[Edit 2016-10-06: Updated to clarify some errors in my explanations, removed dead link to AssetBuilder website.]Hey dred,
sorry it's taken so long; I've been quite busy this past week. But, as promised, I will round up what information I do have. As a disclaimer: I have not yet gone through with any large money transfers or investments.
Complying with IRS and Department of Treasury Requirements (Filing Income Tax / FBAR / FATCA):I am not sure about the details of filing income tax since you are married, but your wife MUST file income tax returns every year in the US as a US citizen (Citizenship Based Taxation,
https://www.americansabroad.org/taxation/).
I am not sure if you have to file in the US since you are married, but that would seem somewhat absurd. [Edit: Being married makes this complicated no matter what: https://www.americansabroad.org/nonamerican-spouse-us-tax-implications/]Another important issue to be aware of is declaring any financial accounts abroad as an American (not just ones living abroad, but any Americans). Your wife is required to file a
Report of Foreign Bank and Financial Accounts (FBAR) with the US Dept. of Treasury
for any financial account which exceeds if the sum of your "offshore holdings" exceeds $10,000.00 any time during a calendar year (meaning, if there are multiple accounts
which exceeded that amount, each one must be listed in the FBAR). Don't panic: I assume that, with your combined income and moustachian way of living, her bank account where her monthly pay is sent has likely exceeded $10,000.00 at some point. I didn't know about FBAR and filed late for 2013 and 2014 , but I still haven't heard anything from the Dept. of Treasury. So, if your wife had any
financial accounts money abroad
which exceeded exceeding $10,000.00 at any point, be sure to file the FBAR immediately. (File online:
http://bsaefiling.fincen.treas.gov/main.html)
As for the
Foreign Account Tax Compliance Act (FATCA), I have no personal experience. The idea is similar to FBAR: report any financial interests abroad. However, the threshold is different: $50,000.00 on the last day of the tax year or $75,000.00 at any time during the year, but the threshold is even greater for Americans abroad. Here is an overview of FBAR and FATCA rules:
https://www.americansabroad.org/current-regulations-and-guidance/ (I didn't link directly to the .PDF on the page, I wasn't sure if you would be comfortable opening a file from a website you may not know). But it already sounds like you guys know full well what FATCA entails judging from your initial post.
[Edit: this page directly from the IRS about the differences between FBAR and FATCA could be helpful as well: https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements]Another important issue for both the FBAR and FATCA: if you guys have a joint account, you (you and your wife) also have to file according to the above criteria which would definitely suck you personally (you, the German guy) into dealing with US tax law (rather than just your wife having to deal with all that).
The American Citizens Abroad website I linked to a few times is a good starting point for reading up on what your wife has to be aware of as an American living abroad.
Investing:Having your wife invest abroad is a bad idea not just because of FATCA (if filed correctly, ther is no penalty/tax/etc.), but also because of
Passive Foreign Investment Company (PFIC) rules. Long story short: income from a PFIC counts as normal income and not capital gains and will be taxed as such (read: up to 40% tax rate) (
http://thunfinancial.com/why-americans-should-never-ever-own-shares-in-a-non-us-incorporated-mutual-fund/). There are ways around this it seems, but I haven't looked into it as an option as it all seems like more trouble than it's worth with both PFIC and FATCA.
As an American abroad, it is near impossible to open an account in the US. The ACA-website has information about this as well as other forums (
https://www.bogleheads.org/forum/viewtopic.php?t=110773) There isn't a law against letting Americans abroad open accounts on US soil; it sounds like it's company policy since the companies don't want to risk get pulled in to dealing with foreign tax and reporting requirements. I am surprised to hear that your wife cannot open a further account with Vanguard despite already being with them though based off of other experiences I have read.
As for other options, a company called AssetBuilder caters to Americans living abroad, but I haven't been able to find much information on them outside of their website (https://assetbuilder.com/expat-investors) and Andrew Hallam (https://andrewhallam.com/) who looks to be in pretty tight with the company. [Edit: I can't seem to find any more info for Expats at AssetBuilder anymore. I am not sure if they ended that service.] [Edit: Charles Schwab allows US-Citizens abroad to open brokerage accounts with them.] One source of information I have not yet tapped into is Thun Financial Advisors (
http://thunfinancial.com/). They manage high net-worth individuals (>$500,000.00), but I e-mailed them an got a reply that they would be willing to answer a few questions for my particular situation. They also have a bunch of information on their website which I haven't finished sifting through.
As for retirement accounts: one cannot use the tax relief from retirement accounts (IRA, 401(k), etc.) when excluding foreign earned income on US tax returns through the Foreign Earned Income Exclusion (FEIE, I think it is Form 2555 in when filing US tax returns). I haven't looked into the possibilities (FEIE & taxable investment account or claiming foreign tax credit in the US and investing into an IRA), but there seem to be options out there that only a small number of people are familiar with (
https://www.bogleheads.org/forum/viewtopic.php?t=158193).
One real crazy idea if you guys are planning on staying in Germany: live off your wife's income and invest your income completely since you have your side of the equation figured out. ;-)
Money Transfer:Since your wife is making money in Germany and probably will want to invest in the US, there is the problem of getting money from here to there. I have only done wire transfers from my German bank to my US bank for medium amounts of money (max. 6000€). I don't think there is any problem with wiring larger amounts, but anything over 10,000.00 (EUR or USD) raises flags and requires extra paperwork (to combat money-laundering) from what I hear. The rates for wiring money should stay flat as well (DKB charges 18€ outgoing, US Bank charges $20 receiving for example) meaning a larger amount results in a relatively small fee. Another option is a forex company such as XE, World First, or Oanda. However, as I said at the beginning, I have not tried this out myself other than medium amounts of money to pay off student loans.
I'm sorry I can't offer you any definitive answers, but I hope some of the info I have is able to help you guys along some more. Check out the websites I've linked to, they have a bunch of information (ACA for compliance with US regulations, Thun for compliance and investment options, search "expat" in the Bogglehead forum to find even more).
Good luck you two.
Cheers,
Bryan