Hi,
I just started teaching overseas this school year and learned that starting next year I will no longer be able to contribute to my ROTH IRA in the US. Seems that you can only contribute to a traditional or ROTH IRA if you have taxable compensation. My school pays me in local currency and US dollars that are sent to my bank in the US. The US dollars are not taxed by the US. I use the local currency to pay for my living expenses but now I am at a loss for what to do with my US dollars. Please help me by telling me what you do with your dollars. Mutual funds, bonds, offshore retirement account, etc. etc. I want to be able to save for my retirement or at least make my money grow faster than inflation. Thanks
Financial questions
Because tax-advantaged accounts are off limits I've been investing in a simple target retirement fund through Vanguard. It adjusts over time and should save me the hassle of adjusting my allocations and paying taxes as I change my allocations over time. After researching and talking to several friends in the investment industry they felt that was a good option. I will be putting untaxed money into these funds and then only have to pay capital gains on them. Also, it's really easy to set up an auto-deduction from your US account, which makes it all even easier.
Me
I have a European pension that I keep moving around, but have a simple target date withdrawal retirement account in Hong Kong. Im heavily invested in the Vanguard index funds.I have enough business with them to avoid courtesy fees, and they are no load funds. Im not worried about what the US thinks, as i dont see my self going back. I'll probably retire in the Philippines/indonesia. If you want you can also pay self employment tax and earn social security credits, and once its "self taxed" you can invest in an IRA or 403b plan if you want. You can also apply for a foreign tax credit, and refund on any of the self employment tax you pay based on your tax return.
Last edited by PsyGuy on Wed Nov 09, 2011 6:21 am, edited 1 time in total.
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BobStrauss
- Posts: 34
- Joined: Sun Oct 03, 2010 11:16 am
[quote="Danda"]Because tax-advantaged accounts are off limits I've been investing in a simple target retirement fund through Vanguard. It adjusts over time and should save me the hassle of adjusting my allocations and paying taxes as I change my allocations over time. After researching and talking to several friends in the investment industry they felt that was a good option. I will be putting untaxed money into these funds and then only have to pay capital gains on them. Also, it's really easy to set up an auto-deduction from your US account, which makes it all even easier.[/quote]
This idea is the best, imo. Some funds (Vanguard's Total Stock Market, for example), are geared toward taxable accounts, with very high tax efficiency.
You may also look into applying for an income tax deduction versus foreign earned income exclusion. Some countries have relationships with the US that provides for this, where every dollar taxed by a foreign government qualifies for a US tax deduction. By using this option, you could still file your income taxes (paying nothing if your foreign tax burden is high enough), and remain qualified for IRA contributions. I'm still looking into doing this myself.
Most importantly, if you are a US citizen, the last thing you want is an overseas brokerage or retirement account. The fees you will pay at overseas brokerages are typically sky high, and then you may have huge tax complications (and real possibility of double taxation) in reporting or transferring any of those funds back into the US. American brokerages also handle paperwork issues (tax reporting forms, for instance) that make your life a lot easier when it comes to dealing with the IRS.
Vanguard's as good as it gets. I'm a converted Boglehead. You should check out their forum sometime if you want to get more answers and ideas on allocations.
This idea is the best, imo. Some funds (Vanguard's Total Stock Market, for example), are geared toward taxable accounts, with very high tax efficiency.
You may also look into applying for an income tax deduction versus foreign earned income exclusion. Some countries have relationships with the US that provides for this, where every dollar taxed by a foreign government qualifies for a US tax deduction. By using this option, you could still file your income taxes (paying nothing if your foreign tax burden is high enough), and remain qualified for IRA contributions. I'm still looking into doing this myself.
Most importantly, if you are a US citizen, the last thing you want is an overseas brokerage or retirement account. The fees you will pay at overseas brokerages are typically sky high, and then you may have huge tax complications (and real possibility of double taxation) in reporting or transferring any of those funds back into the US. American brokerages also handle paperwork issues (tax reporting forms, for instance) that make your life a lot easier when it comes to dealing with the IRS.
Vanguard's as good as it gets. I'm a converted Boglehead. You should check out their forum sometime if you want to get more answers and ideas on allocations.