If I don’t pay income taxes, how should I invest my money?

[milkmustache]

Have enjoyed reading this site for a few months now but still uncertain whether the general advice ‘open a tax-advantaged retirement account’ applies; I’ve gotten some conflicting advice. Or, if it doesn’t, what I should do instead with my savings. So, hoping the collective wisdom of the forum can offer me some insight! (feel free to direct me to other threads if you think they are more useful than replying to mine.)

Topic Title: If I don’t pay taxes, how should I invest my money?

Income: $45,000/year

Current expenses: (average month)

Unavoidable expenses:
   Rent    $370.80
   Loan (min. payment)    $129.00
   Utilities    $20.60
   Groceries    $100
   Mobile and Internet    $5.00
   Transport     $5.00
   Medical costs   $10.00
   Other miscellaneous unavoidable costs    $10.00
Avoidable Expenses   
   Entertainment    $30.00
   Clothing and household goods    $20.00

Subtotal : $700.00/month ($8,400/yr),
Plus about $3,000 a year in recreational travel

TOTAL EXPENSES = $11,400/yr

Assets:
Checking/Savings Accounts (all low interest rates, alas): 19,000USD + 4,900GBP = approx.. $26,000
US Mutual Funds (not a retirement account): $49,700 (Vanguard, a mix of VWELX, VEXPX, VSMGX, VTSMX, VINEX)
Peer-to-peer lending: $3,800

TOTAL ASSETS: $79,500

Liabilities:
$7,7000 – 5.75% - student loan (originally ~$25,000)

TOTAL LIABILITIES: $7,700

Specific Question: I am a 29-year-old American citizen (single, no kids) living abroad and am exempt from paying US income taxes and from paying any in my current country of residence in sub-Saharan Africa. I expect to live abroad for at least another couple years, but by 10 years from now or so, I expect to be living in the US and to retire there. My current employer offers no retirement plans. I save some money each paycheck; where should I put it?

[nereo]

your situation echos some of my own.  I didn't qualify for any tax-advantaged accounts, and that bothered me so much I recently started online tutoring just so I can have some US earned income to contribute to an IRA.

at 5.75%, i'd first shoot down that loan.  In fact, I'd use some of the money in your checking accounts to get rid of that right now. 
Beyond that, the only options I know of are taxable accounts.  Savings are still great, even if you pay taxes on them.  I'd continue adding to your Vanguard funds. 
Hoping someone else chimes in with suggestions I haven't thought of.

[jexy103]

I would max out any Roth accounts you are eligible for. If you're not being taxed now, you can deposit your tax-free money into a post-tax account where it will generate tax-free gains and be withdrawn tax-free. Sounds like a pretty good deal if you can swing it. :-D

If, as nereo said, you aren't eligible for a Roth IRA if you have no US income, then I would invest it just like you would if you were in the US and had already maxed out your IRA and 401(k)- put it in a taxable account. It sounds like you have a Vanguard account and an asset allocation you're comfortable with; I'd just pump money into that.

[milkmustache]

Thanks a bunch for the suggestions, jexy103 and nereo! Sounds like sound advice--I think I'll follow it :) I had been on the fence about paying off the loan vs. investing that money, but given the current sideways market (and that the debt interest is a sure thing, whereas investment gains aren't), paying the loan's probably a better move!

[phred]

If, as nereo said, you aren't eligible for a Roth IRA if you have no US income,

If you are an American citizen, then all your wage income is U.S. income no matter where earned.  True that you pay no American income tax due to the overseas exclusion - which also locks you out of a regular IRA.  However, you can start a Roth IRA as long as you earn less than $105,000 a year