Shifting Gears
Posted: Sun Jun 20, 2021 12:12 am
Hi all,
Life Context: We're in our mid-to-late-30s. One child; more on the way. We are Americans but live abroad, probably will acquire secondary citizenship in place due to naturalization. Not planning on returning to the U.S. really, but want to keep doors open. By and large, we pay the difference in taxes to the U.S., which is relatively minor. Don't have to worry about capital gains here, but we have a minor wealth tax (doesn't scare me in the slightest); plenty of wealthier folks store their money here without reservation. For the kids, college education fees are generally a non-issue here, though everyday expenses appear nominally expensive but are cheap on local salary. We're not planning on renunciating citizenship, though that has been a thought for the past decade for non-tax reasons. Our family ties state side are good, but our families are generally supportive and encourage us to remain where we are for the same reasons. Spouse and I come from middle class families. The family the spouse and I built stumbled into wealth through luck of accidental timing of entrance into an up-and-coming lucrative career sector and general thrift.
Financial Context: We have no debt, and our net worth is about USD 1,900,000 (about half-half between USD and another moderately stable currency). 350,000 is in America retirement (mostly old 401K) and two traditional IRAs, which we max out each year (income too high for Roth). These accounts are invested about 80:20 stocks:bonds (aggressively). Another 300,000 is placed in a foreign retirement account that grows less aggressively (semi-analogous to 401K) that I contribute pre-tax and employer matches. I have no choice on the investment allocations there. We have about 500,000 tied up in Vanguard brokerage account in various funds (about 80:20 again), which I will return to. The rest is kept as cash (almost equally divided between both countries). We kept a lot of cash on hand to facilitate a house down payment here, which is extremely expensive (more options than renting for a growing family), though we're looking at punting purchasing for the time being. A down payment reasonably requires 400,000 to 600,000 here (yes, multiply that by 5 to guess the total). It's not luxury; it's the price of a house in a small, prosperous country. As you can see, that amounts to consuming a lot of the cash on hand — too much for now. Salary is good, but we treat that largely to cover the pre-primary school care of the kids, and it eats a lot. For the time being, we are liquidating restrictive stock units as they come in to diversify: about USD 200,000 per year. These go into the Vanguard brokerage account per the 80:20 I mentioned above. Work values me, so they keep giving me good grants. I'm not looking at changing employers/career for the time being. A bubble to a degree touches my employer, so I'm only banking on about five years of continued grants like this.
Questions:
I'd like to keep about 360,000 cash on hand as liquid as possible for emergencies and floating living expenses. I plan on keeping that in savings accounts. Is that reasonable?
The rest of the cash on hand (390,000) could be used opportunistically for buying a house. We're not in a rush on this yet: 3-5 years out, maybe? I'm inclined to place this about 30:30:30:40 BND:VMFXX:VGIT:BSV. Is that reasonable? Low risk, low return are OK. Just want to not be beat too heavily by inflation.
To the restricted stock liquidation, we are reinvesting 200,000 per year into our brokerage. In practice, some years see greater values when liquidation (250,000 - 300,000) instead of 200,000. Would it make sense to restrict investment to 200,000 per year and hold the excess (hypothetical 50,000 - 100,000) similar to the cash on hand to later liquidate and reinvest back into the original 80:20 in the brokerage during years where restricted stock does not make 200,000 year? In short, smoothing out noise and depositing at a constant rate? Mainly, I estimate continuing these deposits for five years into the future. Is this sensible?
Any other advice? Goals are hard to elucidate. I would like to arrange it such that I can quit working in 5-10 years, but I don't hold unrealistic views about that. My current location is nominally very expensive, but it is home. I've spent a lot of time in the U.S. itself in the first 2/3 of my life, and no place there really calls out to me as home (cheaper places). Leaving here means learning a new language should I move country (I can do 2 fluently and 0.5 passingly), so I'd really like to be creative in finding a way to make a low job stress future support a long-term life where I am.
Life Context: We're in our mid-to-late-30s. One child; more on the way. We are Americans but live abroad, probably will acquire secondary citizenship in place due to naturalization. Not planning on returning to the U.S. really, but want to keep doors open. By and large, we pay the difference in taxes to the U.S., which is relatively minor. Don't have to worry about capital gains here, but we have a minor wealth tax (doesn't scare me in the slightest); plenty of wealthier folks store their money here without reservation. For the kids, college education fees are generally a non-issue here, though everyday expenses appear nominally expensive but are cheap on local salary. We're not planning on renunciating citizenship, though that has been a thought for the past decade for non-tax reasons. Our family ties state side are good, but our families are generally supportive and encourage us to remain where we are for the same reasons. Spouse and I come from middle class families. The family the spouse and I built stumbled into wealth through luck of accidental timing of entrance into an up-and-coming lucrative career sector and general thrift.
Financial Context: We have no debt, and our net worth is about USD 1,900,000 (about half-half between USD and another moderately stable currency). 350,000 is in America retirement (mostly old 401K) and two traditional IRAs, which we max out each year (income too high for Roth). These accounts are invested about 80:20 stocks:bonds (aggressively). Another 300,000 is placed in a foreign retirement account that grows less aggressively (semi-analogous to 401K) that I contribute pre-tax and employer matches. I have no choice on the investment allocations there. We have about 500,000 tied up in Vanguard brokerage account in various funds (about 80:20 again), which I will return to. The rest is kept as cash (almost equally divided between both countries). We kept a lot of cash on hand to facilitate a house down payment here, which is extremely expensive (more options than renting for a growing family), though we're looking at punting purchasing for the time being. A down payment reasonably requires 400,000 to 600,000 here (yes, multiply that by 5 to guess the total). It's not luxury; it's the price of a house in a small, prosperous country. As you can see, that amounts to consuming a lot of the cash on hand — too much for now. Salary is good, but we treat that largely to cover the pre-primary school care of the kids, and it eats a lot. For the time being, we are liquidating restrictive stock units as they come in to diversify: about USD 200,000 per year. These go into the Vanguard brokerage account per the 80:20 I mentioned above. Work values me, so they keep giving me good grants. I'm not looking at changing employers/career for the time being. A bubble to a degree touches my employer, so I'm only banking on about five years of continued grants like this.
Questions:
I'd like to keep about 360,000 cash on hand as liquid as possible for emergencies and floating living expenses. I plan on keeping that in savings accounts. Is that reasonable?
The rest of the cash on hand (390,000) could be used opportunistically for buying a house. We're not in a rush on this yet: 3-5 years out, maybe? I'm inclined to place this about 30:30:30:40 BND:VMFXX:VGIT:BSV. Is that reasonable? Low risk, low return are OK. Just want to not be beat too heavily by inflation.
To the restricted stock liquidation, we are reinvesting 200,000 per year into our brokerage. In practice, some years see greater values when liquidation (250,000 - 300,000) instead of 200,000. Would it make sense to restrict investment to 200,000 per year and hold the excess (hypothetical 50,000 - 100,000) similar to the cash on hand to later liquidate and reinvest back into the original 80:20 in the brokerage during years where restricted stock does not make 200,000 year? In short, smoothing out noise and depositing at a constant rate? Mainly, I estimate continuing these deposits for five years into the future. Is this sensible?
Any other advice? Goals are hard to elucidate. I would like to arrange it such that I can quit working in 5-10 years, but I don't hold unrealistic views about that. My current location is nominally very expensive, but it is home. I've spent a lot of time in the U.S. itself in the first 2/3 of my life, and no place there really calls out to me as home (cheaper places). Leaving here means learning a new language should I move country (I can do 2 fluently and 0.5 passingly), so I'd really like to be creative in finding a way to make a low job stress future support a long-term life where I am.