As a mental exercise, I'm trying to figure out how much total compensation I receive per hour (and using that as a baseline with which to value my time). Here are some of the benefits I get with my employer and how much monetary value I think they have. This turned out to be more difficult/insane than I thought, and it's likely riddled with bad assumptions and math. But I decided to try it anyway and leave it open to feedback from others who are smarter and more knowledgeable. I'm particularly weak on quantifying the benefits of being self-employed.
401(k) match: $10,800 per year. I'm going to assume that it will be taxed someday at 22%, so really it's worth about $8424.
Defined benefit plan: If I stay long enough to vest, I get about $9k a year from this. After tax this might be worth $7200 a year.
Malpractice: I'd probably pay about $5000 a year in my state.
Annual CME: $3750. I do think I get pretty close to full value on this.
457(b) availability: I'm going to assume I can take this out for full value. I think it has an income tax arbitrage of about 20%. I am going to assume that if I quit working I would spend this money first; thus if it were in a taxable account it wouldn't pick up much in the way of LTCG, the effect of which I'll ignore for simplicity. $18500 x .2 = $3700.
HSA availability: otherwise this money would go into a taxable account, and I'd have to pay 40% upfront in taxes + whatever the capital gains tax is. $3400 x 0.4 = $1360. If that remaining $2040 quadruples in a taxable account, and LTCG is 15%, that's an additional $918 in taxes. However, HSA costs about $25 a year in fees. So $1360 + $918 - $25 = $2253 a year?
Health Insurance: Tough to know what I'd pay for this out of pocket. I suppose I'd most likely go with a health insurance ministry for about $150 per month + the catastrophic coverage fee ($40), which is $1840 a year. However, I currently pay $168 a year, so the total benefit I'd put at $1840 - $168 = $1672
Dental Insurance: Also pretty difficult to price. I wouldn't get dental insurance on my own, but not sure how I'd get dental care. Go to a dental school and see students? Go to Mexico? I'm just going to pull $500 out of my rear. I pay $60 a year in premiums now, so that makes the benefit $440.
DEA: $366 a year
State license: $130 a year
Total benefits = $32.2k a year. Just over 10% of my salary.
However, there are some benefits I can only get by not being employed:
Not being able to max out $55k 401(k) limit: If I were working independently, I'd be putting in $18.5k in a solo 401k, just like now. But how much would I contribute through the employer side? I'm not sure. I'm guessing my income would be dramatically lower. Maybe I'd be able to add another $15k a year? 15k x .2 (income tax arbitrage) = $3k. How much would I save in LTCG? I'm going to assume money triples by withdrawal, so $3k x 3 x .15 = $1350.
Schedule C tax breaks: Not even going to try to guess this one.
Lower tax on pass through income: I don't think I'd save that much with this. Probably would be in 22% bracket and would see a 20% deduction. On a low income, that's about $3000.
Not having to pay fees with employer 401(k)/403(b) - This is pretty negligible. I pay about $84 in stupid fees to custodians. Would love to get rid of them though.
Total benefits as an IC (that I can think of): $4434 (+ schedule C deductions)
So the net benefits I think are about $28k, or $12.41 an hour. I make about $95 after tax per hour now. Actually I get paid on production, but that's what a similar salaried job in my organization would pay. So I guess if I worked as an IC, it would need to pay $105-$110 after tax to really be comparable in compensation.
Does that sound off? How much would you value your benefits?
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