Author Topic: Where to start investing when living abroad  (Read 7215 times)

Conrad

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Where to start investing when living abroad
« on: April 28, 2013, 09:36:15 AM »
Hello all,

Just stumbled across this site several hours ago and have become very interested in the ideas presented.
Our goal is to retire at 55, thought we don't know where to begin.

We would like to retire from work and have an spending income of $40,000.
(I know that sounds like a lot, but not for Japan.)
No investments at the moment.

My question is where do I start investing?

Here is the situation we are in right now.
I am 46, Canadian, living in Japan. Will most likely retire here as the spouce is Japanese.
Married, single income due to health reasons.
Save 30% to 40% of income.
Started saving 4 years ago and have $160,000 saved (roughly not sure because of changing exchange rates.)
Don't expect any money from the national retirement fund or my workplace.
We already follow most of the advice mentioned here to some degree or another: Ride a motorcycle to work as time schedule doesn't match public transport and too far to ride a bicycle, eat at home, but have a night out once a month or so, low cost healthy hobby, etc.

Thanks for taking the time to read this.

Sincerely,
Conrad



daverobev

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Re: Where to start investing when living abroad
« Reply #1 on: April 28, 2013, 11:19:27 AM »
Are you.. not sure of the exact word. Do you file taxes in Canada still? Um... non-resident for tax purposes?

Basically you need to find out the equivalent tax-deferred accounts to the TFSA and RRSP in Japan. Interesting you say nothing from the state or your company, I thought Japan was VERY big on "company=family" so assumed they would look after you?

IF you still file in Canada, do you still have access to an RRSP? I was reading that, if you become totally non-resident, the rules for withdrawing from one change.

Where is your $160k at the moment?

$40k p/a at 4% SWR means you'd need 25x that to retire, which is a cool $1m. I'm assuming CAD$ but.. who knows where all the currencies will go.

Same advice as elsewhere I guess - be diversified and tax-efficient. The Nikkei could go waaay up in the coming years but it could just go nowhere (though the quantatative easing is certainly helping at the moment!).

IMHO no need to be as US-weighted as many people advise (well, them being Americans and everything) - as the fate of Asia more closely dictates the fate of Japan.

Aside: Can I come and visit? :) I'd love to see Japan! In fact, funnily enough, I was just thinking... $5k for a trip to Japan... or new windows. Sadly, new windows probably make way more sense, as you get to use them every day, not just for 2 weeks. (I'm not planning on a trip any time soon, just coincidence I was thinking about Japan, while living in Canada, then you write this!).

icefr

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Re: Where to start investing when living abroad
« Reply #2 on: April 28, 2013, 03:54:33 PM »
Are you.. not sure of the exact word. Do you file taxes in Canada still? Um... non-resident for tax purposes?

I'm Canadian and living in the States. Once you filed your 'departure return', you don't need to keep filing income tax returns in Canada, in most cases. Unlike the IRS, the CRA only taxes you on your world income if you live in Canada.

Skinnyneo

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Re: Where to start investing when living abroad
« Reply #3 on: April 28, 2013, 04:37:42 PM »
Hello all,

Just stumbled across this site several hours ago and have become very interested in the ideas presented.
Our goal is to retire at 55, thought we don't know where to begin.

We would like to retire from work and have an spending income of $40,000.
(I know that sounds like a lot, but not for Japan.)
No investments at the moment.

My question is where do I start investing?

Here is the situation we are in right now.
I am 46, Canadian, living in Japan. Will most likely retire here as the spouce is Japanese.
Married, single income due to health reasons.
Save 30% to 40% of income.
Started saving 4 years ago and have $160,000 saved (roughly not sure because of changing exchange rates.)
Don't expect any money from the national retirement fund or my workplace.
We already follow most of the advice mentioned here to some degree or another: Ride a motorcycle to work as time schedule doesn't match public transport and too far to ride a bicycle, eat at home, but have a night out once a month or so, low cost healthy hobby, etc.

Thanks for taking the time to read this.

Sincerely,
Conrad

Hi Conrad,

I am from the US and I'm also living in Japan.  I invest in US stocks every month using a dividend growth investment strategy.  Answering your question about where to invest is a bit tricky as it really depends on you.  Probably not the best answer but I'll try to elaborate using my situation.

I'm 31 and have lived in Japan for about 5.5 years.  I live with my girlfriend who is not Japanese so we don't have any hard family roots here like you do.  This means I don't know for sure that I would ever retire exclusively in Japan.  Because of that I have decided to invest in US stocks as I understand how those companies work and its very easy for me to do banking over the Internet even while living in Japan.

Where do you want to invest? Stocks, property, your own idea?  There is no wrong answer here as long as you can sleep at night (IMHO).  Personally I went with stocks because I don't want to be a landlord which usually requires lots of hands on activity nor do I want to pay a management company a cut. 

In your situation you sound like you are very likely to stay in Japan in the long term so maybe investing in Japanese stocks or proprty is the way to go for you.  Just remember to invest in things you understand how they work.  Coke is always the classic example of this.  They make a sugary drink product, ship it all over the world, and make a healthy profit on each bottle sold.  It's also sold in many restaurants and is a widely recognized brand. 

Good luck and keep us posted Conrad!  There are a few of us expats in Japan on this forum (three to my knowledge including me) so we can help each other out.

daverobev

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Re: Where to start investing when living abroad
« Reply #4 on: April 28, 2013, 05:17:23 PM »
I'm Canadian and living in the States. Once you filed your 'departure return', you don't need to keep filing income tax returns in Canada, in most cases. Unlike the IRS, the CRA only taxes you on your world income if you live in Canada.

Ah yes, but you don't have to - if you keep a Canadian bank account, have family, etc, etc you can opt to keep filing and still be resident (my wife did this while she was living in the UK for a few years, knowing she would be returning to Canada eventually). That was the question I was asking!

Conrad

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Re: Where to start investing when living abroad
« Reply #5 on: April 28, 2013, 06:31:20 PM »
Thanks for the replies.
Here is information that I forgot to include in my original post.

I am a permanent resident of Japan.
I filed my non-resident papers for tax purposes in Canada, which makes RRSPs unavailable to me.
I have an active bank account and family in Canada
Provided the laws didn't change there is some agreement between Japan and Canada where money paid into Japanese, or Canadian, old age pension counts as payment in the other country. Ie. Paying in Japan is considered the same as paying in Canada and vice versa. Lots of paperwork needed to show this and qualify but doable.

Nothing from the state, because the national retirement fund is expected to be broke or not be able to pay a liveable amount by the time I/we turn 65. I am a contract worker whose contract is renewed yearly, so no money back from the company that has paid my salary for the last several years.

My money is just sitting in the local bank earning next to nothing in interest.

We are not really interested in becoming landlords for the same reasons as Skinnyneo.

Thanks for reading and the comments.

Sincerely,
Conrad


JamesAt15

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Re: Where to start investing when living abroad
« Reply #6 on: April 29, 2013, 06:30:13 AM »
Hi, I'm also a permanent resident living in Tokyo. I'm not sure if I can offer specific advice, but maybe some details of my situation might be helpful.

Are you renting or have you bought a home or apartment? We have two kids so we bought a house in western Tokyo - we owned an apartment in a high-rise before that. Buying property won't be for everyone, of course, but it is one way that the low interest rate will benefit you. (We're at 1.85% for the next ten years, after that it will be re-adjusted.)

I mostly invest by transferring funds every month or two to my Schwab account in the States, which converts it to USD, and then buy the usual low-expense index funds that most N.A. people would buy. I'm not really investing in the Japan economy for several reasons:
  • Most of the investment advice and knowledge I have read is in English and assumes investing primarily in the US economy (plus international)
  • There is probably a fair amount of info for investing directly in Japanese markets, but it's probably mostly in Japanese and my reading ability is not up to it.
  • The Japanese economy has been largely moving sideways for the last two decades, with little on the horizon suggesting that would change. Lately "Abenomics" seems to be trying to change that, granted, but we will have to see.

Of course there is exchange rate risk in converting to USD to invest. I figure that since I am basically dollar-cost-averaging by contributing regularly it is mitigated somewhat, but I still view it as a risk that i need to be aware of. Come retirement time (I am a couple years younger than you, shooting for maybe 60 to retire) if the yen has really, massively strengthened against the dollar then we can retire somewhere in the States instead of converting it back to yen.

We still keep a good deal of cash in local savings accounts for emergency funds. I tend to split it up between regular savings accounts (earning the typical .01% or whatever it is now) and foreign currency time deposits that can earn 1-2%, but of course at additional exchange rate risk. I have a good chunk in Australian dollar funds at the moment, getting I think 1.7% when I use a two-week time deposit that auto-renews.

It's kind of hodge-podge, I suppose, but I think of it as a form of diversification. My job income and home equity are in yen, most of my investments are in USD, and some cash reserves are in AUD.

If you're interested in investing in the Vanguard funds, they have an international page that lists several Japanese brokers that offer their funds. Rakuten Shoken is one, which I was originally considering since they make it fairly easy to transfer funds between Rakuten and Shinsei bank, where I have an account. As a Canadian citizen, I believe you aren't prohibited from buying the funds that invest in the US market. (I'm US, so can't buy those funds via Japanese brokers. Not sure what the rationale/law behind it is.)

Conrad

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Re: Where to start investing when living abroad
« Reply #7 on: April 30, 2013, 05:52:09 AM »
Thanks for the continued interest.
lhamo: I completely understand the psychological well-being of having a safety net in case things go different than planned.  We try to do that as well.
I am looking into index funds and dividend paying stocks but as I am extremely ignorant about such matters it will require a fair bit of reading to understand what refers to what.

JamesAt15: We rent as the we don't want the hassles of owning a place of our own.  We like the option of being able to move to a location that is more convenient, newer, cheaper, etc.  should my job suddenly change.

We are thinking of splitting our savings in half and keeping one half in the local bank as an emergency fund and then splitting the other half between an index fund, time deposits and some dividend paying stocks.
The big question is which ones.

Thanks again for reading. Any and all responses welcome.

Sincerely,
Conrad