Author Topic: Expat new to the US - help needed to invest and retirement strategy  (Read 998 times)

SuperBabaman

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Background:
I am new to the US. I was just transferred by my employer from my home country facilities to the US headquarters. I am 40, no kids, currently making 130k, and saving ~50% of my take-home paycheck. I currently have ~70k on my checking account, ~200k invested in my home country, and a piece of land in my home country.

Goal:
Despite the COL here is way higher compared to living in my home country, difference in currency will help a lot in the FIRE process. My idea is staying here for 10-15 years and then get back to retire in my home country due to low COL and free health care. 350k is the minimum and 700k will be enough to live comfortably there.

Asking for help:
Q1: I have set my 401k contributions to 6% (maximum amount for 100% company match). Should I invest more?
Q2: I have no idea what a good investment here is. I have 70k on my checking account. Where should I consider investing this amount?
Q3: I bought a beater that eventually will require maintenance. Buying a cheap brand new motorcycle to commute would be a good idea to save money and avoid car maintenance?
Q4: A good house here costs $350k. Should I consider buying a house instead of renting? I am currently paying $1,400.
Q5:Anything else that I should consider?

Thank you!
« Last Edit: March 28, 2023, 07:53:50 AM by SuperBabaman »

lhamo

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Re: Expat new to the US - help needed to invest and retirement strategy
« Reply #1 on: March 28, 2023, 09:00:39 AM »
What kind of visa are you on?  If an H1b or something else that could disappear if your company has a downturn/lays you off (as has happened to many expat tech workers lately), personally i would be careful about buying a house unless you have the resources to carry the mortgage easily while you line up a sale or rental.  We ended up doing very well with buying property as expats in China, but that was because we put in a considerable down payment (roughly 2/3 of purchase price) and our mortgage + management fees were MUCH lower than we would have paid to rent something half as large/nice. 

Regarding longer term investments, like 401ks, etc. the answer might vary a lot depending on the tax situation in your home country.  Some countries allow you to treat overseas retirement accounts the same as local ones.  Some tax them heavily. 

One other word of caution:  just because your country is currently a LCOL place does not mean it will remain so.  Lower COL countries are also often places where there are high rates of economic growth, and also higher inflation.  And currency fluctuations can take a big toll.  When we first started working in China the exchange rate was a pretty steady 8.26 RMB to the USD.  Then they changed how they did currency exchange valuations and in the space of a year the rate dropped down into the 6s.  So a 25% hit on local purchasing power (we were paid in USD). So you might want to think about how to invest your assets across the two countries so that you mitigate the longer term risks of those macroeconomic factors.  Maybe rather than buying in the US you buy a place in your home country that you would want to live in if/when you return, and rent it out in the meantime.  In hindsight we ended up doing very well with our expat property purchase (which nearly tripled in value over the 7-8 years we owned it), but it also would have been smart for us to buy a property here in Seattle when prices were lowest in 2010-11. 

SuperBabaman

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Re: Expat new to the US - help needed to invest and retirement strategy
« Reply #2 on: March 28, 2023, 09:32:41 AM »
What kind of visa are you on?

O1 Visa. The idea is to obtain the GC ASAP by either EB1 or EB2.

My investments in my home country are all paying Inflation + 4-6%, however I would like to invest in the US to receive dividends in US dollars and avoid my home country currency fragility.

Laura33

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Re: Expat new to the US - help needed to invest and retirement strategy
« Reply #3 on: March 28, 2023, 10:45:20 AM »
Asking for help:
Q1: I have set my 401k contributions to 6% (maximum amount for 100% company match). Should I invest more?
Q2: I have no idea what a good investment here is. I have 70k on my checking account. Where should I consider investing this amount?
Q3: I bought a beater that eventually will require maintenance. Buying a cheap brand new motorcycle to commute would be a good idea to save money and avoid car maintenance?
Q4: A good house here costs $350k. Should I consider buying a house instead of renting? I am currently paying $1,400.
Q5:Anything else that I should consider?

I can't speak to the international aspects, but I can give some basic advice.

1.  Yes.  Your 401(k) is likely your best investment vehicle from the standpoint of saving on US taxes, and of course lowering your current tax burden leaves you more money to invest elsewhere.  Whether it's the best option for you depends on the tax treatment those assets would receive in your home country, of course.

2.  I am a fan of simplicity.  You have a long time horizon and a good income, so you have a good base to weather ups and downs in the stock market.  That means you can afford a high percentage of stocks.  For simplicity, I'd look for a total stock market index fund or ETF.  Basically, you want broad market coverage + low expenses, which for many of us here means Vanguard.  I would personally keep a large emergency fund (at a minimum, enough to get you back home; preferably enough to tide you over while you work the visas and look for a new job, then get you home if you don't succeed), and then put everything else in VTSAX. 

3.  If you'd enjoy a motorcycle commute and that would serve in bad weather, then no reason not to get a motorcycle, or even an e-bike.  But why not get a used one, like you got a used car?  If the goal is to save money, then save money!

4.  No.  If you buy a house, you should view it as a luxury rather than as an investment.  Sure, you might get lucky and hit one of those super-hot markets -- or you might run into something like 2000 or 2009, when many of us couldn't sell a house to save our lives.  So if you're looking to buy to make money, I'd consider that pure speculation, not investing.  The main reason to buy a house is because you want a nicer and/or bigger place to live.  But in many, many parts of the country, it's cheaper to rent.  So as long as your $1400 apartment meets your needs, why pay more to live somewhere else?   

5.  I don't know much about visas, but the O1 designation looks pretty limited, as it is founded on some special talent or ability.  What is the likelihood that your particular talent/ability will remain high-demand for as long as you want to stay here?  Just thinking practically, if you're something like a brilliant professor, then it seems likely you'd continue to qualify for years; OTOH, if you're something like a pop star, well, whatever your innate abilities, musical styles go in and out of fashion, so 5 years from now, someone could decide, eh, no reason to continue to extend the visa (this is all assuming you don't get permanent residency in the interim, of course).  In addition, if your visa/employment depends on a specific talent, look very hard at disability insurance and/or other types of insurance that would protect you if you get sick/injured in a way that takes away that special talent -- for example, if you're a concert pianist and get in a car crash and break your hands badly enough that you can't continue to perform at the top levels. 

IOW, don't just focus on the upside, but also protect yourself against the downside risks.  You have a great plan to set yourself up for a very secure future, and it's reasonable to think that you will be able to execute that plan.  But there are many, many ways even the best plans can go wrong, from car accidents to political changes to market meltdowns, etc.  So it's worth spending a little time playing the "what if" game -- what are all the ways things might go wrong? -- and then taking reasonable steps to protect yourself in the event something like that happens.

SuperBabaman

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Re: Expat new to the US - help needed to invest and retirement strategy
« Reply #4 on: March 28, 2023, 01:49:17 PM »
I can't speak to the international aspects, but I can give some basic advice.

1.  Yes.  Your 401(k) is likely your best investment vehicle from the standpoint of saving on US taxes, and of course lowering your current tax burden leaves you more money to invest elsewhere.  Whether it's the best option for you depends on the tax treatment those assets would receive in your home country, of course.

2.  I am a fan of simplicity.  You have a long time horizon and a good income, so you have a good base to weather ups and downs in the stock market.  That means you can afford a high percentage of stocks.  For simplicity, I'd look for a total stock market index fund or ETF.  Basically, you want broad market coverage + low expenses, which for many of us here means Vanguard.  I would personally keep a large emergency fund (at a minimum, enough to get you back home; preferably enough to tide you over while you work the visas and look for a new job, then get you home if you don't succeed), and then put everything else in VTSAX. 

3.  If you'd enjoy a motorcycle commute and that would serve in bad weather, then no reason not to get a motorcycle, or even an e-bike.  But why not get a used one, like you got a used car?  If the goal is to save money, then save money!

4.  No.  If you buy a house, you should view it as a luxury rather than as an investment.  Sure, you might get lucky and hit one of those super-hot markets -- or you might run into something like 2000 or 2009, when many of us couldn't sell a house to save our lives.  So if you're looking to buy to make money, I'd consider that pure speculation, not investing.  The main reason to buy a house is because you want a nicer and/or bigger place to live.  But in many, many parts of the country, it's cheaper to rent.  So as long as your $1400 apartment meets your needs, why pay more to live somewhere else?   

5.  I don't know much about visas, but the O1 designation looks pretty limited, as it is founded on some special talent or ability.  What is the likelihood that your particular talent/ability will remain high-demand for as long as you want to stay here?  Just thinking practically, if you're something like a brilliant professor, then it seems likely you'd continue to qualify for years; OTOH, if you're something like a pop star, well, whatever your innate abilities, musical styles go in and out of fashion, so 5 years from now, someone could decide, eh, no reason to continue to extend the visa (this is all assuming you don't get permanent residency in the interim, of course).  In addition, if your visa/employment depends on a specific talent, look very hard at disability insurance and/or other types of insurance that would protect you if you get sick/injured in a way that takes away that special talent -- for example, if you're a concert pianist and get in a car crash and break your hands badly enough that you can't continue to perform at the top levels. 

IOW, don't just focus on the upside, but also protect yourself against the downside risks.  You have a great plan to set yourself up for a very secure future, and it's reasonable to think that you will be able to execute that plan.  But there are many, many ways even the best plans can go wrong, from car accidents to political changes to market meltdowns, etc.  So it's worth spending a little time playing the "what if" game -- what are all the ways things might go wrong? -- and then taking reasonable steps to protect yourself in the event something like that happens.

Thank you.

reeshau

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Re: Expat new to the US - help needed to invest and retirement strategy
« Reply #5 on: March 28, 2023, 01:49:45 PM »

Regarding longer term investments, like 401ks, etc. the answer might vary a lot depending on the tax situation in your home country.  Some countries allow you to treat overseas retirement accounts the same as local ones.  Some tax them heavily. 


+1

Get to know the tax treaty between your home country and the US.  Chances are, you should avoid Roth 401k / IRA's, despite them being highly recommended and increasingly common for lifetime US residents--very few countries recognize the Roth as a pension / tax advantaged account.

https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z

A lot of general advice / articles / people who only work with US located people will give you the standard advice, which could be very wrong for you.

Also, note that rules for taxation of wages are different than taxation of pensions.  It matters when and where you save the money (and are, maybe, taxed on it) and when and where you withdraw, particularly if it is classified as a pension.

The best thing you could do is find a CPA who is specifically familiar with your home country & the US as a pair.  They can give you effective guidance.