Author Topic: Case Study: from Canada - where to put money with no IRA/401(k)/TFSA  (Read 1534 times)

nereo

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Hello all:  I'm posting my case study because I felt an obligation to post my situation if I'm going to comment on others. 

My fiancée and I are both US Citizens, but we live in Canada where we are both in paid graduate programs.  I plan on graduating in Spring 2016, she will graduate in Spring 2018 (she just started). Currently our combined income isn’t very large (see below), but it should increase substantially post graduation. We are not eligible for any of the tax-advantaged accounts here in Canada.
We may stay in Canada, we may move to the US. Time and job opportunities will tell.

My specific questions here are:
1)   More efficient methods for saving when IRAs and 401(k)/403(b) are not immediately available to us (little/no US income).  When I wrote it all out on paper I was a bit shocked at how much we’re putting down (including extra payments from renter) into a mortgage with only a 3.04% rate. I might rethink this…
2)   Any suggestions at all about where to put extra cash, or facepunches, whatever.

Monthly income:  $2600 (includes health-care – as students we must take the plan offered)

Monthly expenses (averaged over min. three months whenever possible)
   Mortgage: $1100 ($485 interest, $615 principle @ 3.04%) - plus extra from renter (below)
   Taxes & coproperty fees: $292
   Electricity: $92 (averaged over 12 months)
   Food: $275
   Alcohol: $18
   Internet: $56.45
   Cell: $20.89
   Public Transit: $53
   Fuel (car): $94 (see note at end)
   Student Loan: $100 (hers: currently a ‘feel good’ exercise)
   Gifts/Misc: $100
   “new roof fund”: $125 (needed in 2015 to meet insurance)
   Cat care: $40
Leftover each month: $100-200, which goes into a taxable index fund.

Liabilities:
   Mortgage: $191,600 left.  Accelerated payments, 19.2yrs left. 5 year term.
      Bought for $245,000 in 2012
   S-Loans:    His: $17,000 in deferment (0%), w/funds earmarked
         Hers:   $20,500 in deferment (0%), 6.8% starting in 2018

Assets, tax deferred (approximate value)
Roth IRA: $42,000
   t-IRA:   $57,000 (his name)
   t-IRA: $21,000 (her name)
   401(k) from previous employer: $5,600
   403(b) from previous employer: $3,500
Assets, taxable accounts:
   Index funds $68,000
   Stocks (individual): $14,000
   Savings account: $17,000 (earmarked to pay ‘his’ SL in 2016)
   Checking/emergency: $6,200

Bonus Income (all immediately applied to IRA or Mortgage/home expenses)
   US income (newly started): $1000-5000/year
   Rental income (5 months/yr): $400
      
Special notes: We have one car, a 2005 compact pickup leftover from when I worked in aquaculture & hauled dead things and skiffs around.  It’s paid in full and we’re looking to sell it, but we haven’t been too motivated because we only drive ~4000mi/year, and KBB value is ~$4000.  We need one car to visit family who live 3 hours from us and who we cannot get to without a car (very rural), but besides trips we drive it 3 or 4 times a month.  Fuel ($94) is expensive because gasoline is $5.20/gallon.  I accept a few face punches here but I’d point out that even if I found a 35mpg car my monthly savings would be about $29.  I haven’t found a 35mpg car in good shape yet without needing to pony up $1k+.  I’ll keep looking though.
   
Rolling over t-IRAs:  Because we have almost no US income, we are both rolling over $6000 of our t-IRAs into ROTH-IRAs each year.  As I understand it, our standard deduction and lack of an AGI will mean we should pay no (or nearly no) taxes on this transfer.  Smart move? Am I missing something here (won’t know full tax implications til 2015).


rex.toohill

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Re: Case Study: from Canada - where to put money with no IRA/401(k)/TFSA
« Reply #1 on: December 05, 2014, 01:15:18 PM »
Hey nereo, did you ever get an answer to your 2nd question? I am a US citizen living in Canada and I have been trolling the mustache boards for some tax efficient border straddling investment advice. From my investigation so far it looks like the best first step is to max out any RRSP contributions as these have favorable tax treatment in the US and Canada. After that I am a little bit lost...