Author Topic: Should we change our investing strategy given a pending international move?  (Read 631 times)

FLBiker

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We're moving from the US to Canada (Halifax) next year.  That will involve selling our house, finding new jobs, getting a new used car, etc.  I am a resolute non-market-timer / stay-the-courser, but my wife is starting to get freaked out by all the talk of the coming recession.  We've got ~$750K in low cost index funds (mostly in retirement accounts) and we've got ~$35K in cash.  If we sold our house today, we should clear ~$80-100K there as well.

We currently max out our 457s, and our Roth IRAs.  I'm wondering if we should stop / lessen the 457s and try to accumulate more cash instead?  My worst case scenario is that the housing market crashes before we sell (June 2020 at the latest) and we have a hard time finding work because of a global recession.  And, as a result, we'd burn through our cash and then have to sell our investments at a low point.  Re: the house, we bought it at $143K, Zillow says $215K (I'm thinking more like $200K) and we owe $99K.

Leaving aside the (irrational?) fear, it's hard for me to believe that 1) we won't clear at least a few tens of thousands from the house and 2) we won't be able to find break-even jobs in Halifax.  Hence, I've been thinking "stay the course" but at the same time I am starting to have doubts.  My guess is that $35K would be ~ a (frugal) year in Halifax, but we might need more like $45K when you factor in moving / set up expenses.  It's more emergency cash than we typically carry, though.  And, if we work here through May / June, we'll probably have 5 to 10K more in cash even if we don't change anything w/ 457s.

Our plan is to move into an apartment, but we would like to buy a house the following year, so we intend to keep the proceeds from our house sale out of the market to use as a downpayment.  The fact that we intend to spend that money within a couple of years is another reason that I'm thinking we should hold more cash, even though the plan is to get that cash when we sell our house.

What do you think?  Given the pending life changes, should we lessen our 457 contributions and hold more cash?  And if you have any questions, please don't hesitate to ask.  Thanks!
« Last Edit: August 20, 2019, 04:49:48 AM by FLBiker »

terran

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Money you need in the short term (less than 5 years) should not be invested, so I guess the trick is determining how much you need to be available in the short term.

QyQ

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Don't forget that your 35k in cash is worth approx. 47k in CAD. That's a decent sum of money for a startup.

Also, im currently living in Canada, not in Halifax though, but right now there is PLENTY of jobs in every field.

FLBiker

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Thanks!  I agree with the premise that money we'll need in 5 years shouldn't be invested, and I don't think we really need to change anything in order to do that.  However, if a worst case scenario happens (ie if we don't make much money from selling the house and aren't able to find jobs) then we could theoretically need more cash than we have.  It feels unlikely, but not impossible.

I've never had instability (job-wise) with a family, so this is unsettling ground for me.  Thanks for the feedback!

BicycleB

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It's a judgment call.

In theory, it's slightly better to be in stock. But if you are efficient in deploying the cash, the drag on your long term gains of not investing further amounts now will likely be small. Life changes are a very good reason for shifting to a more conservative allocation.

If I were in your shoes, I would shift my allocation because the downside is low and marriage is important. You can find an option that will keep your wife happy or at least show action that respects her concerns. I would want to discuss that logically, market timing is unwise, but that preparing for life changes is plenty wise, but that's just to get mutual understanding for the future. Right now, I'd research a couple of things and then take action toward gradually raising my cash or bonds.

There are two separate decisions here: Whether to shift assets from stock to something short-term-safer, such as cash or CDs or bonds; and whether to put new savings into tax-advantaged retirement accounts or to hold them in a more accessible form. Can you withdraw from the 457 at will (I'm not a 457 expert)? I think that the decision to have lots of money in an accessible format is more important than the asset allocation, the stock or bonds decision.

For the money you do save outside the stock market, choose appropriate instruments. If you're not going to buy for a year or more, CDs are an option too along with bond funds and money market accounts. You could also play the bonus-for-bank-accounts game to pick up some extra return on your cash.

As a clueless American, I'd also learn how Canadian tax authorities treat my American investments. The forums have some commentary on that somewhere, I think.

FLBiker

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Thanks!  Yes, 457s are totally accessible once we leave our current employer (which we will both be doing).  There's no age restriction.  We also have ~$60K in a taxable account (in index funds), so we have plenty of accessible money, it's just not mostly in cash.

And, just to be clear, my wife isn't really pushing me to change anything, she's just asking.  She trusts me, which is why I want to make sure I'm making reasonable decisions.

And I've been doing a lot of research on Canadian taxes and I think I've got that figured out.  Thanks!