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The short version: My spousal unit and I both took jobs in Hong Kong. His is a 3-year contract, mine a 1-year. He's a college prof., I design web sites. Never having had to deal with contract positions before, we turned to (local smalltown) professionals for advice and ended up establishing SEPs for ourselves in the US, to which we've been wiring $$ monthly. We did this through Edward Jones. From Sept. to Dec. '98 we deposited $4000, and at least that much since.

Now a tax consultant here in Hong Kong informs us that we are, strictly speaking, employees, not contractors and are therefore not entitled to SEPs. (Actually, we're not entitled to any retirement plan at all, best we can figure. Spouse gets a 15% gratuity at the end of 3 years, but otherwise the U. here makes no provision for retirement. This is the rule, not the exception, in Hong Kong.)

So I have two questions for all you brilliant minds out there: Do we owe a fat penalty on the money we've put aside so far? I mean, we have to undo the SEPs altogether, but since we're not yet accountable for 1998 taxwise... (we are paying estimated taxes, though. Have to, from here on out.)

Secondly, what would you do in our situation? We are each entitled to the $70,000 overseas income exemption, so we can sock big $$'s away, but nothing we invest will have the lovely advantage of tax-free growth. We've been told we're not eligible for IRAs, either. And, we're still subject to Hong Kong income tax, which is pretty much a flat 15% on top of what's taxed by the U.S.

Needless to say, we've never had to build our own retirement structure before and we haven't gotten good advice from any professional so far. No one seems to know what to make of our situation.

Anyone care to take a bite of this pickle?
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