Author Topic: investing signifiant money while living abroad  (Read 1319 times)

MichelleD1977

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investing signifiant money while living abroad
« on: September 20, 2015, 07:36:11 PM »
Hi everyone,
My husband and I will be living abroad in New Delhia, India for 1 year.  Our income will increase significantly (for us at least) during that time, with only food/entertainment for expenses, so that we'll be able to use a large portion of our income to work towards financial independence. We hope to invest 40,000-50,000 over a period of 1 year, probably on a monthly basis as we get paid.  We do have a 401 K (TIAA Kref) of around 150,000 already. I'm new to investing money besides the 401 K, and am not sure how to proceed to maximize our investment while minimizing taxes, never mind the possible wrench of living abroad (or does this even matter?). The money I've quoted above is post-taxation in India.

Thanks!

rmendpara

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Re: investing signifiant money while living abroad
« Reply #1 on: September 21, 2015, 07:39:59 AM »
Assuming you're still classified as a US citizen and employee, your benefits will likely stay. I'd check with your HR dept on if you are still allowed to contribute to 401k while living abroad.

Otherwise, your income is still subject to US taxation since you are US citizens (I'm assuming?), so it's nearly the same as if you were just working in the US since the IRS taxes individuals on worldwide income. Things get complicated, so best to talk to a tax accountant specializing in expatriate tax to make sure you understand everything and don't make any big mistakes.

As far as investing, I'd keep things the same. If possible, continue to add to 401k, and maybe even IRAs (if your income allows). Perhaps a 529 plan if you have future kids in the plans (somewhat tax advantaged).

Outside of that, enjoy the low-expense expatriate life, and be sure to do some traveling and stay safe. If/when you end up converting your India earnings back into US dollars, you can also then invest through an after-tax brokerage account.

Can anyone else help? Did I miss something obvious?

nereo

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Re: investing signifiant money while living abroad
« Reply #2 on: September 21, 2015, 10:25:40 AM »
The big thing here is that while you must declare all money earned while living abroad to the IRS, you get a very large foreign earned income exclusion if you are taxed on that income. In 2015, you can exclude the equivalent of $100,800USD earned abroad, as well as deduct some expenses for foreign housing. 

Unless you have earned income you will be ineligible to contribute to your IRAs. Capitol gains do not count.  This is the sad predicament that I am in right now.  However, you can use some of the 'headroom' from your standard deduction to convert portions of your tIRA into a ROTH while paying no or very little taxes on the conversion (because it gets wiped out by your standard deduction).  Basically you using your time abroad to do a ROTH conversion ladder

Here's info on the Foreign Earned Income Exclusion: http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion