My wife thinks that I should close my business and take a job that I’ve been offered. The salary is about half of what I have been earning. She says that the value of the health insurance alone makes up most of the difference. (We have been going without health insurance since I started my business eight years ago.) Is she right? We are both in our late fifties and in good health. I think I should keep the business going and bank all the money we can for retirement. How can I compare the options?
Befuddled about Funds
You are correct that as a business owner, you have more flexibility to spend your income on what you wish – retirement savings, health insurance, reinvest in the business, etc. With an employer, some of those decisions are made for you: part of your income will be in the form of health insurance.
Going without health insurance is unwise for one major reason: you risk losing your business, home, and savings (even retirement savings) if you or your wife become seriously ill. You should carefully consider buying health insurance, whether you take this job or not.
To compare your options, calculate your current net income after paying your self-employment taxes and all your business expenses. Compare that to the job’s salary less payroll taxes, plus the employer’s share of health insurance. Most employers will give you this information with the job offer; they may also pay for other insurances such as dental, disability, and life. You can add those to your total also.
To truly make it an apples-to-apples comparison, you should get a quote for health insurance as a self-employed person. It’s possible that you can keep your business, purchase health insurance, and earn more money than the job offers you. Since you have been without health insurance for such a long period of time, insurers will be suspicious of you. In many states, insurers are allowed to ask you medical questions and charge you higher rates based upon your answers. Getting health insurance through an employer would avoid this issue; group health plans cannot vary their rates based upon each employee’s health.
The numbers won’t make the decision for you. You will still have to decide whether to continue your business or to become an employee. That is more of an emotional, rather than a financial decision. Your wife may be pointing to health insurance as a compelling reason to take the job, but there may be other reasons too. Are you spending a lot of time working in your business? Is she feeling neglected? Have a healthy discussion of the whole picture, and then decide together what is best.