Re: Outsourcing, Layoffs, Contractors and Unions

Subject: Re: Outsourcing, Layoffs, Contractors and Unions
From: Bonni Graham <bonnig -at- IX -dot- NETCOM -dot- COM>
Date: Mon, 10 Jul 1995 09:34:33 -0700

Vince Putnam wrote:

>This subject is huge and without major changes in the laws, it will become
>critical. Specially when many of us can no longer work and have insufficient
>funds to retire on. Remember the change in the law which made companies liable
>for any taxes a Contractor did not pay? I think it went into effect in 1990.
>This stupid action deprives contractors of the 501K plan since most personnel
>agencies that the companies use to protect them against the tax liability, do
>not offer 501K. So we end up without enough retirement funds.

Without going into whether outsourcing is a good thing or not (as an independent
contrator, who's working on a lucrative outsource project right now for a
company that didn't HAVE a TW dept before, I feel that I may be somewhat biased
-- although I also realize that YMMV), there are more ways to fund retirement
than a 401K program.

Even if your job shop or temp agency provides one (mine does), you may still be
better off managing your own retirement funding. I have a SEP (available to any
contractor) that I created by rolling over funds I had in an IRA (founded when I
was working for a regular EMPLOYER who did not have a 401K -- and IRAs are
available to everybody; they're just not as tax-deductible as SEPs). The funds
used by my SEP have consistently outperformed the funds that I would have been
investing in through the job shop; and yes, I track them daily. I contribute
monthly to my SEP, just as I would if I used a payroll deduction -- and I get
the same tax benefits. In addition, I invest in a tax-deferred life
insurance/savings fund.

I don't think anyone, contracting OR employed regularly, can really count on the
employer to provide retirement anymore. With more people moving jobs more ofen,
the gold-watch days are over. Even if an employer offers a 401K, fewer of them
are offering matching funds -- so it's your money (and often only your money)
going in there anyway, whether you're talking about a 401K or SEP/KEOGH or IRA.
Especially if you're contracting, you have to expect to cover yourself for
retirement -- and it's not like there aren't ways to do it. Some of them are
more tax deductible than others, but it's only fairly recently (on a broad
historical scale) that anyone other than the very rich could afford to retire as
early as many of us can anyway. Plan for yourself; don't expect anyone else to
do it for you.

Bonni Graham
Manual Labour


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