It's a living-to-work vs working-to-live question, really.
As it turns out, far more people choose to compartmentalize their work-life into an annoying, necessary evil than to dial back their standard of living while dramatically increasing their work responsibilities.
And this is true of more than just programmers. I've heard similar from accountants, lawyers, cooks, bank reps -- basically everyone I've ever worked with.
They'd all much rather do the sort of work they're currently doing, but at a smaller company or on their own. They just never make a change because, in the end, they value the increased leisure time and higher standard of living more.
(To be fair, in the US some aspects of our economy also have a big impact on that choice. Namely, retirement and insurance opportunities that don't really exist for the self-employed and small businesses.)
I think small businesses get about the sweetest retirement packages in the United States which do not involve backstopping by the taxpayers of California. With the SEP plan (one of a few options) you can sock up to, essentially, $5k + 25% of salary (capped at a very generous number) in a tax advantaged retirement account. It is like the IRAs available to regular wage employees, except superior in just about every way. (You lose out on employer match, you gain on sickening tax efficiency.)
Another fun option, especially for young entrepreneurs, is the Roth IRA, which is such a good deal it ought to be illegal. Pay taxes now at your low "I do not make much money rate". Watch investments compound for a few decades. Then it is yours, tax free, allowing you to avoid the significantly higher rate you'll be facing when you're significantly wealthier, and also letting you do some fun tax structuring if you also have taxable investments and/or income during retirement.
If you start saving young, $1 put in a Roth IRA today buys you $1 in tax-free income a year, for perpetuity, starting at retirement.
SEPs are employer-contributed. The employer selects a fixed percentage of salary for all employees and contribute to an IRA in the employees name. The employee cannot contribute additional money into that fund, so the 49k limit is largely hypothetical (except for perhaps the very-successfully self-employed).
SEP is certainly better than nothing, but they also don't confer any benefits beyond other tax-deferred etirement plan. And the inability of employees under an SEP to make additional contributions to it is a huge drawback for anyone who can't set the contribution percentage to their preference. (catch-up contributions notwithstanding)
IRAs are personal retirement accounts, separate from the issue of employer compensation. Anyone can contribute up to 5k to an IRA in 2009. But if you work for a company with, say, a 401k, you can sock away up to an extra 16.5k. And (the relevant bit) when your employer (inevitably) contributes less than what you'd like, you can personally contribute until you hit that warm fuzzy feeling.
I don't know about you, but I've socked away more than 5k per year toward retirement. Rolling with just my own IRA wouldn't cut it. And the lost employer contribution to a tax-deferred plan is a non-trivial amount of additional compensation loss to be considered when moving from corporate employment to small business/self-employment.
That's an after-tax $1, before-tax $1.25? If so, that's assuming about a 7% risk-free return over 40 years, and that isn't very likely, at least if we're talking about inflation-adjusted dollars. (And we should be.)
If you assume a more reasonable 3%, you get 9.8¢ per year in perpetuity from your after-tax $1 invested 40 years earlier.
As it turns out, far more people choose to compartmentalize their work-life into an annoying, necessary evil than to dial back their standard of living while dramatically increasing their work responsibilities.
And this is true of more than just programmers. I've heard similar from accountants, lawyers, cooks, bank reps -- basically everyone I've ever worked with.
They'd all much rather do the sort of work they're currently doing, but at a smaller company or on their own. They just never make a change because, in the end, they value the increased leisure time and higher standard of living more.
(To be fair, in the US some aspects of our economy also have a big impact on that choice. Namely, retirement and insurance opportunities that don't really exist for the self-employed and small businesses.)