Future proofing international plans with a Fidelity account

[glacio09]

There're a few different ways that my future could go so I'm trying to set myself up in a way that could make things easier. I currently live in the US but there's a good chance I won't stay in the US post-FIRE.

I only have investment accounts in Fidelity. I've heard that Fidelity does not work if you live outside of the US. Is it that you can't use it all or just that you can't buy new trades? Can you still sell slowly as needed?

All of my investments within my taxable account are fidelity no fee indexes. It's served me well, but I've heard that if I needed to change from Fidelity to Vanguard (a la previous question) I would have to sell everything triggering a massive tax event. If I had more universal funds, that would not be a problem, correct?

If the two above are true (yes I would need a different company and yes I would have to sell) what would be the best way to set myself up for that? Right now my thinking is start buying a more universal set of index funds. Then when there is a downturn, do a big loss harvesting sell and buy into the new funds. Would already having some of the new fund cause troubles?

Lastly, does anyone know of which funds would make this the easiest process? Below is my current makeup.

15%   FNSOX   FIDELITY SHORT TERM BOND INDEX FUND
25%   FSGGX   FIDELITY GLOBAL EX US INDEX FUND
60%   FZROX   FIDELITY ZERO TOTAL MARKET

Thanks for anyone who read this. It's something that's been bouncing around my head recently and I figure it's better to know what I'm getting myself into than potentially be surprised after it's too late.

[Tigerpine]

I don't know if you have to switch brokerage houses or not, but if you go that route, look into in-kind transfers.  See link below for an introduction.

https://www.nerdwallet.com/article/investing/switch-brokers-move-investments

[reeshau]

If you won't be in the US, are you cutting all ties?

I had an international assignment in Ireland for 2 years.  As far as Fidelity was concerned, we lived at my in-law's place.  (which, we actually did when we returned to the US, until we found our own place)  I had no problems with Fidelity.  I also migrated my US phone number to an ip phone service, so that I could respond to their calls and 2-factor requests.

If you don't have a US home base, even virtual, then you might look at Interactive Brokers.  As a taxable account, you could even transfer the account to a local broker, although they will likely not be able to keep the US funds.

[glacio09]

If you won't be in the US, are you cutting all ties?

I had an international assignment in Ireland for 2 years.  As far as Fidelity was concerned, we lived at my in-law's place.  (which, we actually did when we returned to the US, until we found our own place)  I had no problems with Fidelity.  I also migrated my US phone number to an ip phone service, so that I could respond to their calls and 2-factor requests.

If you don't have a US home base, even virtual, then you might look at Interactive Brokers.  As a taxable account, you could even transfer the account to a local broker, although they will likely not be able to keep the US funds.

It would potentially be cutting ties. I have dual citizenship (with Ireland funny enough and am currently living in Houston) and have had job interviews in the EU. I don't want to end up in a situation where I have a great opportunity but have to pay a stupid amount in taxes or fees for something that I could avoid now.

Am I overthinking? Absolutely. Am I grasping at any potential concrete action while daydreaming about getting out of what I'm in now? 100%. Is my husband going crazy because of this? Yes. Which is why I'm bugging you lovely people.

I will definitely look into Interactive brokers. Thanks!

[FLBiker]

I'm a US citizen who has lived in a few different countries (UK, Taiwan, China, now Canada).  Sometimes, I have kept a US address on my accounts (when I anticipated returning to the US) but now I mostly have Canadian addresses on them.

In answer to your specific questions:
1) As of today, Fidelity will allow you to keep (and trade freely in) retirement accounts, but not non-retirement accounts.  Many other US brokerages are similar to this.  Vanguard is actually one of the least friendly to expats -- you can't even trade in a retirement account with them.

2) If you want to move your funds to another brokerage, the advice above about doing it as an "in kind" transfer is good -- that means it won't be taxable.  I did this to move stuff from Vanguard.  What I did was first convert my Vanguard mutual funds to the equivalent ETFs (a non-taxable event) and then transfer those ETFs in kind to my new brokerage (a non-taxable event).  It took some time, but it was pretty straightforward, free, and didn't require paying any taxes.

In terms of general advice:
- I would recommend opening accounts at expat friendly US brokerages (e.g. Schwab) BEFORE you move.  Even the friendly ones don't necessarily like you opening an account from overseas.

- Interactive Brokers could be good, but they're not useful from Canada so I don't have any experience with them.

- For a taxable account, the easiest solution for me was to move my US ETFs to a Canadian brokerage.  I didn't sell anything, and they're still in USD.  My brokerage gives me tax docs for both the US system and the Canadian system, which is nice.  Depending on the country, though, this might not be doable.

- Understand tax treaties BEFORE you move.  For example, which retirement accounts are recognized by which countries?  Are there any steps you need to take to get them recognized?  For example, Canada does recognize Roth IRAs (which is great) but you need to file an election with the CRA (Canada's IRS) in your first year of residency.
- Personally, I've kept accounts open at a bunch of brokerages.  You hear horror stories about folks being told by a brokerage that they have 60 days to vacate the premises, so I want to have options.  I'd love to simplify, but because policies are always changing, I have my accounts spread around.

[reeshau]

If you won't be in the US, are you cutting all ties?

I had an international assignment in Ireland for 2 years.  As far as Fidelity was concerned, we lived at my in-law's place.  (which, we actually did when we returned to the US, until we found our own place)  I had no problems with Fidelity.  I also migrated my US phone number to an ip phone service, so that I could respond to their calls and 2-factor requests.

If you don't have a US home base, even virtual, then you might look at Interactive Brokers.  As a taxable account, you could even transfer the account to a local broker, although they will likely not be able to keep the US funds.

It would potentially be cutting ties. I have dual citizenship (with Ireland funny enough and am currently living in Houston) and have had job interviews in the EU. I don't want to end up in a situation where I have a great opportunity but have to pay a stupid amount in taxes or fees for something that I could avoid now.

Am I overthinking? Absolutely. Am I grasping at any potential concrete action while daydreaming about getting out of what I'm in now? 100%. Is my husband going crazy because of this? Yes. Which is why I'm bugging you lovely people.

I will definitely look into Interactive brokers. Thanks!

Well, since you got specific....we should chat sometime!

Also...We knew we would be leaving Ireland in no more than 4 1/2 years.  It might be as short as 3, if you are really cutting ties.

Once you are Ordinarily Resident, Ireland starts taxing your capital gains globally.  There is still the US tax treaty involved, but that only credits you for the taxes paid.  And unless it's a pension account, the preference is to your country of residence.

Once you have been in place for 5 years, Ireland's Estate Taxes take effect.  The big thing here is that the deduction is a mere $650k.  (The actual number has probably changed)

Even on Day 1, you need to be careful about money you earn overseas, after you move.  We could repatriate money to Ireland tax free from our "capital account" of money we had earned before we moved.  But, any money after that, including interest and dividends on that account, had to be separated to an account we never intended to move to Ireland, or it could be considered Irish income.  Again, if you are moving permanently you will want your own take on this.  But know that the expectation is immediately there.

[MustacheAndaHalf]

After leaving the U.S., I was able to open Schwab International and Interactive Brokers (IBKR) accounts.

There's some interesting details about expats and Fidelity, between the duplicate questions #1 and #3:
https://www.fidelity.com/accounts/services/investors_outside_US_faq.shtml

[Scandium]

I'll have to find the reference, but I remember reading that it's almost impossible to trade mutual funds from abroad? Whereas ETFs can work ok. (This might be an EU regulation thing). I might not ever leave the US, but just in case I planned for this long term

Retirement accounts obviously don't matter, can always sell all MFs and rebuy ETFs. I didn't do anything.
Taxable; Vanguard you can always convert MFs to equivalent ETF with no sale/taxable event. Use MF now, since bi-weekly autodeposit is easier.
Taxable Schwab; during market drop in 2022 I sold off my TSX fund, and switched to their total market ETF.

As someone else mentioned cover yourself by having several broker accounts. I don't put much into my schwab taxable anymore, but keep it as a just-in-case/backup account. If for some reason I get kicked off vanguard, or don't have access for a while, I can use or transfer to schwab.

[joshrosenthal5000]

If you won't be in the US, are you cutting all ties?

I had an international assignment in Ireland for 2 years.  As far as Fidelity was concerned, we lived at my in-law's place.  (which, we actually did when we returned to the US, until we found our own place)  I had no problems with Fidelity.  I also migrated my US phone number to an ip phone service, so that I could respond to their calls and 2-factor requests.

If you don't have a US home base, even virtual, then you might look at Interactive Brokers.  As a taxable account, you could even transfer the account to a local broker, although they will likely not be able to keep the US funds.

It would potentially be cutting ties. I have dual citizenship (with Ireland funny enough and am currently living in Houston) and have had job interviews in the EU. I don't want to end up in a situation where I have a great opportunity but have to pay a stupid amount in taxes or fees for something that I could avoid now.

Am I overthinking? Absolutely. Am I grasping at any potential concrete action while daydreaming about getting out of what I'm in now? 100%. Is my husband going crazy because of this? Yes. Which is why I'm bugging you lovely people.

I will definitely look into Interactive brokers. Thanks!

Just remember you have to pay income pay as an American even when you live oversea.  At least you don’t pay state income taxes to Texas.  Personally, I would never leave Houston if I am lucky enough to land a career there.  The pro’s of being a Texas resident far outweigh many things.  I also can’t see myself paying the draconian socialist taxes of Europe.

Just make sure whatever brokers you pick is insured and reputable.  That usually means they are licensed to operate in the U.S. where regulations are tougher than EU, Asia, Latin America, Africa, and Middle East.  Schwab bank is in trouble but their broker department is not.  I know they have actual international offices in many countries.

[Kwill]

Before you worry about it too much, maybe call Fidelity and talk to them about your plans and whether you can continue with them if you move to the EU. Looking at their FAQs for Investors Living Outside the United States, it seems like you could keep what you have with them but not buy more mutual funds.

In 2015, when I was planning a move to the UK from the US, I called Vanguard, and someone nice talked me through it. I was able to use my UK address, and I used my UK mobile phone number for dual-factor authentication when I eventually gave up my US number. They also walked me through the process of rolling over a 403b from a past employer into an IRA with Vanguard. I guess that bit was sales on their part, but it was helpful to me to consolidate and make things simpler. I was overseas for over seven years without running into a problem with Vanguard. The IRS was much harder because you need a US mobile number to file US taxes online.

I wasn't actually doing much with the Vanguard account while overseas, though. I sold my taxable mutual funds to make a down payment on a home, so I didn't have anything in the taxable account for most of my time in the UK. I eventually started buying ETFs in the taxable account because they seemed like they might be better than mutual funds with regard to UK tax law if I actually retired in the UK.

[MustacheAndaHalf]

If you won't be in the US, are you cutting all ties?

It would potentially be cutting ties. I have dual citizenship (with Ireland funny enough and am currently living in Houston) and have had job interviews in the EU. I don't want to end up in a situation where I have a great opportunity but have to pay a stupid amount in taxes or fees for something that I could avoid now.

Am I overthinking? Absolutely. Am I grasping at any potential concrete action while daydreaming about getting out of what I'm in now? 100%. Is my husband going crazy because of this? Yes. Which is why I'm bugging you lovely people.

Cutting ties (moving abroad permanently) can only help you stop paying taxes at the state level - not the Federal.  Most expats can exclude all of their income using the foreign earned income exclusion.

"If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023)"
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

[reeshau]

If you won't be in the US, are you cutting all ties?

It would potentially be cutting ties. I have dual citizenship (with Ireland funny enough and am currently living in Houston) and have had job interviews in the EU. I don't want to end up in a situation where I have a great opportunity but have to pay a stupid amount in taxes or fees for something that I could avoid now.

Am I overthinking? Absolutely. Am I grasping at any potential concrete action while daydreaming about getting out of what I'm in now? 100%. Is my husband going crazy because of this? Yes. Which is why I'm bugging you lovely people.

Cutting ties (moving abroad permanently) can only help you stop paying taxes at the state level - not the Federal.  Most expats can exclude all of their income using the foreign earned income exclusion.

"If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023)"
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

...unless you take he drastic step of renouncing your US citizenship.  That would then subject you to expatriates tax.

https://www.irs.gov/individuals/international-taxpayers/expatriation-tax

[joshrosenthal5000]

If you won't be in the US, are you cutting all ties?

It would potentially be cutting ties. I have dual citizenship (with Ireland funny enough and am currently living in Houston) and have had job interviews in the EU. I don't want to end up in a situation where I have a great opportunity but have to pay a stupid amount in taxes or fees for something that I could avoid now.

Am I overthinking? Absolutely. Am I grasping at any potential concrete action while daydreaming about getting out of what I'm in now? 100%. Is my husband going crazy because of this? Yes. Which is why I'm bugging you lovely people.

Cutting ties (moving abroad permanently) can only help you stop paying taxes at the state level - not the Federal.  Most expats can exclude all of their income using the foreign earned income exclusion.

"If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023)"
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

Would stock investment considered foreign earning if I live abroad in retirement?  I can see paying federal taxes on pension and SS but stock investments are not as clear?  Would it matter if the broker is not HQ in the US?  I want to pay my fair shares and living abroad mean my fair share should reflect whatever amount needed for immediate national defense.  I am also likely going to hold multiple citizenships too so I have to save room for host nation.

[ROF Expat]

There's some good advice here, but if you are serious about moving overseas, potentially permanently, you should get advice from tax lawyers and/or accountants who specialize in this topic, both in the US and in the country in which you intend to reside ,before making decisions.  Details matter. 

Keep in mind: 

If you decide to become an overseas resident and simply not tell your broker (by giving them a US address), you risk having your account shut down with very short notice to move your assets.  They do have ways of finding out that you are overseas.  I know this from direct experience.  Brokerages take this a lot more seriously than in the past. 

If you decide to tell your broker that you will be an overseas resident, some brokerages will simply choose not to have you as a customer.  Some will keep you as a customer and will apply different rules to your account.  For example, non-resident customers usually can't buy mutual funds, but they can buy ETFs.  My understanding is that this is because US mutual funds usually are only registered and regulated in the US, and other countries won't allow brokerages to sell those products. 

The Foreign Earned Income Exclusion is nice, but you have to be physically outside of the US for at least 330 days over 12 consecutive months to qualify.  It is wise to keep track of this carefully and be  prepared to provide evidence.  Spending a month in the US during the Summer and visiting family for two weeks at Christmas can be an expensive decision. 

Remember to factor in actual costs against your specific taxes.  Moving to an EU country will probably mean higher taxes of various kinds, but in my experience, this is often counterbalanced by   things like not having to pay for health insurance and lower university tuition. 

At the end of the day, my own view is that intangible factors often count for more than financial factors.  I don't find living overseas to be less expensive than living in the US, but I like the lifestyle.   

[LightStache]

The Foreign Earned Income Exclusion is nice, but you have to be physically outside of the US for at least 330 days over 12 consecutive months to qualify.  It is wise to keep track of this carefully and be  prepared to provide evidence.  Spending a month in the US during the Summer and visiting family for two weeks at Christmas can be an expensive decision.

There is another test to qualify for the FEIE, which is the bona fide residence test. It might be a moot point for OP though if they're retiring because income from retirement accounts wouldn't be "earned."

I've had a couple year+ stints abroad. In both cases I paid for a mail service to digitize my mail and used that U.S. address for my brokerage accounts. During my more recent stint abroad in 2023, I used a VPN most of the time when logging in.

As @FLBiker suggests, I also have my assets split across three brokerages in case there are any problems. You never know if a move will be permanent so I'd leave my assets at US brokerages for a couple years after moving abroad. After a couple years settled in, confident that it will be permanent, then I'd start moving some assets to my new country.

[Kwill]

You never know if a move will be permanent so I'd leave my assets at US brokerages for a couple years after moving abroad. After a couple years settled in, confident that it will be permanent, then I'd start moving some assets to my new country.

The tricky thing about moving assets to a new country is that US citizens still need to file US taxes wherever they live. Depending on how much they hold overseas, US citizens also need to report foreign assets with Form 8938 with the taxes and the FBAR through a separate process. It's not terribly hard but it is very tedious, and the IRS may not like some types of foreign investments as much as others. There are various articles online about this--here's one example. Although I didn't expect to move back to the US so soon, everything I could find about US expat taxes and investing made it seem like I couldn't invest in UK funds outside of my employer-sponsored pension. Instead, I overpaid my mortgage and eventually started buying ETFs via Vanguard in the US that were on a list of overseas funds registered with the UK for tax purposes. Just be a bit careful and do your homework on taxes for Americans living wherever it is you are planning to live.

[MustacheAndaHalf]

If you won't be in the US, are you cutting all ties?

It would potentially be cutting ties. I have dual citizenship (with Ireland funny enough and am currently living in Houston) and have had job interviews in the EU. I don't want to end up in a situation where I have a great opportunity but have to pay a stupid amount in taxes or fees for something that I could avoid now.

Am I overthinking? Absolutely. Am I grasping at any potential concrete action while daydreaming about getting out of what I'm in now? 100%. Is my husband going crazy because of this? Yes. Which is why I'm bugging you lovely people.

Cutting ties (moving abroad permanently) can only help you stop paying taxes at the state level - not the Federal.  Most expats can exclude all of their income using the foreign earned income exclusion.

"If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023)"
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

Would stock investment considered foreign earning if I live abroad in retirement?  I can see paying federal taxes on pension and SS but stock investments are not as clear?  Would it matter if the broker is not HQ in the US?  I want to pay my fair shares and living abroad mean my fair share should reflect whatever amount needed for immediate national defense.  I am also likely going to hold multiple citizenships too so I have to save room for host nation.

Passive investments do not benefit from the foreign earned income exclusion.  My understanding is that "earned" refers to salary.

Unlike most countries, the U.S. taxes all worldwide income.  It doesn't matter where your stock or ETF is held, you need to pay tax on the dividends and capital gains (selling stocks / ETFs at a profit).

You also need to report all accounts (bank, brokerage) outside the U.S. on form FBAR.  Penalties are stunningly severe... $100,000 or half the account, if I recall correctly.  Essentially expats are treated as money launderers until proven otherwise.

[markpst]

2) If you want to move your funds to another brokerage, the advice above about doing it as an "in kind" transfer is good -- that means it won't be taxable.  I did this to move stuff from Vanguard.  What I did was first convert my Vanguard mutual funds to the equivalent ETFs (a non-taxable event) and then transfer those ETFs in kind to my new brokerage (a non-taxable event).  It took some time, but it was pretty straightforward, free, and didn't require paying any taxes.

I just wanted to add, the switch at Vanguard from mutual fund to ETF for me was at most a 10-15 minute conversation with a Vanguard rep. I can't speak to transfer process to another brokerage, I kept both my Roth IRA and taxable account at Vanguard, but wanted ETF's versus mutual funds

[Sandi_k]

I don't know if you have to switch brokerage houses or not, but if you go that route, look into in-kind transfers.  See link below for an introduction.

https://www.nerdwallet.com/article/investing/switch-brokers-move-investments

The funds he listed are all proprietary Fidelity funds; he cannot do in-kind transfers with them. He'd have to sell, and then reinvest.

[Scandium]

2) If you want to move your funds to another brokerage, the advice above about doing it as an "in kind" transfer is good -- that means it won't be taxable.  I did this to move stuff from Vanguard.  What I did was first convert my Vanguard mutual funds to the equivalent ETFs (a non-taxable event) and then transfer those ETFs in kind to my new brokerage (a non-taxable event).  It took some time, but it was pretty straightforward, free, and didn't require paying any taxes.

I just wanted to add, the switch at Vanguard from mutual fund to ETF for me was at most a 10-15 minute conversation with a Vanguard rep. I can't speak to transfer process to another brokerage, I kept both my Roth IRA and taxable account at Vanguard, but wanted ETF's versus mutual funds

I believe I've read this is a proprietary (patented) vanguard feature. That their mutual funds "function as" etfs, so you can just convert it over (but not back). And other brokerages cannot do this. If any can please let me know. This is the reason taht for my two taxable accounts I sold my schwab mutual funds when they were down to rebuy the ETF, but kept the vanguard as MF.