US Citizen Moving to Australia and Overwhelmed by Investment Differences

[Carbon_Socrates]

Hello everyone. This is my first post here. I'm not very financially savvy, but I'm trying to follow a "hands-off" Bogelhead style approach to my savings where I contribute regularly and plan not to touch the money I put away for the next ~20+ years (I am 31).

I'm a US Citizen married to an Australian citizen and we both currently live in the USA. However, our plan has always been to move to Australia to be near my wife's family. At the time of our marriage we both had just graduated from college, so we had very little money and I had an opportunity in the USA to get some job experience + for us to save up a starter fund, which is why we're living here now. We've put aside an emergency fund and have started putting money away for retirement. Time-frame for moving to Australia is roughly 2 years. The things we are doing now or planning to do as far as savings in the USA go over those two years are:

• Max out employer 401k.
• Max out HSA account.
• Max out Roth IRA + spouse Roth IRA.
• Mega back door Roth conversion.
• Minimum payments on all low interest student loans.
• Put aside 20,000USD in an HYSA on top of our emergency fund to cover possible visa + moving fees.

I read through @deborah 's very helpful investment order post for Australia, but I'm feeling overwhelmed trying to understand how that corresponds to what I'm doing in the US.

It sounds like if I don't have a house loan there are two things I can do in Australia:

• Contribute extra to the superannuation fund.
• Invest in stocks.

The questions I have are:

(1) Is there anything that is comparable to an Individual Retirement Account (IRA) in Australia?

(2) Does the distinction between post-tax (e.g. Roth 401k / Roth IRA) and pre-tax (e.g. traditional 401k / IRA) retirement contributions exist in Australia? Is this all contained within the superannuation fund?

(3) I have a Fidelity brokerage account and Fidelity Roth IRA in the US. I see that Fidelity has an international platform. Is that a comparable service? Is there a better user-friendly (mostly hands off) way to invest in stocks for an Australian resident?

(4) I'm playing catch-up for starting to save for retirement late (when I turned 30), part of that is contributing to extra funds beyond the standard 401k (like the HSA, Roth IRA, etc.). Is there anything like this in Australia? Or would I likely end up investing that money into the stock market (mutual funds / ETFs)?

(5) I feel like I ought to meet with a tax expert, but I don't know how to find someone who is knowledgeable about the laws of both countries! Does anyone know if it would be better to look for an Australian service for that? Is there something like this specifically aimed at incoming foreigners? (Questions I would want to ask (many of which are probably dumb!): Can I use my 401k balance for a first-time home purchase in Australia the way I would in the USA? Can I claim my US student loan payments as a deduction on Australian taxes (and if not, should I aggressively pay them down while I'm in the USA)? Is there any way to continue contributing to my US accounts while residing in Australia? If not, can I convert those funds into an Australian super or another fund? Does it make more sense to convert or to keep them in those accounts? Does Australia respect the tax-exempt status of a Roth IRA?)

Thank you in advance to anyone who takes the time to read my post or respond. :) Any help or additional resources I can consult would be greatly appreciated.

[deborah]

Firstly, superannuation is just a tax dodge. It’s not an investment type. Almost any reasonable investment can be in superannuation, including houses (which can make life difficult when you need to withdraw from super). It used to be that there were different taxation rules for your superannuation when you withdrew it, depending on whether you put in pre-tax or post tax contributions, but those have ceased. If you make a pre-tax contribution it’s taxed at 15% going in, and post tax contributions aren’t.

We do have a tax agreement with the USA, but that doesn’t stop them from double taxing some things. However, the social security agreement does mean that the Australian old age pension years includes USA social security entitlement quarters.

Got to go. I’ll finish this later.

[mspym]

Hello there! I'm a Kiwi married to an American who is about to move from Australia back to NZ so I've been doing a lot of the same thinking but for a different destination country. This is not tax or investment advice etc etc

(1) Is there anything that is comparable to an Individual Retirement Account (IRA) in Australia?
Not really. You have your Super account/s and this is funded by your employer at the mandatory 10.5% of your salary, which is/should be pre-tax, and you.

(2) Does the distinction between post-tax (e.g. Roth 401k / Roth IRA) and pre-tax (e.g. traditional 401k / IRA) retirement contributions exist in Australia? Is this all contained within the superannuation fund? All contained in your super account. You can contribute concessional i.e pre-tax up to a cap of 27.5K p.a. or non-concessional i.e. after-tax. Your concessional contributions get taxed on the way out, your non-concessional don't. Concessional contributions get a flat-tax of 15% which is generally better than your standard tax rate, which can be up to 46%.

(3) I have a Fidelity brokerage account and Fidelity Roth IRA in the US. I see that Fidelity has an international platform. Is that a comparable service? Is there a better user-friendly (mostly hands off) way to invest in stocks for an Australian resident? Vanguard has an Australian domiciled personal investment platform, I don't believe Fidelity does.

(4) I'm playing catch-up for starting to save for retirement late (when I turned 30), part of that is contributing to extra funds beyond the standard 401k (like the HSA, Roth IRA, etc.). Is there anything like this in Australia? Or would I likely end up investing that money into the stock market (mutual funds / ETFs)? You can make catch-up concessional payments into Super, and also put up to 100k p.a. as non-concessional payments. Since you can't really get the money out unless you hit what is called your preservation age, and you are young, probably better putting extra money into the stock market.

(5) I feel like I ought to meet with a tax expert, but I don't know how to find someone who is knowledgeable about the laws of both countries! Does anyone know if it would be better to look for an Australian service for that? Is there something like this specifically aimed at incoming foreigners? (Questions I would want to ask (many of which are probably dumb!):
 - Can I use my 401k balance for a first-time home purchase in Australia the way I would in the USA?
          - No, but you can set up a First Home Buyers super account which can be used. Australian citizens only.
  - Can I claim my US student loan payments as a deduction on Australian taxes (and if not, should I aggressively pay them down while I'm in the USA)?
          - No, just pay them down
   -  Is there any way to continue contributing to my US accounts while residing in Australia?
          - No, the US does not like overseas residents investing in the US markets.
   - If not, can I convert those funds into an Australian super or another fund? Does it make more sense to convert or to keep them in those accounts?
          - I'd recommend leaving them there because it's very hard to get the money out of a Super fund once it's in there. You have more flexibility about getting money out where they are now.
    - Does Australia respect the tax-exempt status of a Roth IRA?)
          - Yes, Australia does respect the tax-exempt status. It's not considered for your taxes here.

[Carbon_Socrates]

Hello @mspym and @deborah and thank you for your responses! @mspym I hope everything with your spouse's move goes smoothly ^_^

I feel a little better already just having some more context, so thank you very much!

The employer contribution to the super sounds nice: better on the face of it than the 5% employer match I get in my 401k currently! :) I'll need to do some more research about Supers as I get closer to moving/working in Australia. It looks like there are a bunch of different Super funds that you can choose between, which is not quite what I was expecting!

With some cursory investigation, the average salary for my position in Australia is around 200,000AUD p.a. which is close to my current salary of 135,000USD p.a. Putting that into a superannuation calculator (https://moneysmart.gov.au/how-super-works/superannuation-calculator), it looks like I can only contribute an extra 2.75% pre-tax and up to 55% post-tax. On my current track in the US I am set to retire at 55 with roughly 80% income replacement. I think it makes sense to keep all of the savings I have in my US retirement accounts if it is easier to access them (but I'll research that some more, of course!). And like you say, if I want to retire before 60, maybe the stock market is the way to go. Hmm, that is a lot to think about.

I know in the US there is a way to do a "conversion" of 401k retirement funds into a Roth IRA, if you know how much you will want to withdraw at least 5 years beforehand, so that you can relatively easily access money in those accounts before 59 1/2 if you plan ahead (or just have seasoned funds in a Roth IRA to begin with). Is there anything similar in Australia, or is my main resource for retiring before 60 going to be a brokerage account (or possibly my Roth IRA held in the USA)? If I leave my 401k for 20 years after I move to Australia, it should have >500,000USD, so maybe I can do some conversions when I am around 50 so that they are seasoned when I am 55.

I was surprised when I read that the retirement age in Australia was 67: over seven years after when I could access my 401k, but now I'm thinking I misinterpreted that.... it looks like "preservation age" is 60 (for someone born in 1992) and the "pension" age is 67, so if preservation age is when I can withdraw from my Super, I would be able to access my 401k and Super without penalties roughly at the same time. I had not even looked at the pension stuff--another thing to add to the list of topics to research!

[mspym]

Yeah, in terms of early retirement here, you need to think of it in a couple of different buckets. There's the taxable investments to take you to your preservation age, and the Super to get you from preservation age to pension age. There just isn't the conversion path available to you or early withdrawal with a penalty option. In your case, part of the bucket that gets you from RE to preservation age could be your IRA accounts with a conversion ladder.

Other considerations here are
- there is a capital gains tax on investments here which is applied when you sell, leave the country permanently, or if your fund has a CGT event. You will get tax paid by the fund attributed to you and can write that off on your taxes.
- there is a strong home bias here due to franking credits on Australian stocks, which is a whole other topic but basically you can claim tax paid by the company
- Super is a big industry and some of the fees are eye-watering but the industry funds are comparably low cost
- Most of the things you can claim for your primary residence in the States don't apply here. It's pretty common to have an offset account attached to your mortgage where you can put savings that will reduce the total interest on your mortgage but are accessible.
- Housing in the main cities is hella expensive. My spouse thought rents were comparable when he moved over and then realised it was per week not per month. Think San Francisco or New York. There is a lot of factors underlying this including but not limited to
               - No CGT on primary residences
               - A lot of tax writeoffs for investment properties driving up demand for housing supply
               - Strong competition for rental properties both from people who can't afford to buy a house and transient residents
               - A very strong NIMBY contingent meaning the developers who can get through the delays build fancy expensive places to recoup the costs

Good luck.

ETA: The ATO website is horrific in terms of communicating anything clearly BUT there is an ATO forum that has ATO staff answering some very complex questions in really clear language and they are worth poking around in. I was very impressed with how good the answers from the forum were.

[MDM]

Carbon_Socrates, you have come to a good place on this forum!  Might be worthwhile perusing some other threads on this board.  E.g., Confused about a lot of thing's. Little help. might be relevant.  Good luck!