Early semi-retirement abroad

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Topic Author
notoriousMG
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Early semi-retirement abroad

Post by notoriousMG »

...55
Last edited by notoriousMG on Fri Mar 18, 2022 6:21 pm, edited 2 times in total.
bltn
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Re: Early semi-retirement abroad

Post by bltn »

Can you live on a 4% annual withdrawal from your accumulated funds?
HomeStretch
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Re: Early semi-retirement abroad

Post by HomeStretch »

With your current investments, your portfolio may or may not keep up with inflation for the next 5 years. That means portfolio growth will mainly come from your contributions.

Your portfolio totals $244k. A 3-4% withdrawal rate is $7k-$10k per year.

How much will you be contributing to your employer retirement plan per year in addition to saving $6k in a Roth IRA and $9k-$12k in a Taxable account? How much will your employer contribute each year?

You need $21.6k per year for living expenses in retirement. Does this include the support of your family member?

What retirement income will you have? Social Security (how much at age 62)? Will you be living in a country that is excluded from receiving SA benefits (i.e., Cuba, Vietnam, etc.)? Any other income - pension, etc.? Can you work after retirement even part-time to earn additional income?

What is your age at retirement in 5 years?
Topic Author
notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

bltn wrote: Wed Sep 25, 2019 5:20 am Can you live on a 4% annual withdrawal from your accumulated funds?
Probably not enough with my current strategy. $21,600 would is 4% on $700k which I could not get to in 5 years.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

HomeStretch wrote: Wed Sep 25, 2019 7:03 am With your current investments, your portfolio may or may not keep up with inflation for the next 5 years. That means portfolio growth will mainly come from your contributions.

Your portfolio totals $244k. A 3-4% withdrawal rate is $7k-$10k per year.

How much will you be contributing to your employer retirement plan per year in addition to saving $6k in a Roth IRA and $9k-$12k in a Taxable account? How much will your employer contribute each year?

You need $21.6k per year for living expenses in retirement. Does this include the support of your family member?

What retirement income will you have? Social Security (how much at age 62)? Will you be living in a country that is excluded from receiving SA benefits (i.e., Cuba, Vietnam, etc.)? Any other income - pension, etc.? Can you work after retirement even part-time to earn additional income?

What is your age at retirement in 5 years?
Indeed the inflation problem is my concern with my super conservative strategy and I am wondering if as I now am fairly debt-free and can move more money into emergency savings and Roth, if I can handle a little more risk for 5 years.

Right now, 15% of my income goes into the employer plan (5% for me and 10% match). The 401(a) plan gets $824.10/mo; $403(b) gets 412.05/mo; supplemental 403(b) $25/mo. I am not maxing out the $19k per year I can put away and I don't know if I should start there perhaps and any extra can go into a Roth ($88k is my taxable earnings).

My needs abroad for $21.6 would be for me mainly. I don't know if my family member will be alive in 5 years.

I will have retirement income from SS and will be in EU so not excluded from income. I can also work part-time. The SS calculator tells me that I am entitled to $1790 at age 62. In 5 years, I will be 47.

My instinct tells me to perhaps start buying more equities as the emergency savings and Roth grows. I changed my future purchases from the 401(a) this week to go into Vanguard Institutional Index Fund Institutional Plus VIIIX, but considering selling half my CREF Money Market fund toward that also.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

I am tempted to opt for simplicity and do a 25% split between annuities, equities, fixed income, and money market. It may introduce a little volatility but perhaps I can get to an average return of 5% over 5 years instead of 3.3%. To be fair this crappy return is because I dropped the ball on managing my portfolio to deal with health emergencies for two years.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

Lastly, I know this is kind of a drop in the bucket but every buck counts ;) I have a 50g credit suisse gold ingot I have held on to for 20 years that I think is the time to sell now. I missed out on the previous gold peak because I had no savings and always used gold for emergencies. Yes - I have paid rent by selling a gold coin here and there so I am pretty European in how I handle emergencies. My family has seen a lot of war and I was taught to hoard a little gold always on hand.
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millennialmillions
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Re: Early semi-retirement abroad

Post by millennialmillions »

There are a couple factors that make this difficult.
  1. Your portfolio is not nearly large enough to support your anticipated spending. As HomeStretch pointed out, your current portfolio is $244k, which at a 4% withdrawal rate is just under $10k a year. You need $22k a year to cover your expenses. With this big of a gap, you'll spend down your portfolio quickly.
  2. Your investment strategy will not support a lengthy retirement. The 4% rule was designed for a 30-year retirement and assumes a higher portion of equities than what you have. The growth from equities is even more important when you are retiring early. Additionally, it sounds like you are seeing even worse returns that expected due to market timing. Saying you "did not move fast enough" goes against core Boglehead principles, and you will likely continue to underperform the market if your strategy doesn't change.
Given these two factors, you're probably looking at more like a 2-3% safe withdrawal rate, or about $6k a year to cover $22k in expenses. Here are a few things you can do to improve the situation.
  • Determine an appropriate asset allocation, find low-cost index funds, and stick to the plan, without any more attempts at market timing. See the Bogleheads wiki on asset allocation and the three-fund portfolio. If this were me, I would be in at least 60% equities, but your risk tolerance may be different.
  • Cut expenses as aggressively as possible now to drastically increase your saving rate
  • Determine if you can find a reliable source of income abroad that would at least cover your expenses while your portfolio can grow
  • Determine what expenses you can cut while in retirement or semi-retirement
  • Using these new numbers, check out FIREcalc to see if your plan is likely to work out
deikel
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Re: Early semi-retirement abroad

Post by deikel »

I would investigate taxation a little bit

If you are a dual citizen, then as a US citizen you will be taxed for life on any income you might have, from any source and wherever you live. Worst case, you will be double taxed...or you can give up your US citizenship, which is frowned upon since some tech millionaires did just that and effective cheated the system.

However, it would make sense to me to calculate what that could mean for you (cash out all money for a one time higher tax and move all money to your home country for possibly no taxes after that point).


Another thought, if you have a health issue and can claim social security disability income, I believe you have penalty free access to your retirement accounts and do not need a 72(t) clause (eg SEPP ect )
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
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Wiggums
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Re: Early semi-retirement abroad

Post by Wiggums »

You got many Good suggestions already. You really need to improve your savings rate. Getting a job over there is a must.

I have a friend that is very conservative and also helping a relative in another country. He has about the same amount of cash, but 59 years old. He finally moved his money into a target date fund and stopped changing funds.

It’s tough, but you need to take a hard look at your expenses. As you stated, every dollar counts.

Good luck to you.
"I started with nothing and I still have most of it left."
MishkaWorries
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Re: Early semi-retirement abroad

Post by MishkaWorries »

Maybe I'm wrong but your situation does not seem all that bad to me. You say you can work about another 5 years. So it looks like you will add another 75,000 to your retirement account plus $30,000 to Roth and $60,000 to taxable. So almost $400,000 in savings assuming you do nothing more than match inflation in the next 5 years.

You say your SS at 62 would just about cover your living expenses so you just need to cover 15 years of living expenses from your savings. That seems doable to me. Five percent is $20,000 per year. I don't know the tax brackets but I would guess that would be zero or 10% tax bracket. I would be converting pre-tax monies into Roth at that time of your life as well.

My wife is like you. She lived through an economic collapse and now she barely trusts government and the banks enough to put her savings in CDs and treasuries. She believes the stock market is just gambling. But we have some of her money in Wellesley fund (VWINX (they also have an admiral version with lower ER)). It has about 60% fixed and 40% stock. She loves that fund. It just goes with very little drama. I think last December it went down maybe 5-7% and had recovered all losses by February or March.

Other issues you may want to explore. Do you have disability insurance at work? Do you think you eventually qualify for SS disability? If so, how would that impact your savings? How would Medicaid impact your savings. The good news is you are EU citizen and they have a rational healthcare system.
We plan. G-d laughs.
Topic Author
notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

MishkaWorries wrote: Sun Sep 29, 2019 11:44 am Maybe I'm wrong but your situation does not seem all that bad to me. You say you can work about another 5 years. So it looks like you will add another 75,000 to your retirement account plus $30,000 to Roth and $60,000 to taxable. So almost $400,000 in savings assuming you do nothing more than match inflation in the next 5 years.

You say your SS at 62 would just about cover your living expenses so you just need to cover 15 years of living expenses from your savings. That seems doable to me. Five percent is $20,000 per year. I don't know the tax brackets but I would guess that would be zero or 10% tax bracket. I would be converting pre-tax monies into Roth at that time of your life as well.

My wife is like you. She lived through an economic collapse and now she barely trusts government and the banks enough to put her savings in CDs and treasuries. She believes the stock market is just gambling. But we have some of her money in Wellesley fund (VWINX (they also have an admiral version with lower ER)). It has about 60% fixed and 40% stock. She loves that fund. It just goes with very little drama. I think last December it went down maybe 5-7% and had recovered all losses by February or March.

Other issues you may want to explore. Do you have disability insurance at work? Do you think you eventually qualify for SS disability? If so, how would that impact your savings? How would Medicaid impact your savings. The good news is you are EU citizen and they have a rational healthcare system.
Thanks! I did the math too and it does not seem as dire as the people above seem to think. Partially, I think some people do not understand how much less one can live with in other countries. I am also not concerned with having enough money in 30 years because well, I have to try really hard to live another 30 years and my income for that after time is guaranteed so long as the US is still standing. If the US is not standing and the world is in a very dire place, a week of shortage on my meds will kill me so I am not too concerned with having money if everything is upside down. I will be the first to go so my planning is a bit different in life. When people tell me I need to plan for a life expectancy of 85, I laugh. Sure, there is a possibility I might make it there but if I live the life I need to save up to that point, I will definitely not live to 85.

I am just trying to see what to park some more cash in so it can get to at least 5% returns in 5 years so it is keeping up with inflation plus a bit more. Someone above alluded to concern that I was timing the markets because I complained about not moving into bonds fast enough. My definition of fast enough is once or twice per year, I make an adjustment to my portfolio and wait it out. I don't think that is excessive or much different than what other people do here. I can handle some ups and downs on a part of my portfolio if I have savings in case of an emergency.

I would qualify for SS disability if something serious happened so that is already covered and in the EU, for about 1000 euro per year I would have healthcare because I am a citizen.
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QuentinCrisp
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Re: Early semi-retirement abroad

Post by QuentinCrisp »

In your financial planning consider the impact of cross border taxation on tax advantaged accounts. Many countries will consider withdrawals from the Roth to be taxable events even though not taxable by the US, and as a result the funds will be subject to double taxation (taxed by US going in, and by foreign country going out). Depending on the country of residence, Roth might not be beneficial if you intend to remain in that country for the long term. Similarly, dividends or capital gains within a tax-deferred 401(k) would not be taxable in the US (assuming funds are not withdrawn) but the country of residence may treat the 401(k) just like a regular taxable account. Tax treaties need to be consulted as well as tax regime of country of residence. Just my two cents.
Q.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

There
QuentinCrisp wrote: Mon Sep 30, 2019 12:45 pm In your financial planning consider the impact of cross border taxation on tax advantaged accounts. Many countries will consider withdrawals from the Roth to be taxable events even though not taxable by the US, and as a result the funds will be subject to double taxation (taxed by US going in, and by foreign country going out). Depending on the country of residence, Roth might not be beneficial if you intend to remain in that country for the long term. Similarly, dividends or capital gains within a tax-deferred 401(k) would not be taxable in the US (assuming funds are not withdrawn) but the country of residence may treat the 401(k) just like a regular taxable account. Tax treaties need to be consulted as well as tax regime of country of residence. Just my two cents.
Q.
Good points. There is a tax treaty between the US and my second citizenship country to avoid double taxation and to not tax retirement income.
international001
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Re: Early semi-retirement abroad

Post by international001 »

Which is your home country? Or are you trying to avoid mentioning on purpose?

I'm curious to know how is the tax treaty worded. As far as I know, Roth are a grey area and may depend on the interpretation of the day

Plan your taxes I think it's the most important thing. In Europe you are likely to be taxed for dividends (no accumulation option). If you resign your US citizenship, I'm not sure you can keep your funds in US
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

international001 wrote: Mon Sep 30, 2019 6:17 pm Which is your home country? Or are you trying to avoid mentioning on purpose?

I'm curious to know how is the tax treaty worded. As far as I know, Roth are a grey area and may depend on the interpretation of the day

Plan your taxes I think it's the most important thing. In Europe you are likely to be taxed for dividends (no accumulation option). If you resign your US citizenship, I'm not sure you can keep your funds in US
I do not want to disclose the home country for privacy. I know my situation may not be unique, but regardless, this is a public forum.

My home country also changes taxation rules frequently so I have learned to expect the rug to be pulled from under me. I do not plan to resign either citizenship. I believe paying some taxes somewhere is fair and in general the taxation has been trying to get to a fair place. It may even improve further in two years, but I do not know.
protagonist
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Re: Early semi-retirement abroad

Post by protagonist »

There are a couple of factors above which you have not explained that may have impact.
You made reference to a family member that may not be alive in 5 years. Do you stand to gain much via inheritance or insurance policy?
You also mentioned your deteriorating health. Do you expect that this will significantly shorten your life, and if so, do you have a vague idea as to how much longer you expect to live? Clearly, the 4% figures quoted above assume you will continue to live for a long time....if you have not much longer to live you can spend much more annually.
There are several countries abroad with low cost of living where you could live on much less money than would be necessary in the US or Western Europe. You mentioned semi-retirement abroad....you might research some of those to see if you think you could live comfortably enough on your budget and enjoy your life there. Semi-retirement also implies that you intend to continue working, so how practical that would be would also depend on your continued income.
Until the recent troubles, I was spending 3-5 months/year in a lovely condo 50 m from the beach every winter on a Venezuelan island, eating much better than I do at home (daily fish or steak dinners with wine, etc), windsurfing every day, playing music with friends....and with the money I made renting out my home in MA for those months and what I saved on heating bills, I was MAKING money every winter just windsurfing, playing music and hanging out on the beach with friends. (My sweetie thinks I will die if I go back, so I haven't been in the past few years *laughing*). The point being, creative minds can often find creative solutions.
Last edited by protagonist on Mon Sep 30, 2019 7:33 pm, edited 1 time in total.
Gatto Bialetti
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Re: Early semi-retirement abroad

Post by Gatto Bialetti »

I suspect that it is Italia. The tax treaty lets you pay taxes only in Italy, but they are higher.

Also, there is the wealth tax, a tax levied on your total holdings. Get a commercialista there to do your taxes. Don't try to figure them out by yourself.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

protagonist wrote: Mon Sep 30, 2019 7:27 pm There are a couple of factors above which you have not explained that may have impact.
You made reference to a family member that may not be alive in 5 years. Do you stand to gain much via inheritance or insurance policy?
You also mentioned your deteriorating health. Do you expect that this will significantly shorten your life, and if so, do you have a vague idea as to how much longer you expect to live? Clearly, the 4% figures quoted above assume you will continue to live for a long time....if you have not much longer to live you can spend much more annually.
There are several countries abroad with low cost of living where you could live on much less money than would be necessary in the US or Western Europe. You mentioned semi-retirement abroad....you might research some of those to see if you think you could live comfortably enough on your budget and enjoy your life there. Semi-retirement also implies that you intend to continue working, so how practical that would be would also depend on your continued income.
Until the recent troubles, I was spending 3-5 months/year in a lovely condo 50 m from the beach every winter on a Venezuelan island, eating much better than I do at home (daily fish or steak dinners with wine, etc), windsurfing every day, playing music with friends....and with the money I made renting out my home in MA for those months and what I saved on heating bills, I was MAKING money every winter just windsurfing, playing music and hanging out on the beach with friends. (My sweetie thinks I will die if I go back, so I haven't been in the past few years *laughing*). The point being, creative minds can often find creative solutions.
I may or may not inherit some property when one of my parents passes away, but it will not be a lot of money. Depending on the local economy, it may be worth $50-100k and I will have to decide if I should keep it or sell it. My other parent has transferred our village assets to me and my sibling. My health must be treated like cancer. I could slowly weaken over the course of 10, 20 or 30 years, or I may need an urgent surgery that could result in significant disability and possible complications after that. It is one of those things that I know it will happen, but I don't know when. I am hoping that if I need surgical intervention further down the line, the science will be a little bit better.

I do not plan to be in another country than my home country because I do not wish to be away from my family and social network and due to health, I can't exactly disappear into South America. My roommate did that for six months at some time and had a great time, but it is what you do when you are young and healthy, or healthy in general. Hopeful, I can continue to do some work if I do semi-retired in 5 years.
Last edited by notoriousMG on Mon Sep 30, 2019 8:12 pm, edited 1 time in total.
Topic Author
notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

Gatto Bialetti wrote: Mon Sep 30, 2019 7:29 pm I suspect that it is Italia. The tax treaty lets you pay taxes only in Italy, but they are higher.

Also, there is the wealth tax, a tax levied on your total holdings. Get a commercialista there to do your taxes. Don't try to figure them out by yourself.
It is not Italia, but it is one of the less wealthy EU countries with a complicated history :)
protagonist
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Re: Early semi-retirement abroad

Post by protagonist »

notoriousMG wrote: Mon Sep 30, 2019 8:10 pm My health must be treated like cancer. I could slowly weaken over the course of 10, 20 or 30 years, or I may need an urgent surgery that could result in significant disability and possible complications after that. It is one of those things that I know it will happen, but I don't know when. I am hoping that if I need surgical intervention further down the line, the science will be a little bit better.

In that case, your health may result in additional financial burden that you will have to factor into your decisions, unless you know you already have that covered.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

protagonist wrote: Mon Sep 30, 2019 8:26 pm
notoriousMG wrote: Mon Sep 30, 2019 8:10 pm My health must be treated like cancer. I could slowly weaken over the course of 10, 20 or 30 years, or I may need an urgent surgery that could result in significant disability and possible complications after that. It is one of those things that I know it will happen, but I don't know when. I am hoping that if I need surgical intervention further down the line, the science will be a little bit better.

In that case, your health may result in additional financial burden that you will have to factor into your decisions, unless you know you already have that covered.
The national health system will handle the most urgent things and for the rest, most of my monthly income can go to a caretaker for as long as I am still willing to be maintained. I have no interest to be kept alive by force for longer than I need to. In many countries outside of the US, dying is still much cheaper than here.
konic
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Re: Early semi-retirement abroad

Post by konic »

OP,

You have access to a lot of tax-deferred space which can be maximally utilized to reduce current taxes and also accelerate savings. Since your estimated expenses in early retirement 5 years from now is ~22k, you taxes will be close to 0 then. Why pay more taxes now to pay low taxes later?

What are your current expenses? Is it possible to max out your tax-deferred space?

Also, does the SS estimate you listed earlier account for the long gap with no earnings to add to SS? The estimate seems high for age 62 considering your income history.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

konic wrote: Mon Sep 30, 2019 9:26 pm OP,

You have access to a lot of tax-deferred space which can be maximally utilized to reduce current taxes and also accelerate savings. Since your estimated expenses in early retirement 5 years from now is ~22k, you taxes will be close to 0 then. Why pay more taxes now to pay low taxes later?

What are your current expenses? Is it possible to max out your tax-deferred space?

Also, does the SS estimate to listed earlier account for the long gap with no earnings to add to SS? The estimate seems high for age 62 considering your income history.
My max tax deferred contribution for 401k and 401b and Roth be can be $19k in 2019. I am not near the max on the 401k and b and do not think I can change that now so the rest will go a Roth. I plan to increase my supplemental non Roth pretax further and put the rest to the max I am allowed into a Roth.

My current expenses allow me to save an extra 750 to 1000 per month post tax if all things go well but I travel a lot and that expense cannot be restricted further.

As for SS, I logged in and got that number from their own calculator in my account. I have not disclosed my income history. Only my current income. I have paid into SS for 20+ years.
konic
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Re: Early semi-retirement abroad

Post by konic »

notoriousMG wrote: Mon Sep 30, 2019 9:42 pm
konic wrote: Mon Sep 30, 2019 9:26 pm OP,

You have access to a lot of tax-deferred space which can be maximally utilized to reduce current taxes and also accelerate savings. Since your estimated expenses in early retirement 5 years from now is ~22k, you taxes will be close to 0 then. Why pay more taxes now to pay low taxes later?

What are your current expenses? Is it possible to max out your tax-deferred space?

Also, does the SS estimate to listed earlier account for the long gap with no earnings to add to SS? The estimate seems high for age 62 considering your income history.
My max tax deferred contribution for 401k and 401b and Roth be can be $19k in 2019. I am not near the max on the 401k and b and do not think I can change that now so the rest will go a Roth. I plan to increase my supplemental non Roth pretax further and put the rest to the max I am allowed into a Roth.

Is the 19k limit shared by all three here? What about an additional 6k to a separate ROTH IRA (not the ROTH component of a 401k or 401a)? Do you also have access to an additional 19k for 403b?

My current expenses allow me to save an extra 750 to 1000 per month post tax if all things go well but I travel a lot and that expense cannot be restricted further.

In that case, you can max out a 401k or 401a or 403b. Whichever pretax account you prefer. Then try and max out the ROTH IRA separately in you post-tax brokerage account.

As for SS, I logged in and got that number from their own calculator in my account. I have not disclosed my income history. Only my current income. I have paid into SS for 20+ years.

Since you directly took the number off your SS account, looks like the SS estimate is based on the default assumption that you will continue to work and earn the current salary till 62. This is not valid for your case and needs to be correctly estimated. Look for the SS quick calculator on their site as a first estimate, and put in 0 for all future earnings past the retirement date of your choice. This will be a closer estimate reflecting your future earning plans.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

konic wrote: Mon Sep 30, 2019 10:18 pm
notoriousMG wrote: Mon Sep 30, 2019 9:42 pm
konic wrote: Mon Sep 30, 2019 9:26 pm OP,

You have access to a lot of tax-deferred space which can be maximally utilized to reduce current taxes and also accelerate savings. Since your estimated expenses in early retirement 5 years from now is ~22k, you taxes will be close to 0 then. Why pay more taxes now to pay low taxes later?

What are your current expenses? Is it possible to max out your tax-deferred space?

Also, does the SS estimate to listed earlier account for the long gap with no earnings to add to SS? The estimate seems high for age 62 considering your income history.
My max tax deferred contribution for 401k and 401b and Roth be can be $19k in 2019. I am not near the max on the 401k and b and do not think I can change that now so the rest will go a Roth. I plan to increase my supplemental non Roth pretax further and put the rest to the max I am allowed into a Roth.

Is the 19k limit shared by all three here? What about an additional 6k to a separate ROTH IRA (not the ROTH component of a 401k or 401a)? Do you also have access to an additional 19k for 403b?

My current expenses allow me to save an extra 750 to 1000 per month post tax if all things go well but I travel a lot and that expense cannot be restricted further.

In that case, you can max out a 401k or 401a or 403b. Whichever pretax account you prefer. Then try and max out the ROTH IRA separately in you post-tax brokerage account.

As for SS, I logged in and got that number from their own calculator in my account. I have not disclosed my income history. Only my current income. I have paid into SS for 20+ years.

Since you directly took the number off your SS account, looks like the SS estimate is based on the default assumption that you will continue to work and earn the current salary till 62. This is not valid for your case and needs to be correctly estimated. Look for the SS quick calculator on their site as a first estimate, and put in 0 for all future earnings past the retirement date of your choice. This will be a closer estimate reflecting your future earning plans.
The strategy above seems to be what I am thinking in terms of contributions. I will max out what my employee contribution allows and if any is left over and allowed, it will go into Roth.

I fiddled again with the darn SS calculator and it will not allow adding income from now to 5 years and then give an estimate at 62. If I stopped contributing today and retired at 62, it would be $1048. If do something tricky like multiply my current income over 5 years and then divide it over 20 till I am 62, it is $1233. If I held out to 65, I could get $1528. If I do not burn out my expected portfolio by doing a 72t, it will still have some money left to supplement social security. My one parent lives on exactly that much money in their village now. I know that with inflation, I will need more of course if I do manage to get myself living to that age...
international001
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Re: Early semi-retirement abroad

Post by international001 »

Gatto Bialetti wrote: Mon Sep 30, 2019 7:29 pm The tax treaty lets you pay taxes only in Italy, but they are higher.
What do you mean? You have to pay taxes in US, but since they are lower you can take a credit. But this is true for most countries with treaty.
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notoriousMG
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Re: Early semi-retirement abroad

Post by notoriousMG »

55555
Last edited by notoriousMG on Fri Mar 18, 2022 6:22 pm, edited 1 time in total.
Gaston
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Joined: Wed Aug 21, 2013 7:12 pm

Re: Early semi-retirement abroad

Post by Gaston »

notoriousMG wrote: Mon Sep 30, 2019 6:53 pm I believe paying some taxes somewhere is fair.
I am not saying this to be mean, but taxation authorities will not care what you think is fair.

As others have indicated, the US taxes it’s citizens on their global earnings, no matter where they live. Taxation treaties between countries are helpful, but never fully alleviate double taxation of at least a portion of your income.

Unfortunately, it’s a complex topic and, to my knowledge, there is no cheap way to figure out all the do’s and don’ts. Obtaining international tax advice is pricey.
“My opinions are just that - opinions.”
Topic Author
notoriousMG
Posts: 77
Joined: Tue Sep 24, 2019 9:49 pm

Re: Early semi-retirement abroad

Post by notoriousMG »

Gaston wrote: Sun Jun 20, 2021 4:34 pm
notoriousMG wrote: Mon Sep 30, 2019 6:53 pm I believe paying some taxes somewhere is fair.
I am not saying this to be mean, but taxation authorities will not care what you think is fair.

As others have indicated, the US taxes it’s citizens on their global earnings, no matter where they live. Taxation treaties between countries are helpful, but never fully alleviate double taxation of at least a portion of your income.

Unfortunately, it’s a complex topic and, to my knowledge, there is no cheap way to figure out all the do’s and don’ts. Obtaining international tax advice is pricey.
I have a good accountant for US stuff but I need to find someone who understands the dual tax issues. As for being mean, I did not take it that way. It felt rather unnecessary to state, but I am asking for advice which comes with people' feelings and mine in response ;)
Gaston
Posts: 1220
Joined: Wed Aug 21, 2013 7:12 pm

Re: Early semi-retirement abroad

Post by Gaston »

Yes, finding the correct tax expert will depend on the countries involved. The person with expertise in US-Italy taxation likely knows very little about US-UK taxation.

Due to work assignments, I lived for a time in Australia, Brazil, Korea, and the UK. In each location, I had to find a different tax expert who knew that country + US tax law.
“My opinions are just that - opinions.”
wineandplaya
Posts: 306
Joined: Fri Sep 14, 2018 9:42 am

Re: Early semi-retirement abroad

Post by wineandplaya »

Be careful with Roth in particular: you may need to pay income taxes in your country of residence, so you risk getting taxed twice. For pretax accounts, double taxation treaties should prevent that.

I think that you should be worried about inflation and the US dollar losing value. Investing in international equities might be the best hedge for that.
wineandplaya
Posts: 306
Joined: Fri Sep 14, 2018 9:42 am

Re: Early semi-retirement abroad

Post by wineandplaya »

Duplicate post
international001
Posts: 2748
Joined: Thu Feb 15, 2018 6:31 pm

Re: Early semi-retirement abroad

Post by international001 »

notoriousMG wrote: Sun Jun 20, 2021 1:55 pm SO many questions:
* Could I get to a net worth of $650k by 2026 assuming I still have this job and some consulting income (an additional $30k/yr on average conservatively)?
* What should I do with 30k of extra consulting money this year? Expenses are minimal. I feel best when my immediate access to cash savings is at $50k.
* How can I simplify my retirement account planning for accumulation since I have some cash savings now to lean on in case of emergency.
* How can I use my brokerage for medium-risk investment for secondary backup funds to postpone touching my TIAA as much as possible?
* What should be my tax-optimization strategy if my residence changes to a country that has a higher taxation than USA but I can live well with $1500 per month after tax. I am concerned about the euro-to-dollar fluctuation and how to protect myself against that.
You have less than $300k and you plan to have $650k in 5 years? Even adding $30k/year seems unrealistic. IT may happen, but do not plan for it. For a 5 years horizon you typically want a conservative portfolio. Aiming 100% stocks to have a chance of $650k is a long shot.

I would just set a more realistic timeline and get a simple Bogleheads portfolio.

Check also if how your new country will tax Roth distributions to help you decide wether you want to invest money there (perhaps you'll be able to do a conversion before leaving US or perhaps not).

There is no single bullet. But estimate your marginal taxes at all years and the tax drag of having taxable account. Then do your spreadsheet.
Topic Author
notoriousMG
Posts: 77
Joined: Tue Sep 24, 2019 9:49 pm

Re: Early semi-retirement abroad

Post by notoriousMG »

You have less than $300k and you plan to have $650k in 5 years? Even adding $30k/year seems unrealistic. IT may happen, but do not plan for it. For a 5 years horizon you typically want a conservative portfolio. Aiming 100% stocks to have a chance of $650k is a long shot.
In my xls sheet, if I calculate a 5% growth on my employer retirement accounts from now to 2026, I get to about $362k. If I add $7k into the solo 401k and calculate 5% growth, that gets me another $46k. And conservatively, I calculate. $121 in cash, savings, and brokerage by 2026. That gets me to $536k with planning on only $13k of extra income per year. That means I could probably get closer to $600k.

I am going to get some tax help this summer to sort more things out. If the employer match resumes, that will also help.
international001
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Joined: Thu Feb 15, 2018 6:31 pm

Re: Early semi-retirement abroad

Post by international001 »

With 5% return rate, you'll need lots of annual savings to get from $362k to $650k
But the most important is that you don't have to assume a 5% return is going to happen, it may not
Look at portfolio visualizer and make your computations as it today was 2007. This will be (perhaps) your worse case scenario.
international001
Posts: 2748
Joined: Thu Feb 15, 2018 6:31 pm

Re: Early semi-retirement abroad

Post by international001 »

With 5% return rate, you'll need lots of annual savings to get from $362k to $650k
But the most important is that you don't have to assume a 5% return is going to happen, it may not
Look at portfolio visualizer and make your computations as it today was 2007. This will be (perhaps) your worse case scenario.
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