Author Topic: Financial Advice Wanted for an American Living in HK  (Read 690 times)

Teaching in HK

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Financial Advice Wanted for an American Living in HK
« on: January 22, 2019, 11:26:44 PM »
This is my first to this forum, but I'm a U.S. citizen living in Hong Kong. My wife is a Hong Kong permanent resident, and I will be soon, but as a U.S. citizen I have to deal with U.S. taxes every year. I hate FACTA and so many laws that are written so against U.S. citizens living and working abroad.

Well I wish I stumbled upon Mr. Money Mustache's blog earlier, but that's a shoulda woulda coulda thing that will keep me down. I'm trying to do better in the future. I thought I was doing well by wearing my clothes till they have holes in them, wearing my shoes until they hurt my feet, and spending extra money on mainly experiences like traveling and eating out (I hate cooking).

I've known about compound interest and finding the lowest fee index funds, but I was dumb and young and still tried to pick winners, and I lost terribly every time. After losing so much, I just stopped trying, but I didn't put money in index funds either. I hated filling out tax forms related to dumb ETFs I bought for two years, and just generally seeing how dumb my mistakes were over and over and then again during tax time.

My income is now up nicely again after quitting a great career in technology and switching to teaching without having any teaching experience or teaching qualifications. It took me about 5 years, and I'm still studying for my PGCE to get a guaranteed raise and significantly increase the amount I can make as a teacher at a local school in Hong Kong over time.

That's too much information, but oh well. I'd like some investing advice on the cheapest/best ways to invest in index funds, but it'll all be in my wife's name as in HK they don't have taxes on capital gains and tons of other investments that the U.S. taxes in such an annoying and complicated way it's really hard for a regular person to figure it all out themselves.

I hate HSBC and their ridiculous fees for everything that those that use an awesome company like Charles Schwab just look at in disgust. My wife has a Hang Seng account in just her name, and could potentially open a brokerage account wherever is best/cheapest in HK. I want to take advantage of her tax status for investing and avoiding all the U.S. tax awfulness.

I also have a U.S. Charles Schwab account, and I could just do everything with them. I don't really want to open a Vanguard account partially for simplicity sake and I've used Vanguard before and I don't think they're better than Schwab.

Anyway, any investing advice for a Hong Konger trying to find the lowest fee index funds that could be bought in the simple terms like in small amounts with the lowest to no fees possible?

flipboard

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Re: Financial Advice Wanted for an American Living in HK
« Reply #1 on: January 23, 2019, 10:20:21 AM »
I know a bunch of people in your situation, so I have some pointers:

1) Schwab are actually decent for persons not living in the US. Interactive Brokers are also often a decent choice. You'd need to verify that they actually serve HK customers though (I suspect they do, HK is big/wealthy enough to be worth it).
2) As a US citizen you need to avoid any non-US domiciled ETF's/Funds because of protectionist PFIC tax laws which make filing taxes a nightmare, hence you want to only buy US-domiciled funds/ETF's - but both Schwab and IB should let you do that.
3) But as a non-USD earner (presumably), you have to deal with currency exchange, in which case Interactive Brokers tend to be the best choice because they offer market-rate currency exchange.
4) Investing via your wife isn't really a good idea: US tax law subjects gifts from US-citizens to non-US-citizen spouses to gift tax (which is completely racist and terrible, but that's life as a US citizen for you). _she_ should avoid mingling her money with yours in any case, but you probably can't give your money to her  easily. Ideally you both have separate accounts. Your wife can easily open an account with the same broker as you though.

Because of all of the above, you can essentially invest the same way as anyone else: at Interactive Brokers you have the full choice of US-based ETF's for 1 USD commission per trade. The easiest way to go is to buy VT which is Vanguard's total world index ETF. I'm less familiar with bond funds, whether or not you want bonds depends on what stage of accumulation you're at anyway. At Schwab, if you go that route: they don't have a total-world ETF, but you can buy 3 separate US + developed world ex-US + emerging markets ETF's, which gives you the same result as a total-world ETF (Schwab have a list of commission-free ETF's, including those 3 ETF's mentioned - they charge 6 USD comission for other ETF's though which is why you'd typically avoid buying VT via Schwab.)

(As a non-US resident you technically can't buy US-based funds: you'd only be allowed to buy ETF's - but that depends on whether or not your broker thinks you live in the US or HK.)

Teaching in HK

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Re: Financial Advice Wanted for an American Living in HK
« Reply #2 on: January 23, 2019, 06:49:31 PM »
Wow flipboard thanks for the advice. I'm not sure exactly how the gift tax works or how it could possibly be tracked. My wife also pays for things for our family (we have one young son and a domestic helper), and I make more, so transferring money to an account of hers isn't really a gift or definitely isn't always.

I really was hoping to find a way to use her amazing tax free status in HK and avoiding U.S. taxes.

The simple but taxed way is yes to buy commission free super-low fee Schwab index tracking funds. ETFs I find more annoying for tax purposes. "Schwab Equity Index Funds are among the lowest-cost index funds around. Fund operating expenses are below the industry average, and there are no loads or transaction fees." SWPPX for SP 500 at a 0.02 expense ratio. SWTSX at 0.03. SWISX for international at 0.06.

Are you saying that the Schwab ETFs like SCHB (US) 0.05 and SCHF (non-US) 0.06 are better than the mutual funds?. I'm not familiar with the pros and cons of buying ETFs versus mutual funds, but I'd like to keep things relatively simple in following either just one or two indexes.

Currently, with my 30-year HK mortgage at 2.25% (it'll go up once the HK prime rate goes up again), I get a guarantee match for all the money I put in the savings account attached to it up to half of my mortgage (currently 3.40mHKD). Thus I've been doing the conservative thing and putting any extra money in simply that account with that guaranteed return. I'd like to take some more risk with an index fund and save as much as I can from now on (the blog has really inspired me to try much harder).


lhamo

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Re: Financial Advice Wanted for an American Living in HK
« Reply #3 on: January 23, 2019, 08:16:33 PM »
One thing you might want to reconsider is sticking to teaching in local schools rather than going the international school route.  Perhaps the pay is lower in HK due to the high desirability of the location, but in mainland China the salary and benefits packages at the internationals are going to be many multiples of what you might get in a local school.  @expatartist has experience in navigating this system in both places and may have useful input.

Since you are domiciled in HK you should be able to claim the Foreign Earned Income Exclusion on your HK earnings from work -- this should keep most of your earned income untaxed in the US.  You will have to pay taxes on dividends and capital gains.  Aim for funds/ETFs that don't pay dividends and a buy-and-hold strategy. 

MustacheAndaHalf

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Re: Financial Advice Wanted for an American Living in HK
« Reply #4 on: January 23, 2019, 10:11:29 PM »
Interactive Brokers has a branch in Hong Kong, and they probably have lower prices and better service than HSBC.

There's two key levels of wealth for financial reporting.  If your accounts in Hong Kong add up to $10,000 then you need to file an FBAR.  The limit is so low, you probably already know about it.  There's also some IRS reporting that kicks in much higher for U.S. citizens living abroad: $200,000 assets at the end of the year (or $300,000 during the year).

The penalties for hiding accounts are very nasty.  If you willfully fail to report, the fines start at $100,000 or half the money.  The IRS / U.S. Treasury are pretty much like an angry divorced spouse wanting half your money.  So before juggling assets between you and your spouse, it's worth checking with a tax lawyer about it.

Speaking of which, is your wife a U.S. citizen by virtue of marrying you?  She would wind up having to pay U.S. taxes, even living in Hong Kong, which might be something worth avoiding.

Take a look at Interactive Brokers in Hong Kong.  You should be able to buy ETFs there.

Teaching in HK

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Re: Financial Advice Wanted for an American Living in HK
« Reply #5 on: January 24, 2019, 12:57:48 AM »
@lhamo I'm assuming you don't personally actually know about teaching in Hong Kong. In short, being a native English teacher at a local school pays between 6,000+USD to 12,000+USD per month plus a ~10% gratuity on a lesser part of that at the end of each two year contract. I'm not saying 0 international schools in China can match that, but I'd say it's a very small number. I'm teaching at a primary school (secondary pays up to 12,000+USD/month) and my monthly cap in 10 years will stop at 10,500+USD/per month. I also don't want to live in China. I love HK, and where I live in HK.

I've spent days of my life reading about US tax code and trying to follow the rules without a tax professional. When I tried to have a business here I had to get professional help, and I hated paying someone else to do what should be simple taxes. Actually I work abroad, and very few countries make their citizens living abroad file taxes when all the money they make is made abroad. The US especially sucks in taxes in this regard.

I hate FACTA, and yes I know about the dumb 200,000+ rule too, but I'm not close to that in liquid assets. With some smart savings I might get there, but I'd most likely just move most of my money to Schwab as I don't have to file that stupid form.

I'll consider using Interactive Brokers.

@MustacheAndaHalf No, my wife isn't a U.S. citizen and she doesn't have a green card. She doesn't live or work in the U.S. and she never has. She has a visitor visa. My son however had no choice in becoming an American, which pissed me off. The other fake choice I had was for him to never visit the U.S. and he could get away without getting a US passport, but all my family is still in US, so him never visiting wasn't a real option. There is something where when he turns 18, he might be able to fairly easily renounce his US citizenship, but the US could pass new laws between now and the next 15 years that change that. They sure make it harder and harder for current US citizens to renounce their citizenship, and they seem to slowly make it more annoying to be an American abroad.

As for the Foreign Earned Income Exclusion, yes I don't make 100,000+USD per year yet, but I still hate filing and needing to tell the US everything about my foreign financial life. Also having to file all the junk about all the stocks, ETFs, and similar financial instruments you sell is just annoying. No need for any of that waste in HK for those that are simply HK citizens.

Since I have no taxable US earned income, what tax rate do I need to pay on automatically reinvested dividends? Do others recommend "Aim for funds/ETFs that don't pay dividends and a buy-and-hold strategy."

I hate the idea of paying someone to do my taxes, but I guess I might have to get professional help if I want to put more things in my wife's name.

So what's better Interactive Brokers or just moving my money to Schwab and investing in their Schwab mutual funds? Or their Schwab ETFs? I worked out a way (local HK bank to local Citi, which lets me transfer to Schwab US brokerage for free as Schwab has a Citi HK account) to transfer money from HK to Schwab without paying fees, which I hate by the way.

expatartist

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Re: Financial Advice Wanted for an American Living in HK
« Reply #6 on: January 24, 2019, 07:40:45 AM »
@lhamo I'm assuming you don't personally actually know about teaching in Hong Kong. In short, being a native English teacher at a local school pays between 6,000+USD to 12,000+USD per month plus a ~10% gratuity on a lesser part of that at the end of each two year contract. I'm not saying 0 international schools in China can match that, but I'd say it's a very small number. I'm teaching at a primary school (secondary pays up to 12,000+USD/month) and my monthly cap in 10 years will stop at 10,500+USD/per month. I also don't want to live in China. I love HK, and where I live in HK.

HK's local/int'l school systems are more varied than in the Mainland where there's a duality thanks to their restrictive laws on who's allowed to go to an international school. Lhamo's comment I assume was not to suggest you move to China, but from a perspective that the local/int'l school market would be similar here in HK to the Mainland. And yes there are a handful of int'l schools in Shanghai and Beijing which pay the upper level of what you quoted as standard. But it takes a rare constitution to thrive in those cities. HK's much easier.


tarheeldan

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Re: Financial Advice Wanted for an American Living in HK
« Reply #7 on: January 24, 2019, 08:09:22 AM »
So what's better Interactive Brokers or just moving my money to Schwab and investing in their Schwab mutual funds? Or their Schwab ETFs? I worked out a way (local HK bank to local Citi, which lets me transfer to Schwab US brokerage for free as Schwab has a Citi HK account) to transfer money from HK to Schwab without paying fees, which I hate by the way.

Do you have a US address? If you don't, just a warning that you might find yourself restricted to trade in US ETFs, and not in US mutual funds. This is a common ex-pat problem for those with accounts created after the onerous laws were passed. Schwab might be cool about it, but it's often an issue unless you have a very large account. I don't have any experience with IB.

Freedomin5

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Re: Financial Advice Wanted for an American Living in HK
« Reply #8 on: January 24, 2019, 08:41:47 AM »
@lhamo I'm assuming you don't personally actually know about teaching in Hong Kong. In short, being a native English teacher at a local school pays between 6,000+USD to 12,000+USD per month plus a ~10% gratuity on a lesser part of that at the end of each two year contract. I'm not saying 0 international schools in China can match that, but I'd say it's a very small number. I'm teaching at a primary school (secondary pays up to 12,000+USD/month) and my monthly cap in 10 years will stop at 10,500+USD/per month. I also don't want to live in China. I love HK, and where I live in HK.

HK's local/int'l school systems are more varied than in the Mainland where there's a duality thanks to their restrictive laws on who's allowed to go to an international school. Lhamo's comment I assume was not to suggest you move to China, but from a perspective that the local/int'l school market would be similar here in HK to the Mainland. And yes there are a handful of int'l schools in Shanghai and Beijing which pay the upper level of what you quoted as standard. But it takes a rare constitution to thrive in those cities. HK's much easier.

Donít forget, at international schools weíre talking $6000-$12000 USD plus free housing plus airfare plus healthcare (which is free/low cost in HK so moot point) plus pension plus private school tuition plus professional development fund plus free computer plus a few other things Iíve forgotten about.

But lifestyle-wise, yeah, I prefer HK over mainland. Itís a lot more comfortable, but then Iím biased. 

lhamo

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Re: Financial Advice Wanted for an American Living in HK
« Reply #9 on: January 24, 2019, 09:00:20 AM »
That's great that salaries are so high for local school teachers in HK -- the friends I have who live there and work outside law/investment banking tend to have low salaries compared to the very high cost of living, so I assumed that was the case for most public servants.  I guess not!  As others mentioned, I was not suggesting you relocate to the mainland -- just erroneously assuming a similar spread between local/international school salaries.  Once you have a HK job you should definitely hang onto it -- they are not so easy to land.

Understand your frustration with paying taxes to a system you do not benefit from, but if the creep of authoritarianism from Beijing keeps going at its current pace you may end up being glad you/your kids have that US passport to fall back on.  Though the creep of authoritarianism here in the US is quite pernicious, too.

MustacheAndaHalf

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Re: Financial Advice Wanted for an American Living in HK
« Reply #10 on: January 24, 2019, 09:11:16 AM »
@Teaching in HK - Since most tax software will quit when you list your residence in a foreign country, you might try TaxSlayer.  Not so much a vote of confidence as ... well I don't know an alternative.  But if your tax situation is just 1099-B (selling stock) and 1099-DIV (dividends), you can handle that with tax software.

Also, you mentioned having under $200,000 in assets.  Right now Vanguard Total Stock Market issues 2.1% in dividends, which means you probably have under $4,200 worth of dividends.  Between the $12,000 standard deduction and 0% tax bracket, your dividends are probably not enough to make you owe tax.  So you might want to take a look at tax software, since foreign income + dividends + stock sales isn't too complicated.  If you also have control over a business, that's a different story.

I know Interactive Brokers is available all over the world, and that they have a Hong Kong branch, but I haven't used them.  I think Interactive Brokers commissions ($4.50) are about the same as Schwab's ($4.95).  But Schwab has some decent ETFs (like Schwab US Broad Market ETF: "SCHB") and some OneSource ETFs that are all $0/trade.  So most likely, you'll spend less trading at Schwab.  Plus I've heard they have international ATMs at no charge, so look into that as well.

flipboard

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Re: Financial Advice Wanted for an American Living in HK
« Reply #11 on: January 24, 2019, 11:51:47 AM »
Quote
@Teaching in HK - Since most tax software will quit when you list your residence in a foreign country, you might try TaxSlayer.  Not so much a vote of confidence as ... well I don't know an alternative.  But if your tax situation is just 1099-B (selling stock) and 1099-DIV (dividends), you can handle that with tax software.
I know plenty of people using TurboTax outside of the US.

Quote
I know Interactive Brokers is available all over the world, and that they have a Hong Kong branch, but I haven't used them.  I think Interactive Brokers commissions ($4.50) are about the same as Schwab's ($4.95).  But Schwab has some decent ETFs (like Schwab US Broad Market ETF: "SCHB") and some OneSource ETFs that are all $0/trade.  So most likely, you'll spend less trading at Schwab.  Plus I've heard they have international ATMs at no charge, so look into that as well.
Schwab does indeed have some good commission-free ETF's, and free international ATM withdrawals. But the ATM withdrawals are only useful when travelling (or in the US), you generally don't want to convert currency twice (HKD->USD->HKD). Some people have managed to get Schwab to give them 500 free trades when transferring approx 100k USD of assets into Schwab, but that requires having 100k USD in asets first.

Interactive Brokers commissions however are actually 0.5 cents per share, and a minimum of 1 USD per trade. Ergo, commissions are usually USD 1 for most trades. (Suppose you want to buy VT, which is Vanguard's total world fund: you'd need to buy 14k of VT to go over 1 USD commission.) Thus, if you want to buy ETF's that Schwab doesn't include in the commission free list, IB is cheapest.

But you're still ignoring the currency conversion aspect: Schwab charge 0.5-1% currency conversion commission. IB let you convert at market rate, for USD 2 in fees. Unless you're investing very small amounts, you're much better off with IB.

flipboard

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Re: Financial Advice Wanted for an American Living in HK
« Reply #12 on: January 24, 2019, 11:57:03 AM »
Do you have a US address? If you don't, just a warning that you might find yourself restricted to trade in US ETFs, and not in US mutual funds. This is a common ex-pat problem for those with accounts created after the onerous laws were passed. Schwab might be cool about it, but it's often an issue unless you have a very large account. I don't have any experience with IB.
Schwab aren't cool about it: if they find out, they'll stop you from buying Funds. Source: I know a few people who had their accounts force-converted (they were able to keep their funds, but prevented from making future purchases).

But there's also no compelling reason to buy funds: funds are much more likely to distribute capital gains yearly, whereas it's easier for ETF's to avoid distributing capital gains. For example SCHB is Schwab's US broad market ETF, SWTSX is the equivalent fund. The ETF doesn't distribute capital gains, the fund does. (The major exception is Vanguard who manage to avoid capital gains distributions for their funds, but Vanguard aren't relevant for non-US-resident investors.)

Teaching in HK

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Re: Financial Advice Wanted for an American Living in HK
« Reply #13 on: January 24, 2019, 04:31:36 PM »
Do you have a US address? Yes, I have a US Schwab brokerage and checking account. They also made it easy to even get a Schwab AMEX card. The AMEX application didn't ask many questions. I still have a valid Texas driver's license. Texas doesn't have any state income taxes, so it's not a terrible place to live on paper. It's my mom's address to be clear, but I've never had trouble changing my address.

Schwab even has sent me a replacement debit card to Hong Kong. The most ridiculous thing though was the Texas department of transportation even agreed for free (shipping wise) to send me a new driver's license (actually I changed my address) all the way to HK. I guess not enough people send their driver's licenses abroad that their systems aren't designed to stop it. I also could just have it sent to my mom and pick it up at her place when I visit, which I do at least once a year.

I've made it fairly clear (via phone calls) to Schwab about my situation and I also have a US phone number (ported my number to Google Voice a few years ago, and it's been free to use ever since). So generally a US address and a US phone number are enough for many things.

As for filing taxes, TurboTax has worked fine for me with using my HK address. The most annoying part was getting my wife a TIN, which took essentially a day at an IRS tax office where all they did was verify the information in her passport. The other ways of verifying her identity without physically visiting a US IRS office didn't work for us. Luckily you only need to do it once, and then with the TIN you can file electronically, but without it you can't even when your spouse doesn't have a green card or US citizenship. I file married filing separately, but she doesn't actually need to file. Married filing separately does decrease the capital losses you can claim to 1,500, which is essentially a tax penalty. I have made many dumb investment decisions, so I might never run out of capital losses.

As for investing, I see there are pros and cons to mutual funds and ETFs, but I'm not 100% which is better, but I think as long as I pick the lowest-cost index tracking Schwab one it will be so many times better than all the junk I tried to play with before.

@flipboard "Schwab charge 0.5-1% currency conversion commission" I'm not sure where you got that information. From HKD to USD I've never experienced even 0.5 when simply typing XXX HKD to USD into Google. I also like simplicity, so avoiding opening another account is simpler. However, my wife might consider opening an account with Interactive Brokers.

@MustacheAndaHalf thanks for the tax info about dividends. I just wasn't sure if I can use my standard deduction to avoid paying taxes on dividends and capital gains. And no business just teaching at a school.

@lhamo "That's great that salaries are so high for local school teachers in HK" I didn't say that exactly. It's a special scheme where each local school gets one native English teacher, which is the post I got after trying to get one for about four years (it's competitive). You can see more details at https://www.edb.gov.hk/en/sch-admin/admin/about-sch-staff/net-scheme/recruitment-primary-net.html. For good international schools in HK like the English School Foundation schools and a few others they can pay just as much if not even a bit more, but I like my post and what I'm teaching.

MustacheAndaHalf

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Re: Financial Advice Wanted for an American Living in HK
« Reply #14 on: January 25, 2019, 06:08:27 AM »
As for filing taxes, TurboTax has worked fine for me with using my HK address.
Just curious since I don't know alternatives - do you know of any others besides TurboTax and TaxSlayer that work for a foreign address?

flipboard

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Re: Financial Advice Wanted for an American Living in HK
« Reply #15 on: January 25, 2019, 11:00:22 AM »

@flipboard "Schwab charge 0.5-1% currency conversion commission" I'm not sure where you got that information. From HKD to USD I've never experienced even 0.5 when simply typing XXX HKD to USD into Google. I also like simplicity, so avoiding opening another account is simpler. However, my wife might consider opening an account with Interactive Brokers.
See:
https://www.schwab.com/public/schwab/nn/agreements/schwab_pricing_guide_for_individual_investors.html
"Foreign currency transactions are subject to a fee based on the amount of currency converted in a single transaction, as follows:"

Disclaimer: I've never actually tested myself, but that's what everyone warns me about every time I mention Schwab. If they don't actually charge that for foreign currency wires into your account: great to know! I might test to verify whether that works from my country of residence too (unfortunately I have to pay my bank a fee for international transfers - even if they're in native currency, which still makes IB cheaper since they have a native account in my country).

// EDIT: Looking at the wire instructions, it turns out Schwab do have native accepting bank accounts in various countries, so I can actually send my local currency to them for free (but I'm still unclear on the currency conversion part).

MrThatsDifferent

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Re: Financial Advice Wanted for an American Living in HK
« Reply #16 on: January 25, 2019, 12:24:21 PM »
Yes, itís galling, but I just pay someone to do my taxes. Iím not going to renounce. Your kid might want the option of living and working at some point in the US. The annoying thing is if your kid does want to pass citizenship ship to his/her kid, they need to live in the US before theyíre 18, maybe younger. So many weird rules.

Teaching in HK

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Re: Financial Advice Wanted for an American Living in HK
« Reply #17 on: January 25, 2019, 10:47:25 PM »
@flipboard I just used Schwab's chat function, and the employee said their foreign wire team uses essentially the market rate, which in my previous experience for HKD to USD has been what Google has basically returned when searching for the same conversion.

Yes, if you have a Schwab account you can use their foreign currency wire instructions at https://international.schwab.com/public/file/SERVICE-FORMS-ROUTING-INCOMINGWIRE-CSCO-FOREIGNCURRENCY. For me I just input my name and account number and after about two business days it shows up in my Schwab brokerage account, and a business day or two after that I can transfer to my Schwab bank account.

As for investing, I just finished reading A Simple Path to Wealth. I'd rather not open a Vanguard account or pay Schwab a fee to buy 3,000+USD of VTSAX, so instead I'm leaning towards putting money I have to invest in SWTSX, which has a 0.03% Net Expense Ratio, no transaction fees, and no load fees.

As for capital gains and/or dividends I'd like for them to simply be automatically reinvested even though it will all be in a taxable account. I can't open an IRA or other tax-advantaged account (as far as I know, except for a 529 for my son) while working and living in HK. That's too bad, but not terrible with the standard deduction, my capital losses, and maybe long-term capital gains tax rate (0% ?) (https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rates/).

flipboard

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Re: Financial Advice Wanted for an American Living in HK
« Reply #18 on: January 29, 2019, 10:24:17 AM »
@flipboard I just used Schwab's chat function, and the employee said their foreign wire team uses essentially the market rate, which in my previous experience for HKD to USD has been what Google has basically returned when searching for the same conversion.
Unfortunately that's not what I saw when testing yesterday: I sen t a smallish transfer directly from my bank to Schwab.

Exchange rate according to charts on xe.com (XXX->USD) hovered between 1.007 and 1.009 (Google charts show similar numbers)
Schwab gave me a rate of 1.002 (i.e. 100 XXX turned into 100.19 USD).
Hence I lost about 0.5%. ((1 - 1.002/1.007) * 100%).
(The previous business day had rates between 1.003 and 1.004 - but even that doesn't explain the difference. The last time the chart showed 1.002 was a week ago.)

For comparison: I exchanged a larger chunk of money on IB, paid USD 2 in commissions, and got a rate of 1.0084 - which happened to just be the actual market rate at that time.

To be completely fair, at a 0.5% fee: Schwab is cheaper if you convert less than the equivalent of 400 USD (0.5% of 400 USD = 2 USD, which is the fee that IB charge). But for anything larger it doesn't seem worth it.

(FWIW Schwab's wire transfer form even explicitly mentions "Schwab charges a markup on foreign currency exchange transactions." - https://www.schwab.com/public/file/P-4210474/APP13517-13_DI_Foreign_Wire_Request_Form_fillable_0718.pdf  - which to me sounds like this is known and expected.)

Teaching in HK

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Re: Financial Advice Wanted for an American Living in HK
« Reply #19 on: February 04, 2019, 01:13:29 AM »
@flipboard So when I read somewhere else on this forum about interactive brokers having something like a 10USD a month fee that's another thing that I like to stay away from.

I have called Schwab a few times recently to try to find the truth about their currency conversions and such. One Schwab rep said they charge .1% to 1% based on the currency. The rep said they use Barclays' rates, so maybe https://www.barclayscorporate.com/foreign-exchange-rates.html is about the right answer.

As for my most recent transfer on Jan. 31st, I sent 40,000HKD, and my Schwab brokerage account was credited for 5,092.09USD. Thus, 5,092.09/40,000 = 0.12730225. According to xe.com the lowest mid-market rate on Jan. 31st was 1HKD = 0.12743USD, and Schwab said the transaction was recorded as happening later in the day, but the highest possible rate would probably have been 1HKD = .12750USD.  So .12743/.12730225 means about a .1% or .16% as the highest possible rate Schwab charged me.

In conclusion, at Schwab each currency conversion is different, but as the HKD is pegged to the USD anyway, maybe Barclays and/or Schwab charges only about a 0.1% conversion fee. That's reasonable enough to me compared to the insane charges HSBC and Citi HK want to charge for a similar conversion of HKD to USD.

My other issue has been with Citi HK and HSBC now seemingly only allowing HKD to be transferred between local HK accounts using Faster Payment Service (FPS). This system is great and super fast, but Schwab and/or apparently US federal regulations require wire transfers to include information not included in FPS transfers, which sucks for me. Thus, I'm left with a local bank, Chong Hing Bank, that still offers a telegraphic transfer option of sending HKD to another bank's HK bank account (for Schwab it's a Citibank N.A. (HK) account). For that Chong Hing charges 110HKD, which is very annoying, but better than the 200HKD Citi wanted to charge on top of a terrible conversion rate (1HKD = .1269USD) for sending my HKD to Schwab in USD (Citi would convert it to USD first).

For my troubles, Schwab gave me 25USD as a customer service gesture to pay for the 110HKD fee, but I'm not sure how often I can get them to give me such a gesture.

My latest test, is sending Schwab's HK branch a 1,000HKD check to see what they'll put in USD in my brokerage account. Due to the Lunar New Year holiday, Schwab's HK branch is off this week, and so I couldn't get anyone at Schwab to give me any clear information about what fee Schwab would charge to convert a check in HKD to USD. I'll report back later, but it'll probably take at least two and half weeks from now to clear (5 business days + I don't know more days probably).

flipboard

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Re: Financial Advice Wanted for an American Living in HK
« Reply #20 on: February 04, 2019, 11:22:46 AM »
@flipboard So when I read somewhere else on this forum about interactive brokers having something like a 10USD a month fee that's another thing that I like to stay away from.
BTW that monthly fee only applies if you have < 100k in assets, so it's not an issue in the long run, depending on income/savings rates/etc. (I don't know what HK income is like, so no idea how quick it is to save 100k...). If you already have assets at Schwab, it's possible to transfer them over directly (although I imagine there's a fee for doing so).

Note also: it's actually a "minimum" rather than fee: say you do one currency conversion (commission = USD 2), and one ETF purchase (commission = USD 1), you'd have to pay another USD 7 that month (which is less bad than the commissions PLUS 10 USD).

An issue some people have with with IB is that their UI is kinda complicated, and you also can't withdraw money immediately. E.g. my usual procedure is: wire money to IB, convert it same day, wait 4 days until it's no longer blocked, send it to Schwab, and wait another day for it to be ready to trade with (I'm using ACH for IB->Schwab transfer, it might be faster if I were to use wire - I still need to investigate that). For me it's worth it, but I can see how this would be tiring for other people.

robartsd

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Re: Financial Advice Wanted for an American Living in HK
« Reply #21 on: February 04, 2019, 12:23:32 PM »
Wow flipboard thanks for the advice. I'm not sure exactly how the gift tax works or how it could possibly be tracked. My wife also pays for things for our family (we have one young son and a domestic helper), and I make more, so transferring money to an account of hers isn't really a gift or definitely isn't always.
2019 Annual Gift Tax Exclusion is $15,000. If you transfer no more than that to your wife in 2019 you're safe. In addition to giving your wife up to $15,000 for herself, you should be able to transfer the value of things she purchases on behalf of yourself or your son (document in case of audit). If you want to transfer more without paying a tax, you can charge it against your lifetime gift and estate tax exemption, but that will be even more paperwork to send to the IRS.