Case Study: Working Abroad- Best way to Invest?

[majandra22]

Hello all,

My SO and I will finally get out of debt in about two months time and are making plans for the future. We are currently still in the US as I obtained a good contract position that should last between 6-18 more months. We want to take advantage of our low COL with the ability to save $2,500 a month for as long as possible, but once this position ends (with hopefully $15k+ in savings), we will immediately put our international plan in place. Our goal is to move countries every 2 years more or less so that after a decade we have lived in 5 distinctly different cultures. In the future, we may return to the US for several years, continue travelling, and/or establish a home base abroad and open a business. My main question is, with being outside the US and switching between high- and low- income locations, what is the best way for us to plan our investments?

Background Info:
I am a highly-qualified English as a Second Language Teacher with 8+ years teaching experience and will soon finish my Masters. I am 30.

My boyfriend did not finish college. He has managerial experience but going forward hopes to become an author and freelance writer. He is 34.

We have 1 car worth less that 5k which we will sell, and are staying rent-free at one of my parent's rental properties. (It has sat empty for 4 years yet they still paid hundreds in utility bills a month, now we pay those bills and are helping to fix it up to rent/sell when we leave.) We have no other investments or retirement but will be debt-free soon. :)

Teaching contracts abroad tend to last 1-3 years at a time, so this works with our goal to move frequently. My boyfriend is not a native speaker of English and doesn't have his bachelor's so he unfortunately will not qualify for teaching in most of the places we plan to live. He therefore needs to find employment that is freelance and/or online. Being a writer aligns well but any other suggestions to supplement this income would be appreciated. He is GREAT with people and I'd like him to have a career that takes advantage of his skillset. Maybe some type of consultant?

**Since his income is completely undetermined, the following information is based on my income only. Our hope is to live off my boyfriend's income and be able to save as much as possible of mine.**

Our plan is as follows:
2-3 years in Bogotá, Colombia (My expected savings: negligible) 
This is my boyfriend's birthplace and our favorite city in the world. We both have great networking there already and will make significantly above average due to having US citizenship and being fully bilingual. A good middle-class income there is 2M pesos/month and we expect to bring in 10M combined. In addition to working full-time, we both have multiple side gigs planned, as well as ways to lower our rent in a desireable neighborhood (biggest expense) significantly. However, we also plan to travel extensively both within Colombia and the Andean region, so this will eat into our savings. Our plan is to lower our living expenses as much as possible, then split the rest between short-term (travel money) and long-term (investments). We plan to eventually buy property here and start a business, so any savings in pesos will likely be left alone to compound over the following decade.

2 years in South Korea (My expected savings: 20-26k per year)
South Korea offers great teaching perks, including free housing, flights, breakfasts and lunches while at schools, and no income tax. While we plan to travel throughout SE Asia while there, we should have around $2-2.2k in monthly savings. This location itself does not appeal to us as much as others, but we'd really like to explore the region and S. Korea offers the best perks. There are some GREAT benefits if I can land a university job, such as around 5 months PTO/year.

2 years in Germany (My expected savings: will likely save nothing)
We just spent 4 months in Europe and (obviously) loved it, so we want to move back to a central location that will allow a lot of travel. I should be able to get a freelance visa and find 2-3 language schools to work at, in addition to tutoring/online lessons. We likely will just make ends meet here, so we will likely need to use some of our savings to afford traveling around the continent on spare school breaks/long weekends.

~4 years in the United Arab Emirates (My expected savings: 65-100k+ per year) This is our big-ticket option in terms of saving for FI. Flights, housing, and daily transportation will be covered. And it's tax-free income. We want to maximize time here for earning potential, but I'm not sure how well we will do culturally/geographically as I'm heat sensitive and SO might struggle with following no PDA law ;-). We may also choose another country in the region (Oman, Saudi Arabia, etc.) based on the best offer/culture/sense of security (In some countries some jobs require an exit visa, so you cannot leave the country unless your employer permits it- this is a no-go for us). I am thinking it's best to do this portion early (so the money can be compounding), but will need to work it around planning a family.
 
1-2 years in Brazil (My expected savings: negligible)
IF we decide to have children, we want one to be born in Brazil. This will make us automatic permanent residents, making it easier to find work, start a business (we plan to eventually expand our business to Brazil), and adopt a Brazilian child. During this time I also hope to complete the next level of teaching certification there, which will double my employment options as I will be able to go into teacher training with some of the top schools in the world.

These are our plans for now. After that, we will likely open our business in Colombia (a language school), or continue moving around until I feel I have enough experience to start it and we are ready to settle down a while. Our goal with FI is not RE, but to be able to not have to worry about money. In addition to these countries, we also want to travel the US/Canada for 1-2 years in an RV and live 3-6 months every year in different places. We will also travel extensively between teaching contracts, and may do some WOOF/HelpX or even Peace Corp work if we can work it in. It may be harder to earn enough income on during these times, so we want to be financially secure.

So after all this explanation, here are my questions in more detail:
1) First off, are there any obvious faults to our plan?

2) What order is best for the 5 countries? (Colombia has to remain first though) Also, keep in mind the more experience I have before going to the Middle East, the higher an income/contract leverage I can command.

3) What is the best way to invest while living abroad? Can we do index funds or 401K while abroad? Our thinking is to always keep about 5k in short-term savings for emergencies, then make lump-sum transfer back into USD to cut down on transaction fees.

4) How should we account for high COL/low income years, such as Germany. Should we keep some money out of investments for these years or is there a way to withdraw it?

5) With S. Korea and UAE, the income is tax free there, however, I am confused about US taxation while abroad. I know we must file yearly, but do we never have to pay if income is below the threshold (around $95,100), or do we only qualify for this if we've been outside the US 330 or more days in a year? We'd like to come back a few weeks each year so that will have to be taken into consideration...

6) What else should we be asking?

Other things to mention:
I don't know if people count this into their FI plans or not, but we will both eventually be the sole inheritors from our parents. His have a property worth around 300k and mine has several businesses/homes, anywhere from 300k-1M+ I think. We hope to use this money to build a house in Colombia and establish our school.

My expected side gigs for some/all locations as my visa permits:

• Local coordinator for study/work abroad programs
• Consultant/teaching assistant at local schools
• Adjunct professor
• Private tutoring and small classes
• Translation and possibly Interpreting
• Blogging

Thank you for any advice or suggestions you can provide. I am very excited to get started with our plan, sitting in my cubical each day is a killer but I know that I'm helping build our nest egg for beginning our life of adventure on the road!

[Catbert]

I have no answers to your questions, however, one blog to look at is:  GoCurryCracker.com    They've been expats for the past 4 years or so although they move around a lot more than you do.  He writes quite a bit about money including taxes, establishing a low tax state of record, ACA, etc.

I would make sure that I tackled the countries in an order so that you would have the $$ to fund IRAs and 401Ks to the extent that they are available to you.  That likely means you shouldn't hit 2 or 3 HCOL countries in a row.

Good luck!  Sounds fun.

 

[majandra22]

I have no answers to your questions, however, one blog to look at is:  GoCurryCracker.com    They've been expats for the past 4 years or so although they move around a lot more than you do.  He writes quite a bit about money including taxes, establishing a low tax state of record, ACA, etc.

I would make sure that I tackled the countries in an order so that you would have the $$ to fund IRAs and 401Ks to the extent that they are available to you.  That likely means you shouldn't hit 2 or 3 HCOL countries in a row.

Good luck!  Sounds fun.

Thanks for the reminder Mary, I do look at their blog sometimes but hadn't considered it a source of ideas regarding doing taxes as an expat. I know they are good at figuring out how to lower taxes in the US so I'm sure they have some tricks for doing it abroad as well!

Yes I think the order to the countries is vital to the plan, I'm just not sure which order is best!

[SunnySaver]

It sounds like you have some big adventures ahead of you. Good luck and have fun!

3) What is the best way to invest while living abroad? Can we do index funds or 401K while abroad? Our thinking is to always keep about 5k in short-term savings for emergencies, then make lump-sum transfer back into USD to cut down on transaction fees.

401K is an employer sponsored plan. Do you plan to structure things somehow to be paid by a US employer that offers a 401K? Otherwise you're out of luck there.

As for index funds, it should be no problem for a US citizen abroad to buy them. You should set up all necessary accounts before you leave the US. People do occasionally report issues with Vanguard, Fidelity, etc. not wanting to deal with customers living abroad, including freezing accounts to prevent any new purchases, so beware. Keeping a valid US address for those accounts should help.

5) With S. Korea and UAE, the income is tax free there, however, I am confused about US taxation while abroad. I know we must file yearly, but do we never have to pay if income is below the threshold (around $95,100), or do we only qualify for this if we've been outside the US 330 or more days in a year? We'd like to come back a few weeks each year so that will have to be taken into consideration...

It sounds like you are both US citizens. Start with IRS Pub 54 (https://www.irs.gov/pub/irs-pdf/p54.pdf). The exclusion you mention is the Foreign Earned Income Exclusion, and there is also a Foreign Housing Exclusion that may allow you to exclude a portion of your housing expenses. You must meet very specific criteria to claim them, as detailed in Pub 54. Being physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months is not all it takes, although that is one of the criteria if you want to qualify under the physical presence option.

Do remember that the value of benefits like housing and flights will probably also be considered income for US tax purposes.

If you live in a state with income tax, some are notorious for claiming you are still a resident for state tax purposes after you move abroad. If you want to keep things like a US driver's license, consider moving to a no-tax state to establish residency there before you leave the US.

6) What else should we be asking?

Don't forget to plan for health insurance coverage to meet your needs in those places.

[Freedomin5]

If you are qualified as a teacher, you could do the international school circuit in all of the mentioned countries, in which case you should command a decent salary comparable to or better than the teaching salary that you would receive in the states. Also, international schools provide housing or a housing stipend), health insurance, and flights home for their teachers and their families. This means that you should be able to have savings each year. Andrew Hallam is a teacher who taught in international schools and reached FIRE through international school teaching. His book is called Millionaire Teacher, and it might be worth reading.

I'm assuming your SO's native language is Spanish? In that case, he could likely find a job providing private tutoring to people who want to learn Spanish. Since it's private tutoring, often no college degree is necessary. Being fluent/native is more important.

[majandra22]

Do remember that the value of benefits like housing and flights will probably also be considered income for US tax purposes.

If you live in a state with income tax, some are notorious for claiming you are still a resident for state tax purposes after you move abroad. If you want to keep things like a US driver's license, consider moving to a no-tax state to establish residency there before you leave the US.

6) What else should we be asking?

Don't forget to plan for health insurance coverage to meet your needs in those places.

Good point regarding the flights and housing possibly being considered income. I will have to check into that.

Yes my state and city do collect taxes. I used to live in Texas and it was very easy to become a resident (unlike Ohio which made me retake my driver's exam when I moved back home) so we may 'move' to Texas before departing the US. There are companies that give you a Texas address for tax purposes (usually used for long-term RVers), so I will check into whether this could work for us as well.

Both UAE and S. Korea typically include health insurance in the offer, but it would be good to look into supplemental plans that include repatriation, medical evacuations, and such.

Thanks for the advice SunnySaver!!

[majandra22]

If you are qualified as a teacher, you could do the international school circuit in all of the mentioned countries, in which case you should command a decent salary comparable to or better than the teaching salary that you would receive in the states. Also, international schools provide housing or a housing stipend), health insurance, and flights home for their teachers and their families. This means that you should be able to have savings each year. Andrew Hallam is a teacher who taught in international schools and reached FIRE through international school teaching. His book is called Millionaire Teacher, and it might be worth reading.

I'm assuming your SO's native language is Spanish? In that case, he could likely find a job providing private tutoring to people who want to learn Spanish. Since it's private tutoring, often no college degree is necessary. Being fluent/native is more important.

I have considered the international school circuit but since my US teaching licenses are for teaching Spanish, I'm not sure what the demand would be. I am planning to add an ESL/EFL endorsement, but then international schools (that teach other expat's children) may not have a high demand for learning English as a foreign language. I will definitely have to check the job boards and see what interest there is out there.

I have seen mention of Hallam's book before so that is something I should definitely read. I purchased another one with a similar premise and he discusses how to get a lot of leverage in your contracts in order to substantially increase your income (on one he simply crossed out their offer and added another 20-30k and they accepted it without complaint!). I will use some of those techniques to build extra time into my schedule for side gigs and/or get the schools to help me land additional positions without risking my visa.

He does speak Spanish and there may be good demand for his Colombian accent, which is highly regarded amongst Spanish-speakers and learners alike. We are considering having him take a certification program to teach Spanish, but he may be very limited without a degree, so we are not sure if it's worth it. If he just did private lessons I could train him myself since credentials wouldn't be as important. Thanks for the great idea!!

[FIRE Artist]

First piece of advice - get married.  Common law relationships are more often than not, not recognized internationally, and highly probable any relocation and visa support provided by employers will not extend to a trailing boyfriend.

[majandra22]

You make an excellent point, FIRE Artist, they absolutely do not recognize/support it. In fact, in the UAE it is illegal to live/stay in the same residence/hotel room as the opposite gender if you aren't married (although hotels in Dubai sometimes overlook this). We will definitely be getting married beforehand, either in the US or Colombia.

I've checked out GoCurryCracker but they FIRED before moving/traveling abroad. We are hoping to achieve FI while working abroad, so some of the issues are unique. Can anyone reference any old forum posts or other blog sites, books (besides Hallam's Millionaire Teacher), etc. that would discuss saving/investing for FI while living abroad and not having access to things like 401s?

And to clarify, if Vanguard were to block our account because they somehow figured out we were abroad, would we just not be able to make further deposits or would the money somehow be at risk because of their concerns regarding money laundering? Our chosen countries may unfortunately make us look more suspicious so we wouldn't want to do anything that could risk our investments. Right now, my (very rough) plan is to save up $5000-10,000 USD at a time, transfer it into some type of online account (either Paypal or my US bank account), then deposit it into Vanguard from there. We will have VPN service and a US address, either with my parents in Ohio or somehow in Texas.

What other types of investments should we consider while living abroad? I'm not keen on buying rental properties in the US (that was the strategy of the book I read cleverly entitled "Get Rich Teaching English Overseas"), although I would be open to buying a property in Bogotá since his family could help us take care of it and we wouldn't have any difficulty renting it out until we move back eventually.

[FIRE Artist]

I definitely recommend buying a place in Bogota ASAP, this will set you up for when you want to settle there, and from what I saw when living there 5 years ago, prices where rising fast in the city,especially in the areas where you might want to live.

[SunnySaver]

And to clarify, if Vanguard were to block our account because they somehow figured out we were abroad, would we just not be able to make further deposits or would the money somehow be at risk because of their concerns regarding money laundering?

I think it's about further deposits/transactions only. It's been discussed in a few threads, though search isn't very effective. Here's a recent one where it was mentioned:
http://forum.mrmoneymustache.com/post-fire/sell-everything-and-become-a-permanent-traveler/msg1337588/#msg1337588

As long as you have a residential US address on your account and funds are coming from a US bank account, there shouldn't be any issue. If your Texas address would be a mail service, there is a slim chance for that to raise red flags. If possible, make all the changes in advance of leaving the US so you have time to make alternate arrangements in case of any troubles. Your parents address in Ohio seems like a great backup option if they are willing to manage occasional mail for you.

What other types of investments should we consider while living abroad? I'm not keen on buying rental properties in the US (that was the strategy of the book I read cleverly entitled "Get Rich Teaching English Overseas"), although I would be open to buying a property in Bogotá since his family could help us take care of it and we wouldn't have any difficulty renting it out until we move back eventually.

Given your plans, I don't think your location should affect your choice of investments very much. If you wanted to be remote landlords in the US, you could do it from abroad. If index funds are your thing, stick with them.

There is the issue of currency/foreign exchange rate risk, but if you are moving that often, I would not worry about it. Keeping your investments primarily in USD, augmented with a property in Colombia, would be a way to hold some percent of your investments/net worth in peso-denominated Colombian real estate. That only makes sense if you decide that mix is appropriate for you, though.

[Freedomin5]

If you are qualified as a teacher, you could do the international school circuit in all of the mentioned countries, in which case you should command a decent salary comparable to or better than the teaching salary that you would receive in the states. Also, international schools provide housing or a housing stipend), health insurance, and flights home for their teachers and their families. This means that you should be able to have savings each year. Andrew Hallam is a teacher who taught in international schools and reached FIRE through international school teaching. His book is called Millionaire Teacher, and it might be worth reading.

I'm assuming your SO's native language is Spanish? In that case, he could likely find a job providing private tutoring to people who want to learn Spanish. Since it's private tutoring, often no college degree is necessary. Being fluent/native is more important.

I have considered the international school circuit but since my US teaching licenses are for teaching Spanish, I'm not sure what the demand would be. I am planning to add an ESL/EFL endorsement, but then international schools (that teach other expat's children) may not have a high demand for learning English as a foreign language. I will definitely have to check the job boards and see what interest there is out there.

I have seen mention of Hallam's book before so that is something I should definitely read. I purchased another one with a similar premise and he discusses how to get a lot of leverage in your contracts in order to substantially increase your income (on one he simply crossed out their offer and added another 20-30k and they accepted it without complaint!). I will use some of those techniques to build extra time into my schedule for side gigs and/or get the schools to help me land additional positions without risking my visa.

He does speak Spanish and there may be good demand for his Colombian accent, which is highly regarded amongst Spanish-speakers and learners alike. We are considering having him take a certification program to teach Spanish, but he may be very limited without a degree, so we are not sure if it's worth it. If he just did private lessons I could train him myself since credentials wouldn't be as important. Thanks for the great idea!!

You have to remember when you teach at an international school, not all international children are native English speakers. I live in China, and in the English-speaking international schools, they often have children from non-English-speaking countries, or they have children holding foreign passports who have lived in China their whole life. There's usually a high demand for ESL teachers.

[FIRE Artist]

Other things to mention:
I don't know if people count this into their FI plans or not, but we will both eventually be the sole inheritors from our parents. His have a property worth around 300k and mine has several businesses/homes, anywhere from 300k-1M+ I think. We hope to use this money to build a house in Colombia and establish our school.

Just notices this one.  In a simple word...NO

if you need a longer justification...

Never count on an inheritance.  Never put yourself in a position of making life plans based on someone else departing this world.  Never assume that an inheritance is secure.  Your travel plans are for about 15 years, do you honestly expect both sets of parents to pass in that time?   You are Mustachian, so you should not need a windfall.