What retirement accounts should I open once I become a Locums CRNA, Travel Nurse, or other 1099 contractor?
This may vary based on annual earnings but here are our recommendations:
1. SEP IRA – Simplified Employee Pension Individual Retirement Account.
2. Individual Taxable Brokerage Account.
3. HSA – Health Savings Account.
4. ROTH IRA – Only if your Modified Adjusted Gross Income qualifies.
Regarding the SEP IRA, usually as high income earners you will not qualify for a ROTH IRA. In order to contribute to a ROTH IRA, you’ll need to make less than $129k for 2022. With a SEP, they are treated with the same tax advantages as a traditional IRA & have higher contribution limits which cannot exceed 25% of your annual compensation. This makes it beneficial for two reasons: 1. Higher amounts can be invested for retirement. 2. Enjoy the annual tax benefits by lessening your tax burden with your contributions.
Individual Taxable Brokerage Account isn’t *technically* a retirement account since there aren’t many taxable benefits, that also means they don’t fall victim to retirement account restrictions. This account is subject to capital gains taxes, which can be offset with reported losses, but something to consider. This account benefits 1099’ers simply due to the fact that there isn’t any income or contribution restrictions. You can also withdraw any funds you contributed tax free, but any funds earned will be subject to gains taxes.
I’ve talked about HSAs at great lengths, but as a 1099, you don’t qualify for employer-based healthcare plans leaving it up to you to fund your medical coverage. HSAs are a magical account that can be used as a retirement account due to the fact that they are triple tax advantaged. Money grows tax free, money used on qualified medical expenses is tax free, & the money contributed provides taxable benefits when Uncle Sam comes calling.
In many cases, 1099 healthcare professionals don’t qualify for Roth IRA contributions due to the annual income limits, but in the even your MAGI is less than the requirement, a Roth IRA is always the way to go.