What should I know about not having benefits at a job?
May 25, 2022 7:57 AM Subscribe
I'm considering a job without benefits. Help me be realistic about what that would mean/cost me.
I am in the final stages for a part-time position without benefits (I think structured as an employee, not as a contractor but I will confirm this).
It pays a wage that is equivalent to around 75% of my current salary for half the hours. I was considering taking a pay cut anyway to find a job that I don't hate, so working part time at a wage that is livable for me sounds GREAT. But... no benefits.
I have certainly scraped by without benefits when I was younger, but at this point in my life I want to have health insurance, contribute to retirement, etc. I also feel like I'm not valuing vacation/sick days enough in my equation.
I have looked at the health insurance exchange in my state to get a sense of what I'd be paying there, and I have a Roth IRA that I could max for retirement. What else should I be considering? Any surprises I should be on the lookout for?
I am in the final stages for a part-time position without benefits (I think structured as an employee, not as a contractor but I will confirm this).
It pays a wage that is equivalent to around 75% of my current salary for half the hours. I was considering taking a pay cut anyway to find a job that I don't hate, so working part time at a wage that is livable for me sounds GREAT. But... no benefits.
I have certainly scraped by without benefits when I was younger, but at this point in my life I want to have health insurance, contribute to retirement, etc. I also feel like I'm not valuing vacation/sick days enough in my equation.
I have looked at the health insurance exchange in my state to get a sense of what I'd be paying there, and I have a Roth IRA that I could max for retirement. What else should I be considering? Any surprises I should be on the lookout for?
See if your current job has a total compensation statement. That will show all the benefits they provide and how much they put towards each, so you can see everything you’d be missing.
posted by kevinbelt at 8:24 AM on May 25, 2022 [3 favorites]
posted by kevinbelt at 8:24 AM on May 25, 2022 [3 favorites]
You’re right to consider the impact of W2 vs. 1099 and to focus on healthcare as a major cost. Other things to consider:
- IRA Max contribution is 6,000$ and is income limited. Depending on your situation, that may be insufficient retirement savings.
- many jobs provide disability and life insurance as well as an opportunity to purchase more. I wouldn’t want to be without short and long-term disability insurance. These can be hard to get on the private market for some people due to exclusions for pre-existing conditions.
posted by lucasks at 8:31 AM on May 25, 2022 [1 favorite]
- IRA Max contribution is 6,000$ and is income limited. Depending on your situation, that may be insufficient retirement savings.
- many jobs provide disability and life insurance as well as an opportunity to purchase more. I wouldn’t want to be without short and long-term disability insurance. These can be hard to get on the private market for some people due to exclusions for pre-existing conditions.
posted by lucasks at 8:31 AM on May 25, 2022 [1 favorite]
The cost of being a contractor is a lot; you have to pay both the employer & employee share of FICA, so an extra 7.2% right there. You should still be able to contribute to an IRA. Employers figure that benefits are an additional 50% of cost. Vacation and sick pay, medical, dental, etc., and usually much more. Good employers have a ton of valuable benefits.
Earning less, even when you have more free time, has a bunch of emotional freight. i've done this, and my feelings are mixed.
posted by theora55 at 8:45 AM on May 25, 2022 [1 favorite]
Earning less, even when you have more free time, has a bunch of emotional freight. i've done this, and my feelings are mixed.
posted by theora55 at 8:45 AM on May 25, 2022 [1 favorite]
The other insurances that jobs usually provide like life insurance, disability, etc.
posted by bleep at 8:56 AM on May 25, 2022 [2 favorites]
posted by bleep at 8:56 AM on May 25, 2022 [2 favorites]
Check the terms of the contract but one benefit is that I don’t feel bad AT ALL about leaving jobs like this. If it works for you, great, if not, gone TODAY.
By benefits do you just mean health insurance? Or do you mean that you don’t revive PTO? I think people underestimate how important it is, especially if you’re already working for a reduced rate
posted by raccoon409 at 9:05 AM on May 25, 2022 [3 favorites]
By benefits do you just mean health insurance? Or do you mean that you don’t revive PTO? I think people underestimate how important it is, especially if you’re already working for a reduced rate
posted by raccoon409 at 9:05 AM on May 25, 2022 [3 favorites]
As far as vacation, consider whether your hours are flexible or not. If you are expected to work 4 hours a day, 5 days a week, with few or no exceptions, then you are likely going to wish for the ability to take a paid day off here and there.
However, if you are able to structure your schedule so that at least sometimes you can have a three- or four-day weekend, you might not care as much about vacation days.
posted by Serene Empress Dork at 10:15 AM on May 25, 2022 [2 favorites]
However, if you are able to structure your schedule so that at least sometimes you can have a three- or four-day weekend, you might not care as much about vacation days.
posted by Serene Empress Dork at 10:15 AM on May 25, 2022 [2 favorites]
- Whatever insurance you do/can get, make sure they treat their doctors/therapists/etc. well, so that you _can_ get an appointment with a good practitioner when you need one.
- Try to make sure this job sets you up well in case you find you want to transition to regular full-time with benefits in the future.
posted by amtho at 10:35 AM on May 25, 2022
- Try to make sure this job sets you up well in case you find you want to transition to regular full-time with benefits in the future.
posted by amtho at 10:35 AM on May 25, 2022
If you find out you are a contractor, I think you will find your are not eligible to contribute to an IRA (no salary) but can set up a SEP. Maybe not in the first couple years, though. Any bank with more than a couple of branches will have someone to explain.
posted by SemiSalt at 12:19 PM on May 25, 2022
posted by SemiSalt at 12:19 PM on May 25, 2022
Another potential option would be to see if you can reduce your hours at your current job with benefits to the minimum that still counts you as a full-time employee. I know someone who was able to move from a 40 hr week to a 30 hour week at the same employer. His PTO is prorated, but the health, dental, life insurance coverage did not change. Would that help?
One bit of info on Obamacare Marketplace health insurance - my 32 year old daughter, who is in good health pays nearly $1000/month for health and pharmacy coverage through one of BCBS's Marketplace plans, and still has a 20% co-pay on radiology and surgical and hospital services after she met a $2000 deductible. She needed both last year, and would have been crushed by higher deductibles and co-pays. This is what I would call significant money on both ends.
posted by citygirl at 12:24 PM on May 25, 2022
One bit of info on Obamacare Marketplace health insurance - my 32 year old daughter, who is in good health pays nearly $1000/month for health and pharmacy coverage through one of BCBS's Marketplace plans, and still has a 20% co-pay on radiology and surgical and hospital services after she met a $2000 deductible. She needed both last year, and would have been crushed by higher deductibles and co-pays. This is what I would call significant money on both ends.
posted by citygirl at 12:24 PM on May 25, 2022
Mild tangent, but in my area 1099 contractors need a "business license" issued by the city and yes, they will absolutely track you down and send a threatening letter if you don't get the license.
...so check into that before you get into solo contracting. It's not a big deal, just like $500 or something, but lots of people don't put it into their calculations.
posted by aramaic at 2:00 PM on May 25, 2022
...so check into that before you get into solo contracting. It's not a big deal, just like $500 or something, but lots of people don't put it into their calculations.
posted by aramaic at 2:00 PM on May 25, 2022
Price out dental and eye insurance not just medical. Take into account your deductible and how large the network is. Price out short and long term disability and life insurance. I would pretty much only take this if you are an employee not a contractor. If you can cover the cost of your bills + deductibles (don’t forget pharmacy deductible may be different and you may need to purchase separately!) take the pay cut and get back your time! But if you can’t cover it WITH the deductibles figured in, you can’t afford to take the job.
posted by Bottlecap at 2:43 PM on May 25, 2022
posted by Bottlecap at 2:43 PM on May 25, 2022
I'm freelance and very familiar with this issue.
You should get health insurance through the state marketplaces. The subsidies are based on taxable income, so depending on your situation and how the employment is structured, you might get a lot of it covered as a tax credit even if you make decent money.
If you are relatively healthy, you should get a "high deductible" qualifying Bronze plan (HDHP). This allows you to put money into a Health Savings Account (HSA) which is the most tax advantaged way to save for both medical expenses & retirement. You can Google the reasons why but the HSA is by far the best deal if you're on your own for benefits. Currently the max HSA contribution is $3650/year and you must be covered by a HDHP to make contributions.
HSA I always max out first, then an individual IRA contribution is $6000/year max. If you are contracting you can set it up as a SEP-IRA and make contributions on behalf of yourself as a individual ($6k) and as your employer (based on % of Schedule C I think).
TLDR bare minimum annual benefits for me as a self employed person is $3650 HSA + $6000 IRA = $9650 + the actual cost of your non-subsidized health premium. If I have more money left over that I make employer contributions to my SEP-IRA or I throw it into a ROTH account.
posted by bradbane at 11:22 PM on May 25, 2022 [1 favorite]
You should get health insurance through the state marketplaces. The subsidies are based on taxable income, so depending on your situation and how the employment is structured, you might get a lot of it covered as a tax credit even if you make decent money.
If you are relatively healthy, you should get a "high deductible" qualifying Bronze plan (HDHP). This allows you to put money into a Health Savings Account (HSA) which is the most tax advantaged way to save for both medical expenses & retirement. You can Google the reasons why but the HSA is by far the best deal if you're on your own for benefits. Currently the max HSA contribution is $3650/year and you must be covered by a HDHP to make contributions.
HSA I always max out first, then an individual IRA contribution is $6000/year max. If you are contracting you can set it up as a SEP-IRA and make contributions on behalf of yourself as a individual ($6k) and as your employer (based on % of Schedule C I think).
TLDR bare minimum annual benefits for me as a self employed person is $3650 HSA + $6000 IRA = $9650 + the actual cost of your non-subsidized health premium. If I have more money left over that I make employer contributions to my SEP-IRA or I throw it into a ROTH account.
posted by bradbane at 11:22 PM on May 25, 2022 [1 favorite]
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posted by cakelite at 8:01 AM on May 25, 2022 [8 favorites]