Australia Citizen Living in the US. How to handle tax advantaged accounts?

[austachian]

Following up from my thread here: http://forum.mrmoneymustache.com/investor-alley/newbie-betterment-or-vanguard/

I've been trying to understand 401ks/IRAs. A lot of my research recommends keeping funds in these tax advantaged accounts, so that I don't pay capital gains when rebalancing my asset allocation. I'm currently residing/working in the US, but am not a citizen, and don't plan to retire in the US.

Does it make sense for me to put money in an IRA/401k? Since I'm not planning to retire in the US, I'm not sure whether it makes sense for me to put money here. At the moment I'm not contributing at all to my 401k for these reasons, but I'm wondering if this is a mistake.

I'm also not quite sure how the process of rebalancing works. It seems like I sell some of one asset class and use the proceeds to purchase another asset class, so that it matches my initial allocations more closely. How do I do this and avoid capital gains? Can I choose to send the proceeds of the sale to my tax advantaged account?

Anyone have experience in this area?

[actionjackson]

Hey Austachian, Another Aussie expat here living in the US.

I elected not to have a 401k, because I'm not planning on staying here long term - I had a brief discussion on the phone with a rep at the firm our company runs the 401k through, and elected not to do it. Keen to see what others suggest though.

I'd be curious, while we're here - to know what you have done regarding Aussie and US based assets - and what you're planning to do in future.

I have some VAS shares on the ASX in Australia. Plus our emergency cash fund is sitting in a 'high' interest savings account in Australia. Most of our money is currently in USD here in the US, and I'm currently debating whether to send money back to Australia, or leave it here. I've been waiting for the AUD to drop below 70 cents before I send any more back.

I was able to open an investment account here with Vanguard - other brokers turned me down because I don't have permanent residency. I'm now wondering if I keep USD invested here locally, as a way to hedge against an Australian market crash. The only issue then is that it makes my tax returns more complex, and I will need to do a tax return for AUS and the US every 6 months, so long as I keep assets in both countries.

[austachian]

Hey actionjackson,

Interesting about the 401k, I came to a similar conclusion. Just going to have to live with not getting the tax breaks for now I guess!

I haven't done anything interesting with my assets yet, I'm not even investing so far (which I'm trying to fix at the moment). My current plan is to get my US assets into Vanguard ASAP, then I'll think about what to do with my AUD. I'm actually just considering using it to invest in Vanguard further, but not sure if there's a reason to invest locally in Aus as well.

I've had the same thoughts about whether to leave my investments in USD after I return to Australia. Not sure whether it's worth the tax return hassle, but at this point that's a fair way off, so I'll deal with that down the line.

[actionjackson]

Yeah, I guess it depends on how long you stay here?

I'm in Texas - been here for 2.5 years, probably only stay until the end of this year - who knows what Trump will do with E3 visas...

For me, atm, 5 cents on the exchange rate is worth 10k. So holding out until it goes back down to 70ish cents, which banks etc. are forecasting it will - especially if the Fed here hikes the rate, as they are suggesting they will.

[fsabia]

What did people decided to do with there money in AUD and USD?  Im an american who has worked in AU and CAN and have thousands of dollars in each country doing nothing. I am wondering if I should move my AUD and CAD to USD and invest in Vanguard USA. Or...should I open Vanguard accounts in AU and CAN? The problem is I can't add funds to AU or CAN unless  transfer money all around. I am currently in Canada working.

So do people exchange there money to USD or keep it put investing in the country the money is sitting.

[Paul der Krake]

I probably won't retire in the US either, but max the crap out of my tax advantaged accounts anyway. The US currently has the best investing opportunities in the world in terms of diversity, corporate strengths, and market power. I may not live here forever, but my assets will.

Tax treaties ensure that you will be taxed roughly the same regardless of where the money comes from. Unless you intend on retiring in a weird country or have a very peculiar situation, I think you are giving up too much upside by not investing here while you can.

[actionjackson]

That's a good point.

I'm thinking the same thing. To me, money invested here is also a hedge against the Australian market crashing - I'm bearish on Aussie RE market, and VAS ASX is exposed to the major banks, who are heavily exposed to Aussie market.

Being an Aussie and throwing majority into AUD securities on ASX such as VAS, perhaps with some international exposure, doesn't allow for international mobility once FIRE'd, which is something I want to maintain. Having assets in USD and AUD gives a bit more flexibility if I want to say, move to back the US or Europe 10 years from now.

Only downside is having to lodge 2 tax returns each year.