I have a sort of complex situation and would like some advice: I am a professional currently employed by a company. I have maxed out my 403-b. I can afford to put more money into tax deferred retirement savings. I may have the option of setting up a personal corporation and contracting myself out to the company. In this way I could set up a SEP-IRA and may be able to put away more in tax deferred savings. In addition I could manage my own investments instead of choosing from mutual funds. There are of course other tradeoffs; like paying my own malpractice insurance, life and disabilty, etc. Is this a wise idea? Are there other tax deferral options if I don't qualify for roth IRA, etc.? Thank you in advance for your advice.
After some years as an independent contractor, I accepted employee status. The reasons: The disability insurance, malpractice insurance, life insurance, and more important, health insurance provided by my employer, plus now the employer pays half my social security, far outweighed, in my opinion, the reduced amount I can put away for retirement. In studying the options, I find the ability to use tax efficient mutual funds such S&P 500 funds, particularly Vanguard, is a satisfactory substitute for putting that money into a retirement fund. Since the index fund will do little buying and selling, the taxes are in fact deferred. Further, I can buy a stock and hold for a long time. The problem with holding a stock for a long time is that I find the stock may do very well indeed for the first year after I buy it, but then it runs out of steam, the picture changes, and I find it appropriate to sell that stock and buy a different one: enter, TAXES! So I do better to buy individual stocks within my IRA and index funds outside it. Best wishes, Chris
thanks chris for your suggestions. I should probably consult with my cpa and attorney to see if the transition is of financial benefit to me. The other advantage, in my case, would be that I could contract myself out to other corporations as well. But, I'll have to do more homework to see if its feasible.
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