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I have a question and would appreciate any help from the Fools here. DH is interviewing for a new position - it's a long term consulting position. He's a consultant now, but the new company apparently takes a much lower chunk of his hourly rate than his existing one.

Anyway, that's not the question. The new company offers him two pay options: 1) they pay him net, remit all his taxes, offer him healthcare benefits, and a 401(k) with 50% of first 6% match or 2) they give him $7 more an hour, but all tax remittance is our responsibility, his health insurance is his responsibility, and there is no 401(k).

So, in the table below, I've included 40 hours for 4 weeks at the two pay levels. I've added the 3% match to the lower as an increase. I've assumed $38 bi monthly for his premiums (that's same as mine) or the additional $51 adding him to my plan would cost for option 2. Finally, I've subtracted the lost tax benefit of the $14K 401(k) contribution if he takes option 2. I realize he can utilize a TIRA, but then loses the Roth option, so I've left it out. And, it's only $3K per year.

$45/hr $52/hr
Pay per month 7,200 8,320
3% 401-k match 216 0
Health Insurance (76) (102)
Lack of 401-k tax 0 (2,800) >assumes $14K contrib. (20% tax)
7,340 5,418

Without looking at any numbers, he just gut-feeling believes option 1 is better - less hassle with taxes, SS, etc. and the 401(k). After running the number, I think I agree.

Are we missing anything? If my calculations are correct, it appears it doesn't break even until he gets to a $19/hour differential. Seems odd.

I guess it could work if he set up a separate company and formed a SEP IRA?

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