Author Topic: Is our Roth IRA worth investing in?  (Read 1841 times)

Anette

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Is our Roth IRA worth investing in?
« on: January 12, 2022, 07:42:27 AM »
We live in Germany, my DH is American, I am German.

My DH has been resident here for almost 30 years, has previously paid taxes here in Germany, paid into our retirement system...
For the past 14 years he has been working for an American employer which has enabled him to pay US Taxes again (instead of German, win) as well as Medicare and Social Security payments.
He was able to open an account with the state department federal credit union.
As we cannot find a European bank that will let him invest in stocks, etf... (all afraid of penalties and lots of paperwork to fill in for their US customers due to regulations) we tried finding a US bank to open an account and IRa for years. This doesn't work either ( other than above mentioned bank) as he is resident here in Germany (no, we don't have anyone in the States who will let us - illegally - use their address...)

After unsuccessfully trying different US Investment banks, all at first claiming "no problem, this will work," long processes and in the end a "sorry, won't work" , we were able to open a Roth IRA with the State Department Federal Credit Union.
However, this only works like a savings account and gives us a monthly 0.5% interest rate. We have not contributed last year as we were contacting them to find out whether it isn't possible to get a better deal and be able to invest in Etf...NO

There are about 22.000$ earning about 10$ a month on there which doesn't seem worthwhile so our plan is to not contribute more.

Are we missing something? Would it make sense to contribute despite the small interest rate because of taxes?
There are no other tax sheltered retirement investments possible for him here or in the States (other than SS)

We are planing a trip to New York and Vermont this year but I doubt that will make a difference as we still won't have a residential address.

We will be very grateful for any help!

Anette

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Re: Is our Roth IRA worth investing in?
« Reply #1 on: January 12, 2022, 04:39:08 PM »
Forgot to mention ST will be turning 52 this year.

cool7hand

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Re: Is our Roth IRA worth investing in?
« Reply #2 on: January 13, 2022, 06:59:59 AM »
The lack of growth upside negates any tax benefits. I'd avoid.

yachi

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Re: Is our Roth IRA worth investing in?
« Reply #3 on: January 13, 2022, 12:24:29 PM »
Interactive Brokers seems to come up quite frequently as a place that will accommodate a US citizen residing in Germany.  I think it's because they have operations in both Germany and the US.  Have you tried them out?  In the US, stock investments and ETFs are offered through brokerages.  Banks offer an insured place to store money.  Sometimes a bank is affiliated with a brokerage.

I'm confused on why your DH's tax situation depends on what employer he works for instead of where he lives.  I've not heard of that before, unless he works on a US military base in Germany. 

The tax advantage of the Roth IRA is that you can pull money out without taxes (a secondary benefit is you can rebalance within the account tax free).  Are you planning on retiring in the US?  I not, are you sure Germany won't tax Roth IRA withdrawals?  There's a ton of discussion here that leads me to believe it's not a sure thing:

https://www.toytowngermany.com/forum/topic/354821-living-in-germany-with-us-retirement-accounts-401k-ira-roth/

DaTrill

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Re: Is our Roth IRA worth investing in?
« Reply #4 on: January 13, 2022, 12:50:51 PM »
USAA?  Probably need more details on income/residency for anyone to comment. 

Anette

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Re: Is our Roth IRA worth investing in?
« Reply #5 on: January 27, 2022, 01:43:27 PM »
The lack of growth upside negates any tax benefits. I'd avoid.

Thank sou vor uns clear answer!

Anette

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Re: Is our Roth IRA worth investing in?
« Reply #6 on: January 27, 2022, 02:04:01 PM »
Interactive Brokers seems to come up quite frequently as a place that will accommodate a US citizen residing in Germany.  I think it's because they have operations in both Germany and the US.  Have you tried them out?  In the US, stock investments and ETFs are offered through brokerages.  Banks offer an insured place to store money.  Sometimes a bank is affiliated with a brokerage.

I'm confused on why your DH's tax situation depends on what employer he works for instead of where he lives.  I've not heard of that before, unless he works on a US military base in Germany. 

The tax advantage of the Roth IRA is that you can pull money out without taxes (a secondary benefit is you can rebalance within the account tax free).  Are you planning on retiring in the US?  I not, are you sure Germany won't tax Roth IRA withdrawals?  There's a ton of discussion here that leads me to believe it's not a sure thing:

https://www.toytowngermany.com/forum/topic/354821-living-in-germany-with-us-retirement-accounts-401k-ira-roth/

Thank you!
DH has been able to open an account with Interactive Brokers and we have transferred some money. However we don't find the platform easy to navigate (coming from German style accounts) and so far have only been able to invest some of that money  in Vanguard Etfs. The goal here is to open an (Roth) IRA account but haven't done this. Not certain it will work though and it's been frustrating to find out at other places like fidelity and creative planning. They opened accounts, we transferred money and in the end after a one year process with calls, lots of paperwork and planing, they tell us, sorry, doesn't work (because DH needs to have US residency and doesn't)

We will most likely retire in Germany. Thank you for the thrown link, we will read through that. DH is is locally employed for the state department and able to pay his taxes in the US. We are hoping this will stay this way when he retires and draws SS (or other funds from US accounts)

Anette

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Re: Is our Roth IRA worth investing in?
« Reply #7 on: January 27, 2022, 02:07:12 PM »
USAA?  Probably need more details on income/residency for anyone to comment.
Thanks for your input!
USAA has not been an option for locally employed Americans but DH will ask again when they next come to visit.

Anette

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Re: Is our Roth IRA worth investing in?
« Reply #8 on: January 27, 2022, 05:37:30 PM »
The lack of growth upside negates any tax benefits. I'd avoid.

Thank sou vor uns clear answer!

Sorry, should have switched the key board to English first.

Thank you so much for your clear advice!

MustacheAndaHalf

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Re: Is our Roth IRA worth investing in?
« Reply #9 on: March 17, 2022, 10:06:53 AM »
Interactive Brokers (IBKR) doesn't have a great web interface, but their Trader Workstation is good.  It's software you install on a PC / Mac.  When I place limit orders, I scan just click/scroll/click/click to update prices.  All a few clicks and moves of a mouse, very responsive.  Everywhere else... that takes several different screens (Vanguard, Schwab, IBKR's web interface).

Have you also looked at Schwab International?  I believe they offer free ATM withdrawals around the world, and can handle international addresses for US citizens.

ROF Expat

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Re: Is our Roth IRA worth investing in?
« Reply #10 on: March 17, 2022, 12:15:51 PM »
Anette,

This is an increasingly common problem for Americans living overseas.  Here's a link to an article that explains the topic pretty well. 

https://thunfinancial.com/home/american-expat-financial-advice-research-articles/us-brokerage-accounts-american-expats-closed-2015/

I don't think USAA will be an answer for your husband.  USAA no longer has a brokerage and sent all its own customers to Charles Schwab and Victory Capital. 

There are still smaller operations that welcome customers who reside outside the US, but they generally will not allow you to buy mutual funds.  In my limited experience, foreign residents can usually buy ETFs, but the article I linked says that may not be possible in the EU.  You should still be able to buy and sell individual stocks, though.  The other downside is that the smaller companies that will serve Americans overseas tend to be boutique operations that will want to act as financial advisors and bill you accordingly. I would expect an annual fee of about 1%, but less for a larger account and maybe more for a smaller one. 

By the way, I would keep the SDFCU account even if the IRA isn't very useful.  It can be very useful to have a US bank account, and the State Department Credit Union is used to dealing with customers overseas. 
 
« Last Edit: March 17, 2022, 12:19:10 PM by ROF Expat »

Anette

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Re: Is our Roth IRA worth investing in?
« Reply #11 on: March 19, 2022, 03:36:34 AM »
Hi Anette,

My friend who lives in the Middle East uses Interactive Brokers. It's not the best platform, but you get used to it. Their trading fees might be more expensive than others.

Have you inquired with TD Ameritrade? I have another friend from the Philippines who was able to open a non-resident account with TD. You just need to fill out a W8 Ben form, I believe.

This Ultimate Roth IRA Guide blogpost might help you get familiarized with the ins & outs of a Roth.

https://districtcapitalmanagement.com/roth-ira/

Note that one needs to have US earned income in order to contribute to a Roth.

Thank you for your advice.
My husband does have American earned income so he qualifies, it is just very hard to find a brokerage to work with.
We tried using Ameritrade but it wasn't possible. That may be specific to Europe.
We might have to call Interactive Brokers to understand better how to get more out of that account and how to invest in an IRA with them. Hopefully this will be possible.

Anette

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Re: Is our Roth IRA worth investing in?
« Reply #12 on: March 19, 2022, 03:39:56 AM »
Interactive Brokers (IBKR) doesn't have a great web interface, but their Trader Workstation is good.  It's software you install on a PC / Mac.  When I place limit orders, I scan just click/scroll/click/click to update prices.  All a few clicks and moves of a mouse, very responsive.  Everywhere else... that takes several different screens (Vanguard, Schwab, IBKR's web interface).

Have you also looked at Schwab International?  I believe they offer free ATM withdrawals around the world, and can handle international addresses for US citizens.

Thank you! We had forgotten to check Schwab an d will do that now!
Also thanks for explaining the I B web interface thing, will give that a try.

Anette

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Re: Is our Roth IRA worth investing in?
« Reply #13 on: March 19, 2022, 03:42:17 AM »
Anette,

This is an increasingly common problem for Americans living overseas.  Here's a link to an article that explains the topic pretty well. 

https://thunfinancial.com/home/american-expat-financial-advice-research-articles/us-brokerage-accounts-american-expats-closed-2015/

I don't think USAA will be an answer for your husband.  USAA no longer has a brokerage and sent all its own customers to Charles Schwab and Victory Capital. 

There are still smaller operations that welcome customers who reside outside the US, but they generally will not allow you to buy mutual funds.  In my limited experience, foreign residents can usually buy ETFs, but the article I linked says that may not be possible in the EU.  You should still be able to buy and sell individual stocks, though.  The other downside is that the smaller companies that will serve Americans overseas tend to be boutique operations that will want to act as financial advisors and bill you accordingly. I would expect an annual fee of about 1%, but less for a larger account and maybe more for a smaller one. 

By the way, I would keep the SDFCU account even if the IRA isn't very useful.  It can be very useful to have a US bank account, and the State Department Credit Union is used to dealing with customers overseas.

Thank you for the advice and very useful link!