Quote:
Originally Posted by powerhouse_b
Well since you'll be on W2, you won't get paid for those 13 day off.
You won't be able to continue contributing to your 401k, and the IRA that you can set up will have a 5.5k maximum contribution per year. So expect to pay 3k+ more on taxes just because you are not contributing as much to retirement. Plus 2-4k health insurance.
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Contract is contract. W2 contract is the same as a 1099 contract but the benefit on W2 is the employer is paying your self-employment tax. Neither one gets paid vacation or sick days. Neither one gets a 401k, nor insurance.
On a 1099, however, you can deduct more. Don't quote me on that but I am pretty sure this is the case. Remember, W2 means you're an employee. Contract or not you're an employee. 1099 you work for yourself and that allows for more deductions of expenses.
This is part of what everyone is telling OP. To compensate for the higher taxes and out of pocket insurance, and still actually feel like OP makes more money, a $20k - $25k annual jump in gross income from salaried employee to contractor (any kind) is minimally necessary. That means after taxes and costs, he sees maybe $10k+/yr more net. That is a noticeable bump.
There is a reason contract rates tend to be higher than their equivalent salaried employee counterparts. There are more costs, more risks, less perceived security, higher turnover rates, and shorter overall gigs than full time jobs. There are also risks of being unemployed between contracts.
One must not shortchange themselves in such a jump and take all this into account. Don't be afraid to ask for what you're worth or what you want. Within reason of course, forget that guy who posted $195k a while back. That being said, it is a negotiation, and you will never get that which you do not ask for.
True, there is opportunity cost of not contributing to the 401k (particularly if you're leaving a fully vested company match on the table) but that money can be invested in IRA and Roth IRA, so not a huge deal. 401k is pre tax now but you pay tax when you cash out; Roth IRA is post-tax but you pay no tax on gains when you cash out eventually. There is always a trade off so it's hard to fully quantify this type of thing.
Hence, from a pure income perspective, unless there is some serious benefit such as better career growth and potential, more family time, hated your old job and no longer to be miserable, etc., a lateral jump (net to net after factoring in taxes and extra out of pocket expenses) usually doesn't make sense. Some bump in income is warranted in most cases.
There are quantifiable aspects to a job move and there are qualitative aspects to same; only the person in question can accurately assess the value of the intangible qualitative aspects as they fit to his or her situation to determine if a lateral jump is worth making.
I've made a lateral jump before, but it was a career move which got me working with newer technology in my industry in a more demanding slice of the field, and has proven to pay dividends in growth in years since.
You wouldn't think that being a Professional Orangeer makes that much of a difference as opposed to a Professional Carrot Juicer; same field, different fruit/vegetable. If not for that move, I'd never have grown into my own Orange Stand and the financial security that comes forthwith.