Employee vs. contractor (consultant)
I am considering a new job as a contractor(consultant) instead of a regular employee and have a few questions.
1. Will I receive a 1099 in place of W-2?
2. What kinds of retirement savings plans are available?
2a. May I join the company’s 401k?
2b. If not, what are the other options?
2c. Is an individual plans such as 401k available and worth the hassle and expense? I expect only a few years. May it be rolled over to IRA after the job ends? I am over 59 1/2.
2d. Is the company match still available outside the company’s 401k?
Permalink Submitted by Alan - IRA critic on Mon, 2022-04-18 18:49
Yes.
Whatever the employer offers if you are an employee. 401k, 403b, SEP IRA, SIMPLE IRA, state sponsored IRA, etc. If an independent contractor, then you must select your own plan such as solo 401k, SEP or SIMPLE IRA. 2a) If you are an employee and the company offers one. Waiting periods to join will vary. 2c) Yes, retirement plans are worth the hassle, some more than others. They can be rolled over to an IRA after separation or retirement. 2d) No, but a few profit sharing plans may contribute to your 401k even when you do not. If your income is low and you contribute to an employer plan or IRA, you can receive a tax credit called the savers credit, in which the govt matches your own contributions with or without an employer match.
Permalink Submitted by learner on Mon, 2022-04-18 20:55
Thank you, Alan. If the contractor income is high enough, may I max out the 401k limit, $67,500 in 2022, as an employer contribution regardless whether mega backdoor conversion of the after-tax part of 401k is closed next year?
Permalink Submitted by Alan - IRA critic on Mon, 2022-04-18 21:15
Yes. Rollovers do not affect your contribution limits. If you open a solo 401k, make sure the plan document allows after tax contributions. Many do not.
Permalink Submitted by learner on Mon, 2022-04-18 21:28
Since one may contribute as an employee and also as an employer in a solo 401k, may I contribute as the employer to max out the 401k limit on top of the employee limit without using the after-tax contribution if the income is high enough?