You would essentially be a freelancer. Using that framing instead, there are plenty of resources out there on how to build a life as a freelancer. For an EA-specific perspective, here’s a good starting point: https://resourceportal.antientropy.org/docs/receiving-grant-funds

As all the replies so far have mentioned paying tax on grants, I think it is worthwhile noting that this probably isn't required in many countries (although it is in the US). When I got a grant from the LTF Fund I contacted a tax lawyer to ask if I should pay income tax on it as, based on my experiences with income tax-free academic stipends/scholarships in Australia, Sweden, and Brazil, I assumed I wouldn't. His reading of the CEA Grant agreement was that:

the money you receive from this research grant should be expended on the research, but it is not dependent on your performance of any services to the granter, and therefore does not represent a compensation for services you render to the granter nor does it represent to the granter any other type of economic advantage
 

I'm living in Brazil, where the tax code provides an income tax exemption for: 'scholarships and research grants characterised as donations, when received exclusively to carry out studies or research and provided that the results of these activities do not represent an advantage for the donor, nor do they imply compensation for services' (I never looked into the tax codes in Australia or Sweden, but I assume they included a similar exemption). This actually surprised the accountant who does the taxes for my company (which I used for research consulting), as he didn't have any experience with people receiving academic scholarships and thought I would have to pay income tax on it. 
 

Anyway, my assumption is that research grants from EA funders is likely to be tax-free in any country where it's possible to get tax-free scholarships for PhD studies or postdoctoral research. I think it would be useful for EA Granters to advise recipients to check whether any academic scholarships are tax-free in their country, and if so, to seek advice from a tax professional familiar with the taxation of academic scholarships. I got a bit lucky with the tax lawyer I contacted, as he had advised Brazilians about receiving domestic scholarships to do research abroad, and so was generally familiar with this part of the tax code. Most students I know receiving tax-free scholarships don't file taxes at all (or earn very much for that matter), so I assume that many tax professionals won't be familiar with the situation. 

(This whole answer is USA-specific)

This seems to me like a scary situation with essentially zero job security, but maybe I’m wrong about this?

The only real job security is to have marketable skills. Eternal perfect job security is extremely rare in the USA—I can’t think of anyone but tenured professors who have that. If you work at a startup, the startup could go under. If you work at a big firm, there could be layoffs. Etc.

The way I see it, if you successfully get a grant in Year N, then that should be strong evidence that you can successfully get a grant in Year N+1. After all, you’ll now have an extra year of highly-relevant experience, plus better connections etc. Right? (Well, unless you waste the grant money and get a bad reputation.) (Or unless the cause area funding situation gets worse in general, but that would equally be a concern as an employee at big nonprofit too, and anyway seems unlikely for major EA cause areas in the near future.)

And if not, whatever type of job you were doing before, you can apply for that type of job again! (If you leave on good terms, you could apply for literally the same job you left.)

Should they take their grant in small amounts spaced out year-by-year instead of all in the first year?

Do your taxes with accrual accounting! One time I wound up getting 26 months of pay in one calendar year. It would have been a catastrophe with cash-basis accounting, but it was perfectly lovely thanks to accrual accounting.  :)

For tax efficiency, should grant recipients optimally incorporate themselves as an S-corporation, or a charitable foundation, or something else?

You can be self-employed automatically without filing any special paperwork. That’s the category I’m in.

IIUC, the advantages of being a charitable foundation are all on the grant-giver side, not the grant-receiver side. Namely: (1) If you’re a charitable foundation, and another nonprofit wants to give you money, it is extremely easy for them to do so. (2) If you’re a charitable foundation, and an individual wants to give you money, then they can tax-deduct it.

However, some institutions including EA Funds have jumped through whatever hoops there are such that they can give money to individuals.

If your grantor is willing to give you the money as an individual, I think there’s no reason on your end to do anything different than that.

(If you want the advantages of being a nonprofit, e.g. getting money from SFF, without filing all the paperwork to be a nonprofit, I vaguely recall that there is an institution in the EA space that will “take you in” under its umbrella. But I can’t remember which one. (Update: Maybe I was thinking of Rethink.Charity Fiscal Sponsorship?)There are also “virtual research institutes” (Theiss, Ronin, IGDORE, maybe others), that offer the same advantage (i.e. that your grantor would be officially granting to a nonprofit), but they’ll take a cut of every grant you get. A different advantage of the “virtual research institutes”, I suspect, is their ability to handle government grants, which I imagine come with a ton of bureaucracy & paperwork.)

Certain kinds of incorporation give you liability protection, which would be relevant if your “business” is going to borrow money or where there’s a risk of getting sued. That hasn’t been applicable for me.

If you get a $50K grant, is this better or worse on net than earning $50K of traditional W-2 employment income? … How do EA freelance researchers deal with the things that are typically provided through the employer/employee relationship — things like healthcare, disability insurance, retirement savings accounts, and so forth?

If you want to know how big a grant is necessary to support your living expenses, you have to do the annoying spreadsheet where you calculate the major taxes and deductions and expenses etc.

To answer your specific questions:

• For me, $X of grant income was considerably worse than $X of W-2 income, even leaving aside the fact that the latter often comes with employer-provided benefits. The QBI deduction helps, but not nearly enough to compensate for the employer contribution to payroll taxes etc. It’s possible that this is income-dependent, I’m just saying what it was for me.
• Yes I pay out-of-pocket for disability insurance, and (Roth & regular) IRAs, and an obamacare plan.

what lies do you tell your relatives to stop them from nagging you about your unorthodox career decisions

It was fine, partly because I didn’t quit my old job until my first 1-year grant was finalized, and so far I have gotten renewal grants well before the previous grants ran out. (Sample size = 1, but still.)

Not currently funded by an EA grant, but I am a fellow for an organization the classifies me as an independent contractor (IC), which in essence is what most people who receive a grant are likely to be (in the eyes of the IRS anyways). This is obviously not tax advice, always consult an attorney, etc. but as someone who has done this a few times in their career, I wanted to share some high level thoughts (also, this is going to be very focused on the U.S. and as an American taxpayer).

• Is a 50K grant as an IC better or worse than 50K as a W-2 (traditional) employee?: In purely financial terms, you're going to likely be worse off as an independent contractor as 1) you will have higher tax liability from self-employment taxes and 2) you will probably not have any benefits that are standard with traditional employment (medical, dental, 401k match, etc.) that you will have to manage yourself.
• Should you incorporate yourself?: I had talked to an accountant about this a while back and my takeaway is if we're talking about sums like 50k or 100k, there isn't really a serious benefit. If you're dealing with larger amounts per year, I would recommend speaking to an accountant and figuring out how to create an optimal structure, but for a regular salary, I think it's better to just simply take it as a sole proprietor. That said, if you have concerns over legal liability of the services you provide, you might consider working through a legal structure, but this is not really a financial consideration.
• How do you deal with things like healthcare?: If you're in the U.S. there is a healthcare marketplace for each state now through ACA (Obamacare) that you can use to shop for private plans. For my 401k for simplicity I use Wealthfront, I also keep a life insurance policy that I used a broker to find, for other things I just pay out of pocket at cash prices (e.g. getting a teeth cleaning).

As far as how to think about it- I'm not a great person to respond as I've generally been pretty comfortable with a high level of personal career/financial risk, but I would just remind yourself that you probably have valuable skills and that even if you found you weren't going to get renewed for a grant ~3 months before you run out of funding, you could probably find a new gig by the time it ends (that said, always good to have a few months of buffer just in case). 

If you get a $50K grant, is this better or worse on net than earning $50K of traditional W-2 employment income?

Worse, easily, but it costs them less. If a regular employer pays you a $50k salary, that is costing them more like $75k or $100k or something - they are paying part of the taxes, and the benefits, on top of the salary. So the real comparison is between a $50k salary and a $75k or $100k grant, in which case I would say the grant is better because you have more flexibility about benefits. Don't have any dependents? As a grantee you can just not buy life insurance, and spend the money on something else. As an employee, you may not have a choice.
 

For tax efficiency, should grant recipients optimally incorporate themselves as an S-corporation, or a charitable foundation, or something else?

This is not legal advice, but my guess would be no. When a nonprofit pays its employees (which is what you would be if you set up a nonprofit and pay yourself), the employee still has to pay income tax on that just like anyone else, and the nonprofit still has to pay its share of social security taxes and such. For a typical EA job, if you aren't employing anyone, or taking out loans for your work or something, you also don't get any advantage in terms of liability. Incorporation does not protect you when you do something stupid. Incorporating protects you when someone else in your organization does something stupid. This is not useful if there is noone else in your organization.
 

How do EA freelance researchers deal with the things that are typically provided through the employer/employee relationship — things like healthcare, disability insurance, retirement savings accounts, and so forth?

I was self employed for years. Health insurance is easiest through obamacare but you could buy it form any insurance company. For savings, I used IRAs, and if you max those out there are other accounts available to the self-employed. I didn't have disability insurance, but I imagine that can also be bought from an insurance company. But yes, you have to decide what benefits you want and go buy them yourself.

Note: Quick thoughts written whilst on the train.

I've received three grants from the EA Infrastructure Fund to start and develop Effective Self-Help so I can hopefully offer some useful thoughts here.

I think personal finance questions are difficult as there's likely significant variation between countries and personal circumstances. For me specifically, I'm listed as an independent contractor on my grant agreements and have full responsibility for filing my taxes in the UK as a self-employed individual. 
I've found the EA Infrastructure Fund to be generous in their salary offers and I think a good part of this is to account for pensions, health insurance, taxes, etc. that you'll have to cover within that salary. I can't speak for any of the fund managers but would guess from my interactions that they would be quite happy to pay an extra 10-20% in salary if that was likely to make a difference to the productivity of the grantee and the sustainability of the project. 

For long-term career planning, I fit snugly into the bucket of people who took a grant to fast-track skills and knowledge growth while being in an early part of my career. I think working on an independent project provides a host of valuable skills and likely additional exposure that can compensate for the additional psychological stress of lacking long-term employment stability. Certainly that's easier to say as someone with minimal direct responsibilities outside of my own wellbeing.

If it's helpful to anyone, happy to chat in more depth about these topics with anyone thinking seriously about working on an EA grant - just shoot me a message!

One might want to consider how quickly one can get a job if grant funding was to run out. In my experience, the emotional resistance to relying on short-term grants was not rational. I have 2 kids and have always been a full-time employee. When recently I contemplated working directly on EA causes via a grant, I felt lots of fear. However, I get incoming LinkedIn messages quite frequently with job offers and I am >90% confident that I could within a week or two after a grant would run out, get some full-time position, e.g. at a consultancy, with enough money to cover my portion of my family's expenses (another data point is that I have been asked to come back to former employers a few times). Therefore, if your situation is similar to mine in terms of ease of getting a job, I would recommend putting fear aside and emphasize ambition and rationality. If you do not know how attractive you are on the job market, perhaps there are ways to find out? That said, I recognize that many potential grantees might not be able to as quickly find a job as me, and in those cases my advice does not apply. Another option is to ask for a sabbatical from your current employer - if they grant you this at least you have a strong indication that you can come back to your current job if subsequent grant funding dries up.

I also actually have no idea how people do this, curious to see answers!

Also, the questions seem to assume that grantees don't have another (permanent, if not full-time) job. I'm not sure how common that is.