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Any size business can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small business with few employees. However, you can exclude from participating in the SEP plan anyone who:

' Has not worked for the company during three out of the last five years.

' Has not reached age 21 during the year for which contributions are made.

' Received less than $450 in compensation (subject to cost-of-living adjustments) during the year.

SEP IRA contributions to each employee for 2004 cannot exceed the lesser of $41,000 or 25% of pay for W2 recipients (20% of income for sole proprietors).

A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA retainer for each eligible employee, hence the name SEP-IRA. A SEP is funded solely with employer contributions. Employees do not make contributions to their SEP-IRA retirement account. Any money that goes into a SEP belongs to the employee. Thus, the employee has the right to take his SEP IRA bill of fare money with him whenever he stops working for the company.

Any size project can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small operating company with few employees. The SEP IRA rules dictate that if the operating company contributes for one employee, (i.e., the owner), then the political activism must contribute proportionately for all of the employees. With few exceptions, anyone who works for the reciprocal trade must be included in the SEP. However, you can exclude from participating in the SEP plan anyone who:

• Has not worked for the chorus during three out of the last five years.

• Has not reached age 21 during the year for which contributions are made.

• Received less than $450 in compensation (subject to cost-of-living adjustments) during the year.

SEP IRA contributions to each employee for 2004 cannot exceed the lesser of $41,000 or 25% of pay for W2 recipients (20% of income for sole proprietors). The SEP IRA contribution limit goes up to $42,000 for 2005, and is subject to cost-of-living adjustments for later years. SEP-IRA rules do not provide for supplementary catch-up contributions for those 50 years old or over.

A growing number of self-employed individuals with no employees are abandoning the SEP-IRA for a newer type of retirement plan titled the Solo 401(k) or Self-Employed 401(k). The two main reasons for the switch are 1) they can generally contribute much more to a Solo 401(k) than they can under a SEP IRA, and 2) Loans are accepted under a Solo 401(k), whereas loans are prohibited under a SEP-IRA.

Example: Henry, age 52, a realtor received $60,000 in compensation from self-employment income in 2004. For 2004, he could contribute a maximum of $27,152 in a Solo 401(k) versus a maximum of $11,152 under a SEP IRA.

However, the Solo 401(k) does not work for businesses with employees. Thus, if your eleven plans to hire employees or currently has a few employees, the SEP IRA may be your best fitting as a retirement plan that is inexpensive and simple to operate.

Someone who reads my blog sent me this email:

Geoff,

I came from Japan to US for business school in 2001. I became extremely intrigued by Buffett's value investment philosophy. I wanted to read everything available about his philosophy and became more and more familiar with his investment philosophy. And I personally pick stocks too. 

Anyway, about investment in Japan, I read your "Japanese stocks: Now 34% of My Portfolio - Plan to hold Them For At Least 1 Year", I see one part in "Buy Japan", you are talking about "Japan is barely a capitalist country." I see that you see Japan pretty well. They care much less about generating profits to shareholders than people do here in US. I imagine, that US investors who invest in Japan would feel slighted. They should be the boss, but not in Japan actually. 

Here is the key point why I wrote. You say "It’s definitely the most investor unfriendly place on the planet – excluding a few countries that seize private property". In my view, Japan is a country that would seize private property away from you. Not by legitimate ways, but more subtle but practical ways. Who has the largest control over Japanese economy? The system of capitalism?  Absolutely no. Bureaucrats have. They have tremendous control over businesses with both explicit laws and implicit powers. 

They have ways to drag down companies performance that they don't like. If a business is strong enough and brave enough to openly fight against bureaucrats, like Softbank did in the past, there is chance to win. But most businesses are afraid of this structural, chronic bully that deprives Japan of economic flexibility over the years. But interesting thing to me is, this chronic inefficiency sometimes works well, but sometimes doesn't. Like it worked in our 70s to 80s. But not in the later decades. My father always tells me that this is just like fascism that drove Japan in WWII all the way to final disaster. When it works well, we are invincible, but once the ship turns to a wrong way, we are unstoppable. Being said that, I wonder how, like you mentioned, pre-war southern states unraveled their woven bonds and connections and became part of the rest of the capitalism world. Losing the war changed their way of business life completely? Then, maybe Japan also needs dramatic change like that. 

In my view, the Japanese have strong fear of sticking out. If you stay in a crowd, you are invisible and no one would say anything. But if you stick out too much, bureaucrats will get you. Rising stars in business are always the easiest to go after for bureaucrats who are influenced by competitors. In US capitalism holds the power. This is the rule of the game and it seems that even the government cannot defy this rule. In Japan, bureaucrats rule the market most definitely. 

And most obviously, this system is not working for our prosperity. 

So, I just wanted to point out your assumption that Japan is not a country who seizes private property may not hold.

Shin

Talk to Geoff about Japanese Stocks

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