US Citizens: Did you open up a brokerage account in another country?

[ScaerCroe]

I have been thinking about Nassim Taleb a bit lately, and want to be a little less anti-fragile with my investments. I have done a little bit of research on opening up a brokerage account in another English speaking, stable country where I could pocket a little money here and there in case TSHTF. I have read up on people doing something similar in Canada, and while it seemed a bit difficult, certainly not impossible. For those of you who have looked into or done this:

• Which country did you choose?
• How long did it take to set up?
• Overall difficulty? Any gotchas or tax surprises?

Thanks!

[reeshau]

...want to be a little less anti-fragile with my investments.

I'm sure this is a typo.  Or, maybe you need to re-read Taleb?  ;)

Why do you need to open a non-US brokerage, vs. just invest in international stocks?  There are many available.  Schwab and IB have many foreign exchanges open to their US customers.  Also, many foreign brokers won't take US-based customers, because they do not want to comply with US investment regulations.

There are plenty of gotchas.

First of all, get used to commissions again.  Even if done on an online brokerage, there are commissions, and they could be significant.

When I moved to Ireland, I was very interested in investing locally, since I had eyes on the local environment.  I didn't get much past the commission being 1% of your purchase price!  before stopping that research.  BTW, the sale commission is, you guessed it, another 1%!  That's an outlier, but $50-$100 isn't unheard of.

It didn't help that the capital gains tax rate is 40%, either.

You will always pay foreign income tax on your dividends and profits.  Your US broker will take those out before they hand you your money--saving you the effort of figuring it out, including how to file.  The only benefit of this, getting to take those taxes off your US taxes, can be spoiled if you buy a foreign stock out of a tax-benefitted account like an IRA.

If you are thinking of buying a fund, there is just one thing to know: PFIC.  Run, run far away.  Fortunately, that does not apply to operating companies, so that is a case where investing in stocks beats funds, hands down.  Blame the 1% and their offshore havens.

[ScaerCroe]

Yup, you got me with a typo :blush:!

I was thinking in the off-chance that assets get frozen or you need to book it (like Taleb did when leaving Lebanon), having a backup would be nice in a place where you could reside for 6 months at a time.

[reeshau]

N26 was an interesting idea of a multi-currency bank account, but it closed shop in the US after a brief time.  (It is available globally still-they just left the US)  You may find other accounts that have multiple currencies.

I suppose the ultimate would be crypto.   But you'd have to be more afraid of a government collapse than a crypto hack or exchange collapse, which have a much more solid track record of occurring.

I still have an Irish account open, but can't wait to close it, as I will have the last incoming money pass through.  They have been nice to work with, but there is a monthly fee,  no possibility to earn anything, and extra paperwork in both countries, each year.

I do keep amounts of petty cash in several currencies.  Basically, I don't want to have to change money at the airport somewhere, or even on the first day.

[maizefolk]

You may have more luck just opening a foreign bank account than a foreign brokerage account. Non-US banks still aren't going to be thrilled about having US customers but you can probably find one that will take you.

Don't forget about the FBAR and Form 8938 requirements if you open either kind of account in a foreign country and end up with significant money in it.

[Dicey]

Why? Please explain to me like I'm 5, because I do not understand. Am I being short-sighted?

[MustacheAndaHalf]

Why? Please explain to me like I'm 5, because I do not understand. Am I being short-sighted?

As your only post in this thread, I think we're missing some context.

[GilesMM]

I think historically risks have been higher in other countries. In fact, world citizens are largely clamoring to invest in the US.


I have invested under $100,000 in a couple countries where I lived and done well with returns partly due to luck on exchange rates. I find those rates hard to forecast and one can get quite lucky or unlucky with them. An added risk to your proposition.

[Dicey]

Why? Please explain to me like I'm 5, because I do not understand. Am I being short-sighted?

As your only post in this thread, I think we're missing some context.

My post was only #5 in the entire thread. I do not understand your response.

[MustacheAndaHalf]

Why? Please explain to me like I'm 5, because I do not understand. Am I being short-sighted?

As your only post in this thread, I think we're missing some context.

My post was only #5 in the entire thread. I do not understand your response.

I thought you wanted to know "Why?" of one of the replies.  If you're simply replying to the title, here is the very first sentence in this thread, which answers your question:
"I have been thinking about Nassim Taleb a bit lately, and want to be a little less anti-fragile with my investments."

[uniwelder]

Why? Please explain to me like I'm 5, because I do not understand. Am I being short-sighted?

As your only post in this thread, I think we're missing some context.

My post was only #5 in the entire thread. I do not understand your response.

I thought you wanted to know "Why?" of one of the replies.  If you're simply replying to the title, here is the very first sentence in this thread, which answers your question:
"I have been thinking about Nassim Taleb a bit lately, and want to be a little less anti-fragile with my investments."

After just reading Taleb’s Wikipedia entry, I also have the same questions as Dicey. The answer sounds like it’s going to be extremely vague— “guard against unpredictable collapses by spreading risk and assets everywhere”.  I’m hoping there might be something more substantial to add to that, in a way that a newbie can understand.

[ScaerCroe]

I think in short, what would you do if you could no longer access your US-based funds? You can imagine a few edge cases where war, pandemic, unrest/upheaval might make this difficult. Nassim had to flee Lebanon with his family despite their relative affluence and influence in the country. Having a country that you can flee to that is well regarded internationally might be useful. Also Neil Strauss' book: https://www.amazon.com/Emergency-Neil-Strauss-audiobook/dp/B002NLSDW6/ref=sr_1_1?crid=33FIRS6OLE6TZ&keywords=emergency+neil+strauss&qid=1701100254&sprefix=neil+strauss+the+em%2Caps%2C121&sr=8-1

[lemonlyman]

Don't forget about the FBAR and Form 8938 requirements if you open either kind of account in a foreign country and end up with significant money in it.

Seriously, you better ace the reporting requirements on your tax return if you open accounts in another country. Maizefolk is on point here.

[Scandium]

Don't forget about the FBAR and Form 8938 requirements if you open either kind of account in a foreign country and end up with significant money in it.

Seriously, you better ace the reporting requirements on your tax return if you open accounts in another country. Maizefolk is on point here.

No big deal. Due to a bank account in the country I moved from I've been doing the FBAR for decade+ (as do many other fellow immigrants). It's only a few lines, and 95% repeat of previous year's. Now earnings (and taxes, tax credits) in another country is a bit of a bigger PIA, though by no means impossible.

My issue with this idea is that I'd only be willing to put a small amount in an account abroad (say $10k?), due to it being a bit of a pain, more limited investment options, and often higher risk. So it's not enough to secure me anyway (if the the US collapse). I guess it's marginally better than "loosing it all", but would it really matter? Just keep a stash of gold/cash/whatever at home instead? And of course if the US collapse, would a brokerage in e.g. Germany be much better? Isn't that a food-and-ammo scenario?
Putting enough money (with limited earnings?) in a foreign account, for a basis to truly "start over" (idk, $100k?) just makes me too nervous. If you feel different maybe there are options. I still think a bank account, CD or bonds(?) is the least hassle, rather than funds or stocks.

[lutorm]

Not much point in opening a bank account, IMHO, you wouldn't hold much of your assets in cash anyway, would you? If you want to, though, you can open a Wise multi-currency account and keep whatever set of currencies you want in it.

If you manage to open a brokerage account, you'll be restricted to buying individual stocks or you'll be hit with the PFIC penalty. Because of this, we've decided that (apart from calling our representatives to complain about the way the US treats expats... wait, we don't have any) it makes most sense to keep our assets in US brokerages, but invested in global index funds. It's true that a SHTF event that somehow prevents us from drawing on those assets would be very bad, but we judge the probability of such an event to be sufficiently low that it doesn't warrant severely penalizing our portfolio.

[FLBiker]

If you manage to open a brokerage account, you'll be restricted to buying individual stocks or you'll be hit with the PFIC penalty. Because of this, we've decided that (apart from calling our representatives to complain about the way the US treats expats... wait, we don't have any) it makes most sense to keep our assets in US brokerages, but invested in global index funds. It's true that a SHTF event that somehow prevents us from drawing on those assets would be very bad, but we judge the probability of such an event to be sufficiently low that it doesn't warrant severely penalizing our portfolio.

At the risk of getting a bit into the weeds here, I want to add a little nuance.  As a US citizen, you could hold US-domiciled ETFs in a US dollar account at a foreign brokerage without having to do PFIC filings.  Also, you can hold foreign ETFs or mutual funds in recognized retirement accounts without doing PFIC filings.  So, in Canada for example, I (a US citizen) have our taxable account at a Canadian brokerage, in US domiciled ETFs.  And my wife and I both have RRSPs (like a TIRA without the age restriction) and we have Canadian ETFs and mutual funds in those.  None of this is for a SHTF scenario, though -- it's because we moved to Canada three years ago.  I suppose the move to Canada was partially motivated by SHTF-type thinking, though...

[reeshau]

If you manage to open a brokerage account, you'll be restricted to buying individual stocks or you'll be hit with the PFIC penalty. Because of this, we've decided that (apart from calling our representatives to complain about the way the US treats expats... wait, we don't have any) it makes most sense to keep our assets in US brokerages, but invested in global index funds. It's true that a SHTF event that somehow prevents us from drawing on those assets would be very bad, but we judge the probability of such an event to be sufficiently low that it doesn't warrant severely penalizing our portfolio.

At the risk of getting a bit into the weeds here, I want to add a little nuance.  As a US citizen, you could hold US-domiciled ETFs in a US dollar account at a foreign brokerage without having to do PFIC filings.  Also, you can hold foreign ETFs or mutual funds in recognized retirement accounts without doing PFIC filings.  So, in Canada for example, I (a US citizen) have our taxable account at a Canadian brokerage, in US domiciled ETFs.  And my wife and I both have RRSPs (like a TIRA without the age restriction) and we have Canadian ETFs and mutual funds in those.  None of this is for a SHTF scenario, though -- it's because we moved to Canada three years ago.  I suppose the move to Canada was partially motivated by SHTF-type thinking, though...

For a retirement account, you also are generally restricted to contributing a certain level of your income, as reported in that country. So, an US resident, US citizen would not have that second scenario available.  But for expats coming back, it is something to consider--leaving a footprint in that country if and when you come back to the US.

In the EU, they have their own fund regulations, so you won't find US-domiciled funds in a local brokerage there.  The US funds don't want to adhere to EU regs any more than the EU funds want to adhere to the US ones.

[ScaerCroe]

If you manage to open a brokerage account, you'll be restricted to buying individual stocks or you'll be hit with the PFIC penalty. Because of this, we've decided that (apart from calling our representatives to complain about the way the US treats expats... wait, we don't have any) it makes most sense to keep our assets in US brokerages, but invested in global index funds. It's true that a SHTF event that somehow prevents us from drawing on those assets would be very bad, but we judge the probability of such an event to be sufficiently low that it doesn't warrant severely penalizing our portfolio.

At the risk of getting a bit into the weeds here, I want to add a little nuance.  As a US citizen, you could hold US-domiciled ETFs in a US dollar account at a foreign brokerage without having to do PFIC filings.  Also, you can hold foreign ETFs or mutual funds in recognized retirement accounts without doing PFIC filings.  So, in Canada for example, I (a US citizen) have our taxable account at a Canadian brokerage, in US domiciled ETFs.  And my wife and I both have RRSPs (like a TIRA without the age restriction) and we have Canadian ETFs and mutual funds in those.  None of this is for a SHTF scenario, though -- it's because we moved to Canada three years ago.  I suppose the move to Canada was partially motivated by SHTF-type thinking, though...

For a retirement account, you also are generally restricted to contributing a certain level of your income, as reported in that country. So, an US resident, US citizen would not have that second scenario available.  But for expats coming back, it is something to consider--leaving a footprint in that country if and when you come back to the US.

In the EU, they have their own fund regulations, so you won't find US-domiciled funds in a local brokerage there.  The US funds don't want to adherence to EU regs any more than the EU funds want to adhere to the US ones.

Thanks, this was helpful! Can you mention which brokerage you chose in CA, and if they gave you any grief over being a US citizen? And would I be barred from having EU/CA stocks with that account, or just I would have to file extra paperwork?

[FLBiker]

For a retirement account, you also are generally restricted to contributing a certain level of your income, as reported in that country. So, an US resident, US citizen would not have that second scenario available.

Great point -- without local income, we couldn't contribute to Canadian retirement accounts.

Can you mention which brokerage you chose in CA, and if they gave you any grief over being a US citizen? And would I be barred from having EU/CA stocks with that account, or just I would have to file extra paperwork?

Sure thing -- I use Questrade.  They are very US citizen friendly.  However, in thinking more about this I'm not sure if they'll work in your situation.  It's been a few years since I set up my account, and I don't remember if I needed to give them a Canadian address or my SIN (like a Social Security number in Canada).  You could give it a shot, though.

[ScaerCroe]

Thanks! In my ongoing plan, I would be moving to CA as well to get PR/Citizenship so the SIN hopefully wouldnt be an issue. The extra paperwork seems painful, but doable.

[ChpBstrd]

...in another English speaking, stable country where I could pocket a little money here and there in case TSHTF.

I suspect the biggest threat to stability is the internet, which is deeply embedded into all English-speaking countries. If the internet is destined to contribute to a series of destabilizing ideological conflicts like some say the Gutenberg Press did, then there is limited reason to think anywhere is safe. That is to say by picking another English-speaking country with a very similar culture to the U.S. you might remain exposed to the same systemic threat. They could all collapse into turmoil at once. Canada may be too close to be unaffected.

Democracy and rule of law might be more likely to survive a systemic cultural crisis that affected the U.S. if they were less attached to US culture. For example, Columbia, Brazil, Kenya, or Chile. Whether your broker could survive a U.S. version of something like the 1991 coup in Russia, or a sudden devaluation of the USD would be another variable.

[reeshau]

Sounds like a Swiss bank account scenario.

[ScaerCroe]

...in another English speaking, stable country where I could pocket a little money here and there in case TSHTF.

I suspect the biggest threat to stability is the internet, which is deeply embedded into all English-speaking countries. If the internet is destined to contribute to a series of destabilizing ideological conflicts like some say the Gutenberg Press did, then there is limited reason to think anywhere is safe. That is to say by picking another English-speaking country with a very similar culture to the U.S. you might remain exposed to the same systemic threat. They could all collapse into turmoil at once. Canada may be too close to be unaffected.

Democracy and rule of law might be more likely to survive a systemic cultural crisis that affected the U.S. if they were less attached to US culture. For example, Columbia, Brazil, Kenya, or Chile. Whether your broker could survive a U.S. version of something like the 1991 coup in Russia, or a sudden devaluation of the USD would be another variable.

This is an interesting thought experimenting for sure, and one I had not considered. I recently heard something more about the Gutenberg revolution and ensuing chaos on a podcast. Was there a book you read about this?

[ChpBstrd]

...in another English speaking, stable country where I could pocket a little money here and there in case TSHTF.

I suspect the biggest threat to stability is the internet, which is deeply embedded into all English-speaking countries. If the internet is destined to contribute to a series of destabilizing ideological conflicts like some say the Gutenberg Press did, then there is limited reason to think anywhere is safe. That is to say by picking another English-speaking country with a very similar culture to the U.S. you might remain exposed to the same systemic threat. They could all collapse into turmoil at once. Canada may be too close to be unaffected.

Democracy and rule of law might be more likely to survive a systemic cultural crisis that affected the U.S. if they were less attached to US culture. For example, Columbia, Brazil, Kenya, or Chile. Whether your broker could survive a U.S. version of something like the 1991 coup in Russia, or a sudden devaluation of the USD would be another variable.

This is an interesting thought experimenting for sure, and one I had not considered. I recently heard something more about the Gutenberg revolution and ensuing chaos on a podcast. Was there a book you read about this?

Can't remember exactly where I picked it up, but I've picked it up more than once. The invention of new ways to transmit information (the press, radio, TV...) has previously been associated with massive wars or the collapse of empires. In theory, new ways to communicate that are cheaper, harder to censor, or able to reach more people allow more fringe ideas (Protestantism, Huguenots, fascism, communism...) to spread, leading to clashes against the existing orders (e.g. Catholicism, feudalism, democracy, Soviet empire...).

[SeattleCPA]

You may have more luck just opening a foreign bank account than a foreign brokerage account. Non-US banks still aren't going to be thrilled about having US customers but you can probably find one that will take you.

Don't forget about the FBAR and Form 8938 requirements if you open either kind of account in a foreign country and end up with significant money in it.

+1

P.S. FBAR and FATCA penalties are assessed in $10K increments.