The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Kapni on March 13, 2018, 02:43:45 PM
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I am on temporary visa working in States. Now the savings I am making cannot be invested back in my home country due to taxation issues. Right now it is lying in low yielding savings account. I want to get a higher return than savings account but without any risk. Can someone guide me on options available to me or any content that I can read and find some options?
- Do not want to block my money in 401K as I will move out of States in near future.
- Do not plan to invest in equity/ETF's due to short horizon of investment period.
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A CD is about the only short term risk free thing out there. I haven't checked rates for different CD's, I have an 11 month penalty free for early withdrawal CD at Ally Bank, I think it's at 1.74%. You can get higher rates if you can invest it for longer periods of time without needing to cash it in.
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Maybe take a look at municipal bonds if you want to get beyond the short-term CD returns, but muni bonds are not 100% risk-free if that's an absolute requirement.
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You can get 3% on up to 15K by parking it in a Lake Michigan Credit Union checking account. There are a few requirements to get the 3%, but most of them can be automated by following a routine similar to the one Rubic describes here:
https://forum.mrmoneymustache.com/investor-alley/how-should-i-choose-between-cds-and-money-market-certificates/msg1346758/#msg1346758
After the first year, I have been very happy with LMCU.
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Keep in mind that relative to your home currency you are invested in US Dollars, so you already have risk/opportunity there. The dollar could rise or fall vs your home currency during your stay here. US dollar inflation is at 2%, and CDs or other safe investments can be found yielding 1%. If you're seeing CDs or other safe investments in your home country earning something like 8%, it might be because their currency is expected to experience 9% inflation.
I'm curious about the taxation issue, is it that you don't want to complicate your US taxes with foreign investments? If not, what changes the tax situation when you eventually move your money back to your home country?
I would suggest you repay debt either here or in your home country as that would be the safest bet, unless this is strategic money like a security fund.
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Thanks yachi for your response and insight questions. My responses:-
- I am aware that there would be currency fluctuation. So that risk/gain is there, but I do not have much control over it.
- Taxation issues arises as any gain abroad needs to be declared and paid tax to IRS. That would sufficiently reduce the total returns. I am open to complicating the tax return if there are any options, just want to avoid double taxation. Also not sure with the FBAR filing if I have large amount outside US would have any issues. And definitely my home country has more returns than US.
- When I move to US, I am not a taxpayer here, so I do not have any tax liability here. Once I move back, all money gets wired and it is all tax paid money, I can reinvest in my home country.
- All the savings are there for my future goals and retirement. I already have emergency fund planned and I do not want to loose on the compounding.
Thankfully no major debt and whatever I have is containable in the long term.
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You can get 3% on up to 15K by parking it in a Lake Michigan Credit Union checking account. There are a few requirements to get the 3%, but most of them can be automated by following a routine similar to the one Rubic describes here:
https://forum.mrmoneymustache.com/investor-alley/how-should-i-choose-between-cds-and-money-market-certificates/msg1346758/#msg1346758
After the first year, I have been very happy with LMCU.
This looks like a decent option. Let me try this.