Keeping most asset amounts in US after retiring abroad permanently.

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ebeb
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Keeping most asset amounts in US after retiring abroad permanently.

Post by ebeb »

I am looking into the pros and cons of keeping most of the funds in US brokerage/bank accounts after retiring abroad permanently in a developing country. This is to simplify tax filing in US for most amounts while filing tax for small income/amounts abroad. I see the pros/cons as below:

PROS:
1. Large inflation in countries abroad helps to keep better value in USD amounts when converting to foreign currencies later.
2. Simpler tax filing in US and abroad if most income/amounts from US
3. Some countries make it extremely difficult to transfer fund back to USD or other currencies due to tax payment issues.
4. US markets are more stable and giving better returns over decades compared to many emerging market countries.
5. FDIC type bank insurance is lacking or minimum amounts in many developing countries.
6. Avoid PFIC issues with non-US mutual funds.

CONS:
1. Beneficiaries abroad will have difficult time getting the funds from US if not in local banks/brokerages.

Appreciate your thoughts to fill up additional points to consider. :?
Last edited by ebeb on Sat Jun 03, 2023 6:13 pm, edited 2 times in total.
80% VOO | 20% BND+TBILL+CASH | Don't believe Nobody because Nobody knows nothin' - Anon
daviddem
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by daviddem »

I am a European expat and I have lived most of my life abroad, in the Middle-East and Southeast Asia.

Most definitely keep your US bank accounts and US / international brokerage. Local investment / banking options are terribly limited in many countries, not to mention I'd never keep more than one or two months of living expenses in any local bank.
Last edited by daviddem on Sat Jun 03, 2023 1:32 pm, edited 1 time in total.
Valuethinker
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by Valuethinker »

ebeb wrote: Fri Jun 02, 2023 12:25 pm I am looking into the pros and cons of keeping most of the funds in US brokerage/bank accounts after retiring abroad permanently in a developing country. This is to simplify tax filing in US for most amounts while filing tax for small income/amounts abroad. I see the pros/cons as below:

PROS:
1. Large inflation in countries abroad helps to keep better value in USD amounts when converting to foreign currencies later.
2. Simpler tax filing in US and abroad if most income/amounts from US
3. Some countries make it extremely difficult to transfer fund back to USD or other currencies due to tax payment issues.
4. US markets are more stable and giving better returns over decades compared to many emerging market countries.
5. FDIC type bank insurance is lacking or minimum amounts in many developing countries.

CONS:
1. Beneficiaries abroad will have difficult time getting the funds from US if not in local banks/brokerages.

Appreciate your thoughts to fill up additional points to consider. :?
PFIIC and PRIIP (PIIRP?)

Due to IRS rules you can only hold US domiciled funds otherwise PFIC will bite - and I gather that is truly unpleasant.

Conversely for EU, and currently UK, financial services rules prevent platforms from selling you funds without documentation that basically only EU domiciled funds have.

Catch-22. Welcome to (potentially) hell.

Keep at least 2 brokerage accounts in the USA, in case they decide to close one on you (it happens) when they find out you no longer live in USA. You may also wish to consider keeping a US postal address - although I understand the rules have become stricter about those (it has to be a proven home address?).

The point about FDIC or EU equivalent is the deposit insurance is really the credit rating of the sovereign government. So for example when it hit the fan in Iceland during 2008-09, a country w less than 500k inhabitants and a ratio of bank deposits to GDP of 15 to 1 (UK and Switzerland were around 8 to 1, I think the USA was under 2 to 1) they imposed exchange controls & basically prevented you from taking your money out. Something similar happened with Greek financial institutions (ie EUR accounts) during the bailout.

Bank of Cyprus the original bailout diluted *all* deposit holders. Then it became clear this would lead to a bank run by depositors across every southern European country, and so it was hastily revised to "make good the 100k EUR deposit insurance" but dilute all deposits above that by 60%.

So just be careful. Again I'd have at least 2 US bank accounts.

Anyone who lives in an Emerging Market can tell you about the reasons to have a bank account in Miami etc. Think Latin America. Or Turkey. Even Israel has experienced hyperinflation (in the 1980s).
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mrspock
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by mrspock »

Why not just maintain a US part-time presence somehow? You are taxes on global income anyway, so what difference does it make?

This way US brokers will happily sell to you. I wouldn’t even bother getting a EU bank, Schwab wires and withdrawals are free.

Never understood this.

I think most American investors don’t get how lucky we are, we have our issues, but damnnnnnn we know finance. Things are so primitive in other countries due to ignorance and grift… Canadians still have to punch in each stock transaction *manually* on their tax software. I.e. There isn’t even an import feature between the tax software and banks. I was so disgusted when I was helping my mom, it’s pathetic. Funds are rife with high ERs.
EddyB
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by EddyB »

mrspock wrote: Sat Jun 03, 2023 2:13 pm
I wouldn’t even bother getting a EU bank, Schwab wires and withdrawals are free.

Never understood this.
I hadn’t presumed the OP was talking about the EU, but given that I couldn’t pay my income tax, trash bill, electronic highway tolls bill, water bill, or my primary care doctor without a SEPA account, it doesn’t seem like a very practical suggestion.
backpacker61
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by backpacker61 »

Investment costs in much of the world are like the US 30 years ago (or worse).

1% ER on a mutual fund-like holding would be considered "very good". Not infrequently you "must' go through an "advisor".
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Topic Author
ebeb
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by ebeb »

mrspock wrote: Sat Jun 03, 2023 2:13 pm Why not just maintain a US part-time presence somehow? You are taxes on global income anyway, so what difference does it make?
Never understood this.

I think most American investors don’t get how lucky we are, we have our issues, but damnnnnnn we know finance. Things are so primitive in other countries due to ignorance and grift…
Yes planning to keep a mailing or even physical address if possible in USA. Agree that the stability and maturity of financial products in US is far better than most countries. One only realizes this after visiting abroad. For example even for sending $100 outside India one has to prove that it was tax paid money by paying hundreds of dollars to a CPA to fill some forms. From US I send thousands of dollars via Wise or Ria without anyone asking. :shock:
80% VOO | 20% BND+TBILL+CASH | Don't believe Nobody because Nobody knows nothin' - Anon
Topic Author
ebeb
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by ebeb »

Valuethinker wrote: Sat Jun 03, 2023 1:16 pm So just be careful. Again I'd have at least 2 US bank accounts.
Yes opened a new bank account with State Department FCU and an Interactive Brokers account to be safe.
80% VOO | 20% BND+TBILL+CASH | Don't believe Nobody because Nobody knows nothin' - Anon
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mrspock
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by mrspock »

EddyB wrote: Sat Jun 03, 2023 3:49 pm
mrspock wrote: Sat Jun 03, 2023 2:13 pm
I wouldn’t even bother getting a EU bank, Schwab wires and withdrawals are free.

Never understood this.
I hadn’t presumed the OP was talking about the EU, but given that I couldn’t pay my income tax, trash bill, electronic highway tolls bill, water bill, or my primary care doctor without a SEPA account, it doesn’t seem like a very practical suggestion.
Do they not have "credit cards" in Europe anymore? :) You can pay all of this with a credit card in North America. Taxes should accept wires, it's extremely common to wire internationally to pay taxes.
EddyB
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by EddyB »

mrspock wrote: Sat Jun 03, 2023 8:13 pm
EddyB wrote: Sat Jun 03, 2023 3:49 pm
mrspock wrote: Sat Jun 03, 2023 2:13 pm
I wouldn’t even bother getting a EU bank, Schwab wires and withdrawals are free.

Never understood this.
I hadn’t presumed the OP was talking about the EU, but given that I couldn’t pay my income tax, trash bill, electronic highway tolls bill, water bill, or my primary care doctor without a SEPA account, it doesn’t seem like a very practical suggestion.
Do they not have "credit cards" in Europe anymore? :) You can pay all of this with a credit card in North America. Taxes should accept wires, it's extremely common to wire internationally to pay taxes.
I can pay my gas, electric, phone/internet, mobile phone, and kids’ school fees by credit card, but I just re-checked trash, water, and my electronic highway tolls pass—all require direct debit from a SEPA account.
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theac
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by theac »

mrspock wrote: Sat Jun 03, 2023 8:13 pm
EddyB wrote: Sat Jun 03, 2023 3:49 pm
mrspock wrote: Sat Jun 03, 2023 2:13 pm
I wouldn’t even bother getting a EU bank, Schwab wires and withdrawals are free.

Never understood this.
I hadn’t presumed the OP was talking about the EU, but given that I couldn’t pay my income tax, trash bill, electronic highway tolls bill, water bill, or my primary care doctor without a SEPA account, it doesn’t seem like a very practical suggestion.
Do they not have "credit cards" in Europe anymore? :) You can pay all of this with a credit card in North America. Taxes should accept wires, it's extremely common to wire internationally to pay taxes.
Most countries nowadays have wallet-apps for your phone where you can load them at like a 7-11, or from your credit card etc, then use them for paying local bills such as those you mention.
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha (a George Harrison song)
TedSwippet
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by TedSwippet »

backpacker61 wrote: Sat Jun 03, 2023 5:55 pm Investment costs in much of the world are like the US 30 years ago (or worse).

1% ER on a mutual fund-like holding would be considered "very good". Not infrequently you "must' go through an "advisor".
So every one of the extensive sub-0.25% Vanguard and iShares non-US domiciled ETF range, available freely at retail level to the entire non-US part of the globe, and capable of building a complete balanced portfolio, is completely illusory?

Thank you for letting me know. If you can give me the real numbers, I'll update the wiki.
EddyB
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by EddyB »

TedSwippet wrote: Sun Jun 04, 2023 2:58 am
backpacker61 wrote: Sat Jun 03, 2023 5:55 pm Investment costs in much of the world are like the US 30 years ago (or worse).

1% ER on a mutual fund-like holding would be considered "very good". Not infrequently you "must' go through an "advisor".
So every one of the extensive sub-0.25% Vanguard and iShares non-US domiciled ETF range, available freely at retail level to the entire non-US part of the globe, and capable of building a complete balanced portfolio, is completely illusory?

Thank you for letting me know. If you can give me the real numbers, I'll update the wiki.
They don’t exist, because they’re of no use to US citizens.
daviddem
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by daviddem »

TedSwippet wrote: Sun Jun 04, 2023 2:58 am So every one of the extensive sub-0.25% Vanguard and iShares non-US domiciled ETF range, available freely at retail level to the entire non-US part of the globe, and capable of building a complete balanced portfolio, is completely illusory?

Thank you for letting me know. If you can give me the real numbers, I'll update the wiki.
In many countries, they're only available if you have an IBKR account. In the Philippines for example, you do not get access to any of these through any local banks, local "brokerages" or local insurance companies. Instead, they sell overpriced local funds, which sometimes themselves invest partly in one of the cheaper index ETFs, but they juice up the ER and load...

IB being pretty much the only viable option is quite scary I must say. If one day they decide to pull the plug on servicing some countries, like many brokerages and banks have done in the recent past, I have no idea what I will do.
EddyB
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by EddyB »

daviddem wrote: Sun Jun 04, 2023 4:16 am
TedSwippet wrote: Sun Jun 04, 2023 2:58 am So every one of the extensive sub-0.25% Vanguard and iShares non-US domiciled ETF range, available freely at retail level to the entire non-US part of the globe, and capable of building a complete balanced portfolio, is completely illusory?

Thank you for letting me know. If you can give me the real numbers, I'll update the wiki.
In many countries, they're only available if you have an IBKR account. In the Philippines for example, you do not get access to any of these through any local banks, local "brokerages" or local insurance companies. Instead, they sell overpriced local funds, which sometimes themselves invest partly in one of the cheaper index ETFs, but they juice up the ER and load...

IB being pretty much the only viable option is quite scary I must say. If one day they decide to pull the plug on servicing some countries, like many brokerages and banks have done in the recent past, I have no idea what I will do.
Can you buy the US-domiciled ETFs from those local banks and brokers?
halfnine
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by halfnine »

My spouse who is not a US citizen nor resident has more investing options at perfectly reasonable expense ratios than I do. The idea that somehow all of the rest of world is years behind the USA is ridiculous. Now if you want to say that an expat US citizen has limited options to tap into those options because of the gross overreach of the US governement...well we can agree on that.
daviddem
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by daviddem »

EddyB wrote: Sun Jun 04, 2023 4:24 am Can you buy the US-domiciled ETFs from those local banks and brokers?
No
EddyB
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by EddyB »

halfnine wrote: Sun Jun 04, 2023 4:29 am My spouse who is not a US citizen nor resident has more investing options at perfectly reasonable expense ratios than I do. The idea that somehow all of the rest of world is years behind the USA is ridiculous. Now if you want to say that an expat US citizen has limited options to tap into those options because of the gross overreach of the US governement...well we can agree on that.
On the banking side, I don’t know about the rest of the world, but account-to-account payments are simpler and quicker throughout the SEPA, which affects how payments are normally arranged (at least in some countries) vs. the US, where an additional intermediary has managed to extract profit from the opportunity afforded by the comparatively limited ACH system.
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Maple
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by Maple »

TedSwippet wrote: Sun Jun 04, 2023 2:58 am
So every one of the extensive sub-0.25% Vanguard and iShares non-US domiciled ETF range, available freely at retail level to the entire non-US part of the globe, and capable of building a complete balanced portfolio, is completely illusory?

Thank you for letting me know. If you can give me the real numbers, I'll update the wiki.
TedSwippet, I and many others appreciate your efforts in compiling and maintaining this wiki. Thanks.

I continue to find the costs (such as ETF expense ratios and trading commissions) to be incrementally higher for non-US investing, although the gap is gradually narrowing.

As another board member mentioned above, there are fewer choices available (brokers and ETFs) for non-US investing also. Interactive Brokers is one of the few viable brokerage choices. That is a concern.
TedSwippet
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by TedSwippet »

Maple wrote: Sun Jun 04, 2023 2:05 pm I continue to find the costs (such as ETF expense ratios and trading commissions) to be incrementally higher for non-US investing, although the gap is gradually narrowing.
Where true, absolutely. However, the key word here is "incrementally". It is nowhere near the case that non-US investing is "like the US 30 years ago (or worse)". This is absurd. A non-US investor can buy Vanguard's Ireland domiciled S&P 500 index ETF for 0.07% TER. Sure, this is above the 0.03% of VOO, but it is still remarkably inexpensive. Also, for a non-US investor, an S&P 500 index ETF holds foreign (international) stocks, with all of the extra considerations that entails.

Neverthless, I've enjoyed the contributions made in this thread by US investors who have clearly never lived outside the US, and so have no clue on the actual practicalities of day-to-day financial life in the 94% of the globe that is not the US. They have at least been entertaining to read. :-)
JohnFiscal
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by JohnFiscal »

I find this thread very interesting and pertinent to my own situation. I was already thinking of posting something similar, perhaps at the Financial Wisdom forum ("Canadian Bogleheads").

I am retired and my wife and I moved from the US to Canada a while ago. She has Canadian citizenship as well as US; I have US citizenship and am now a Canadian Permanent Resident (I will likely apply for Canadian citizenship in a year or so when I am eligible).

All of our financial assets are in the US with the exception of a Canadian chequing account (RBC) and two savings accounts (RBC and Oaken). Cash in the US is pretty limited: a RBC (US) checking account and a Fidelity money market. The bulk of financial assets are in IRAs (traditional and Roth) split between Vanguard and Fidelity (mostly equity and bond index funds, with VPMAX and VGHAX thrown in). At the moment I use a US address for both firms. Once I fully commit to using our Canadian residence as the address for Vanguard and Fidelity they will both restrict activity on the retirement accounts to distributions only: no purchases, no rebalancing (they will permit reinvested dividends IIRC). I think I want to take that step, but it's a bit further down the road. And perhaps I don't want to or need to take that step.

But I have wondered whether I should "keep most asset amounts in the US after retiring abroad permanently", as the thread title states. I am thinking that this really is the best, even with the restrictions indicated by Vanguard and Fidelity.

Of course, I am collecting US Social Security (they direct deposit into my Canadian bank, which is great and the exchange rate is about as good as it will ever get). My small US pension is deposited into my US bank...and I should transfer that to the Fidelity money market on occasion and then once in awhile send that up to Canada using the Wise foreign exchange.

Well, that is what I am doing. I am hoping that this thread will flesh out a bit more with detailed particulars and personal experiences.
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Hyperborea
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by Hyperborea »

mrspock wrote: Sat Jun 03, 2023 8:13 pm Do they not have "credit cards" in Europe anymore? :) You can pay all of this with a credit card in North America. Taxes should accept wires, it's extremely common to wire internationally to pay taxes.
Most of the places I dealt with in the US would charge a percentage of the bill to use a credit card for payment. That includes the IRS, county property tax, water bills, etc. If you're happy with spending an extra 2-3% for the "convenience" of using a credit card over the free or in worst case low fixed fee to direct transfer or pay with a debit card in the rest of the world then keep on wasting your money.
It’s not just that facts don’t seem to matter anymore. It’s that it doesn’t seem to matter that facts don’t matter.
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Hyperborea
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by Hyperborea »

JohnFiscal wrote: Tue Jun 06, 2023 4:46 pm with the exception of a Canadian chequing account
You've officially been assimilated!
JohnFiscal wrote: Tue Jun 06, 2023 4:46 pm Once I fully commit to using our Canadian residence as the address for Vanguard and Fidelity they will both restrict activity on the retirement accounts to distributions only: no purchases, no rebalancing (they will permit reinvested dividends IIRC). I think I want to take that step, but it's a bit further down the road. And perhaps I don't want to or need to take that step.
Before you do that just arrange the assets in a "forever" allocation. What that means will depend on how you plan to use the money and your other assets. You could use one of the target date or fixed asset allocation (split of bonds and stocks) funds/ETFs. That way your rebalancing happens inside the fund/ETF.
It’s not just that facts don’t seem to matter anymore. It’s that it doesn’t seem to matter that facts don’t matter.
lynneny
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by lynneny »

I retired to Mexico almost 5 years ago from the U.S. Before leaving, I consolidated my taxable brokerage, IRA and Roth IRA accounts at two U.S. financial institutions, and simplified my holdings into investments I´ll be ok not changing as I gradually spend them down. My pension is deposited into one of the two U.S. accounts, and Social Security will be, too, when I start collecting at 70.

I mostly get money from an ATM, or use credit cards. For larger sums (like buying a house), I can wire money from the U.S. to a local bank account. I keep a U.S. mailing address.

My pro tips for anyone planning to retire abroad;

1) Keep a U.S. phone number. Financial institutions often confirm your identity by texting a code to your U.S. phone. They won´t send it to a non-U.S. phone number.

2) Arrange your financial affairs before you leave the U.S., because you won´t have as much freedom to open new accounts, and move things around (including buying mutual funds) when you´re no longer a U.S. resident. For instance, it can be a good idea to open an account with Schwab, because they´re friendlier to expats than some U.S. financial institutions, and their ATM debit card refunds all withdrawal fees, and doesn´t charge a foreign transaction fee.

3) Get good local health insurance, but also keep, or sign up for at 65, Medicare. You may think you´ll always live abroad, but it´s surprising how many people return to the U.S. in a health crisis. Either because it´s more affordable on Medicare, or U.S. treatment is more advanced (certain cancer drugs, or example), or you want to be close to family when you´re ill.

4) You can vote from abroad in federal elections, from the state you last voted in. Sign up at VoteFromAbroad.org.

Now you´re ready to retire abroad!
Always passive
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Re: Keeping most asset amounts in US after retiring abroad permanently.

Post by Always passive »

That is what I did in 2003. All my financial assets are in Fidelity. Investing through banks in my new country of residence is more expensive and not as efficient.
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