiming_4_55
Thinks s/he gets paid by the post
Ok, I was having lunch with a contractor that we have on a project. He mentioned that his DW has reasonable megacorp health benefits, so he is leveraging as much of his income into a self-employed 401k, stocking away about 40k a year. He is in his mid-40s so no catch up contribution included. By stocking away $40k a year, he reduces his taxable income and get paid for all hours worked. Not sure if he is w-2, 1099, or Corp to Corp, I will have to ask. For 2011, employee contribution of $16.5k and employer contribution of 20% net income.
I’m currently an employee for megacorp, however I see this to be a great option. I can sign-up with a few IT temp agencies. There is a shortage in my field, most experienced contractors are paid between $60 – 75 an hour with a bill rate range of $85 to $110. Most of the contractors work reasonable hours with limited bench time. If I form an LLC and get the business direct, I could maybe take a bigger cut and write off expenses, e.g. mileage, business lunches, etc.
I see this as a huge benefit if I RE at age 52 – 55 and backdoor it to a Roth IRA, potentially paying a lower tax rate on funds.
Looking for feedback….could this be a better way to defer compensation? Also,
Other than risk of bench time, what am I missing?
I’m currently an employee for megacorp, however I see this to be a great option. I can sign-up with a few IT temp agencies. There is a shortage in my field, most experienced contractors are paid between $60 – 75 an hour with a bill rate range of $85 to $110. Most of the contractors work reasonable hours with limited bench time. If I form an LLC and get the business direct, I could maybe take a bigger cut and write off expenses, e.g. mileage, business lunches, etc.
I see this as a huge benefit if I RE at age 52 – 55 and backdoor it to a Roth IRA, potentially paying a lower tax rate on funds.
Looking for feedback….could this be a better way to defer compensation? Also,
Other than risk of bench time, what am I missing?