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Comment by erik998 | Hacker News Reader

One thing I would like to add... I created my own solo S-corp and started on the path of contracting. I have been successful enough to minimize my payroll taxes using a solo 401k (~18k max contribution and then my company can contribute 25% of my w-2 salary). Now I am at the point where I am investigating how to setup a defined benefit plan for myself to defer 75-100k in payroll taxes. Most likely a cash balance plan.

I think most employees at FAANG don't realize how much they really give up paying CA taxes and a significant portion of Federal taxes.

Then I realize why FAANG companies don't have defined benefit plans... The tenure of most employees would not make it worthwhile.

I wish we had something like the SAG-AFTRA rate fees for programming. We don't so I guess my solo way of doing things will have to do for now.

https://www.sagaftra.org/contracts-industry-resources

Look at those rates!

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Here is a good example of how you can max out a solo 401k and use a private pension plan.

https://www.watsoncpagroup.com/kb/Turbo-Charged-401k-Plans_3...

The dumbest thing in the world is working at FAANG at high salary levels. Unless your are in the C-suite you are always in a precarious position. It's not easy to justify the high salary at a competitor all the time.

The best strategy is to get good amount of revenue via a solo S-corp and minimize your payroll taxes. Hell your defined benefit plan can purchase all the FAANG stock it wants. You don't want to be the Sun employee with many stock options that are worthless in a downturn. At least you can dump your stocks and have some flexibility in your own defined benefit plan.

> The dumbest thing in the world is working at FAANG at high salary levels. Unless your are in the C-suite you are always in a precarious position. It's not easy to justify the high salary at a competitor all the time.

I don't think you know what you're talking about. An engineer making $200k+ at a FAANG can leave that company and.... probably make the same (or more) at another large tech company. Their salary is determined by basic supply & demand, if they have skills worth $200+ at one company, they'll find similar compensation elsewhere. (If it's not easy to justify their salary at a new company- why exactly is their current company paying them that much? Are they running a charity or something?)

I don't understand your obsession with payroll taxes. I'm self-employed too, everyone knows you avoid payroll or self-employment taxes by setting up an S Corp and paying yourself disbursements on top of a salary. Anyways, for an employee they're really not extremely high, so I don't understand building a whole strategy just to avoid this 6% tax. Being a FAANG employee comes with a ton of non-cash benefits & perks- the 401k match alone is probably double whatever you're losing in payroll taxes. The value of the health insurance is probably more than payroll taxes.... Sounds like you're not really properly accounting for any of this

It's not 6%. Im not talking about the employer's portion of social security taxes.

Go to http://www.esmartpaycheck.com/FreeCalculator/ Change cycle to annually (2019) and in column cp put in 250k.

the taxes I am talking about are: Federal Income Tax Withheld $61,363.50 State Income Tax Withheld (CA) $22,103.55

That's where you can make a substantial amount of savings by diverting that into a solo 401k and defined benefit plan. You need to pay taxes but you can knock that down quite a bit.

So from 250k down to 150k is your take home... imagine you can structure your business to save a substantial amount of that.

Health insurance ... ehh yea can be expensive but you can use an HSA and high deductible plan... That's why keeping obamacare laws are helpful. As long as you can get bumped off for pre-existing you are ok.

Screw the non cash benefits... Im sure many Sun and IBM employees enjoyed those same perks too. No FAANG company has a 25% match policy, they usually have 3% or some small matching percentage across the board for their 401k safe harbor provision... The same match for all employees.

People are catching on and making these calculations... Sure moving around FAANG companies might seem easy but just because company A pays you X doesn't mean company B will pay X+Z... It may seem like it in the hype but ask any former Sun employee making X why they can't find X+Z.

Options... that's where you might get real lucky. You got me there. That's something I am still learning about... But in your defined benefit plan you can just buy a basket of FAANG stocks.

Take a look at https://watsoncpagroup.com/kb/turbo-charged-401k-plans_302.h...

> Federal Income Tax Withheld $61,363.50 State Income Tax Withheld (CA) $22,103.55

I think there's some confusion around terminology- that's not payroll taxes (the 6%), that's regular income taxes. Anyways, you realize you do have to pay taxes eventually on your deferred income, right? I agree they will probably be lower rates, but you're not 'saving' yourself from these income taxes, just deferring for a few years....

Health insurance costs $6k+ for a not-great plan with a kinda high deductible (source- this is what I have). The type of HS offered by a FAANG is ultra-premium, literally everything is covered. There is so much financial value there man, especially if you have a medical emergency and actually use it- not to mention that they cover your family too. Minimum value is $10-20k and could be way, way, way higher depending on your usage or your family's usage in a given year.

Yes, FAANGs will match 401ks 10% or above (!). 3% would be poor in any industry or sector. Your information is incorrect.

Not interested in arguing with you about FAANG salaries, you're simply wrong. If you're worth $200-300k at one of them, you're extremely in-demand and worth that at a lot of companies.

I want to argue respectfully, but you have some awful weird financial ideas just based around tax avoidance (which is really just tax deferment). There is absolutely no way the tax benefits of contracting with a defined benefit plan even come close to the $ amount of the benefits from working at a FAANG, you're not even in the ballpark. More proof that taxes just make some people crazy and lead some to absolutely bizarre financial decisions (like people who commit tax fraud and go to real prison- the risk/reward there is completely out of whack)

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