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Subject:  Re: Unique situation Date:  11/7/1997  10:20 AM
Author:  TMFPixy Number:  562 of 88538

Greetings, Prebson, and welcome.

<<I have a unique situation that I haven't noticed being
talked about. I am a computer consultant, and being
such, I frequently change employers (I have so far
worked through agencies that find the jobs and then
pay me on an hourly W-2 basis). I am about to start a new
assignment, and the agency I will be with is offering a
401K. Should I sign up for it and take out the max, even
though there is no match?

My thoughts are that I take out the max and put it into
one of the fixed income accounts. Then, when I leave this
agency in 4-6 months (or possibly longer), I do a direct
transfer to my brokerage account to follow the FF strategy.
I would take the max to reduce my taxable income, and I
would go with a fixed account to ensure that I would retain
all of the principal for this short-term investment. The
401K sponsor does have a S&P 500 index account, but I would
be afraid that I may lose some of the principal before
taking it out.>>

The way you have described this situation, you will not be employed by the firm with the 401k, but by the temp agency who pays you and issues you your W2 at the end of the year. If that's the case, then I fail to see how you can possibly be eligible to participate in the new firm's 401k plan, which is open only to employees of that firm. As a temp, you won't be eligible.

OTOH, if you're not using your agency on this job but instead will be employed directly by the firm AND assuming you are eligible to participate in the 401k immediately after hire, then your plan will work.

In short, it really depends on by whom you will be employed.


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