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How I stopped worrying and learned to love FATCA. This would have been a marginally funnier joke had it fit in the title, but here we are. Hello BFC, I will be flying to the US from the Netherlands on june 19th to join my wife there. Hooray? Hooray! It's very exciting. However, I'm also mostly clueless about finance in the US, and know just enough to get myself into trouble from lurking the threads here. My wife doesn't even lurk dead gay comedy forums' finance threads, so I am terrifyingly the most well-read of us. The plan is for us to be in the US for at least a decade, but in all likelihood not retire in the US due to a variety of factors. Chief of which is that there is universal healthcare in Europe, which will depress our expected spending on healthcare in old age significantly.  A little about us: Me - 31 No Horse No income until I get a new job in tech, which for my job title, experience and particulars seems to be around $100.000 to $180.000 depending on employer, area and so on. No debts Around €85.000 from sale of most of my stuff, accumulated retirement savings from my years of sole proprietorship and money that was going to be used for a down payment to a house some years ago. Some unspecified but tiny amount (no more than €2.000) of money tied up in a defined contribution pension provided by my current employer. As I would incur tax penalties liquidating it, I've decided to leave it untouched until it becomes more trouble than it's worth. I receive some royalties from book sales of my late father (€1.000-3.000 a year) as part of his estate. I split this three ways with my two siblings. Her - 27 No Horse Income: approximately $48.000 a year as an adjunct, looking for more steady work. Debts: Around $41.000 in student debts, broken up in loans of various denominations and interest rates (as low as 1.700, as high as 24.000, rates between 4 and 7%) $24.000 owed on a car (2.5% or so). The student loans are on IBR. No savings, since she prefers to allocate her money to her debts. Her parents have a life insurance policy and a (mostly) paid off house that will be sold upon their deaths to cover any remaining debt they (her parents, and my wife and her brother) may have by then. The big question I'm stuck with at this time is what the tax implications of my defined contribution balance and the royalties are, and how the hell to save for retirement. From the research I've done, it's not immediately the obvious move to max out your tax advantaged space if you don't plan on taking the distributions in the US. As far as I have been able to find out for my expected situation, all roth accounts are counted as investment or savings income where the Dutch tax authorities are concerned, which means that as of today, tax is paid based on a fictitious return on investment, rather than actual returns. "Conventional" accounts have their distribution taxed as regular income and seem to work mostly the same as they do in the US, as far as I can tell. Secondary questions are whether to convert the lump sum of euros I've accumulated to dollars, or whether to hold it an euro-denominated account at a US financial institution? FATCA will just complicate my tax returns and if it makes the IRS happy that I keep that money parked in a domestic financial institution I'll shut up and take my licks. Also, whether or not the conventional wisdom of a fairly heavily US-weighted portfolio still makes sense if you're planning to take a retirement in a non-dollar economy? I'm heavily out of my depth here. I'd also at some point hope I have the luxury of having money left over to give to give away to kids, especially if I retire myself somewhere cheap. I'm not sure if or how this would change where the money gets put. For posterity I should probably also mention that the student debt is going to go on an aggressive repayment schedule as soon as I am gainfully employed and we have no crazy hobbies that suck up disposable income. Any feedback at all is welcomed, including on things I haven't mentioned yet, because I don't know what I don't know!
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Jun 4, 2018 22:19
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Hambilderberglar posted:... how the hell to save for retirement. This is difficult to answer. Tax treaties change over time, so what is good advice now may not be 30 years from now. Also consider how flexible you can be when retiring. Will you definitely retire in the Netherlands, or would another EU country with more favorable tax treatment work? This flexibility may save you thousands or even tens of thousands a year in retirement. I would say for now, the best course of action may be to put half in an IRA, and half in a Roth IRA. Also look into how social security or other pensions may be taxed. quote:Also, whether or not the conventional wisdom of a fairly heavily US-weighted portfolio still makes sense if you're planning to take a retirement in a non-dollar economy? I'm heavily out of my depth here. I'd go 50/50 U.S./International, but I'd recommend that regardless of where you live. I wouldn't worry about leaving money to potential heirs right now; you have a lot on your plate as it is. Also, not to be a downer, but if you are not a U.S. citizen, look into what may happen if you get divorced. You may need a good amount of your savings to get back on your feet and find a job back in Europe.
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Jun 5, 2018 04:17
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Well first of all, you both need horses
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Jun 5, 2018 05:57
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Hambilderberglar posted:Secondary questions are whether to convert the lump sum of euros I've accumulated to dollars, or whether to hold it an euro-denominated account at a US financial institution? Unfortunately, the best course of action to shield your money from taxes is probably to pay down those debts instead of investing. Like inept said, that could be problematic in the worst case scenario if you guys break up. You should at least contribute to a 401k up to match, is that also taxed as savings? That might be a good thing to look for when evaluating job offers.
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Jun 5, 2018 06:03
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Inept posted:This is difficult to answer. Tax treaties change over time, so what is good advice now may not be 30 years from now. Also consider how flexible you can be when retiring. Will you definitely retire in the Netherlands, or would another EU country with more favorable tax treatment work? This flexibility may save you thousands or even tens of thousands a year in retirement. I would say for now, the best course of action may be to put half in an IRA, and half in a Roth IRA. Also look into how social security or other pensions may be taxed. On divorce, I've done that research, as far as I can tell, my residency is conditional for the first two years of my marriage. If I divorce in those two years I can pack my bags, after these two years I can apply for a non-conditional green card. 50/50 US/International feels like it's heavily weighted toward the US, from my perspective? I was going to allocate something like 40/40/20 US/Euro/Developing? Feel free to tell me this is a bad idea. moana posted:Currency conversion always takes a chunk out, plus another chunk when you transfer it back, hold it in euros if you can. On the topic of debt, we've currently made the arrangement that I would take care of living expenses (rent and so on) leaving her free to put more of her money toward her debts until it becomes a more manageable figure or her earnings go up. She's strongly of the opinion it shouldn't be my job to pay for her debts but I feel gross with a potential salary of 2-3x what she has and just socking away money like I'm scrooge mcduck, so this accounting trick keeps everyone happy. We are planning a post-nup soon to hash out exactly who would get what in the event of a split while we still like each other. On 401k topic, as I understand it these accounts take gross funds, but the disbursal is taxed come distribution time? If so, these accounts are taxed as regular income according to the tax system in the Netherlands, which currently breaks down like so: 0 eur to 34404 eur - 18.65% 34404 eur to 68800 eur - 36.93% 68000 eur and beyond - 49.5% Caveat: these are the rates a current retiree will pay. If I plan for financial independence earlier than retirement age, I will be paying different (higher) tax rates. And of course, past results are no guarantee for the future, etc. Wealth/savings taxes according to the following brackets first 25000 eur tax free 0 eur to 75000 eur (this really means that the 0 euro is actually euro 25001) 75000 eur to 975000 eur 975001 and up Here's where it becomes funny/awful - The tax you pay isn't based on reality, but on an assumed fictitious return on investment that is recalculated every five years based on what the economy at large is doing. To illustrate this, I will use my own example using 2017's figures: 85000 euro in savings. 2017 has a tax free allowance of 25k, reducing my taxable sum to 60k. 0 to 60000 eur - 67% of which is assumed to return 1.63%, the remaining 33% has a fictitious return of 5.39% So - 60000*0.67=40200 1.67%*40200 = 655.26 in fictitious gain 60000*0.33=19800 5.39%*19800=1067.22 in fictitious gain 655.26+1067.22=1722.48 30% of 1722.48 is 516.74 euro tax owed. I'm not financially literate enough to draw definitive conclusions from this, but it sure looks like roths would be more favourable to my particular scenario, not counting the fact that income tax rates I'd pay at the time of investment (in the united states) would be lower for the same amount of post tax dollars, compared to the situation I am in now. Hambilderberglar fucked around with this message at 17:39 on Jun 5, 2018 |
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Jun 5, 2018 17:36
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Hambilderberglar posted:50/50 US/International feels like it's heavily weighted toward the US, from my perspective? I was going to allocate something like 40/40/20 US/Euro/Developing? Feel free to tell me this is a bad idea. Vanguard has a fund for the total global stock market that you can invest in as well. It attempts to evenly weight stocks from every country. It currently is 51.7% U.S. https://investor.vanguard.com/mutual-funds/profile/portfolio/vtwsx (scroll down to Market Allocation). 20% developing would significantly overweight developing markets and carries more risk. For your specific tax questions, you probably need to find a professional in the Netherlands who has experience with this. The U.S. has a lot of different tax advantaged retirement schemes that may each be treated differently. A few hundred euro now is worth it to get this figured out.
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Jun 5, 2018 18:25
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Euro denominated bank accounts do exist in the US but they're hard to come by. http://thecurrencyshop.com/blog/2017/08/08/foreign-currency-accounts-explained-compared/ has a short list of banks to start you off. In general, though, the US is nowhere near as foreign currency friendly as Europe is - you can expect massive fees when using an ATM and so on. You also -really- want to avoid FATCA; the FBAR is manageable, but FATCA is such a massive bitch that I would make very sure to stay under the reporting threshold.
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Jun 5, 2018 18:56
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Inept posted:Vanguard has a fund for the total global stock market that you can invest in as well. It attempts to evenly weight stocks from every country. It currently is 51.7% U.S. https://investor.vanguard.com/mutual-funds/profile/portfolio/vtwsx (scroll down to Market Allocation). 20% developing would significantly overweight developing markets and carries more risk. Will vanguard still do business with clients not domiciled in the United States (anymore)? E: Adar posted:Euro denominated bank accounts do exist in the US but they're hard to come by. http://thecurrencyshop.com/blog/2017/08/08/foreign-currency-accounts-explained-compared/ has a short list of banks to start you off. In general, though, the US is nowhere near as foreign currency friendly as Europe is - you can expect massive fees when using an ATM and so on. I'm not expecting to have to draw on the euro denominated money except at the very start while I get on my feet and get employed. Certainly not that I'd be regularly making ATM withdrawals against it. There'd also not be (much) inflow, at most it would be my share of the estate (300-1000 a year or so) that would top it up. E2: Having read this list exhaustively I see the following: quote:Specified foreign financial assets include foreign financial accounts and foreign non-account assets held for investment (as opposed to held for use in a trade or business), such as foreign stock and securities, foreign financial instruments, contracts with non-U.S. persons, and interests in foreign entities. Doublepost by another name: I just re-read your first post, Inept, and was wondering about this quote:I would say for now, the best course of action may be to put half in an IRA, and half in a Roth IRA. Hambilderberglar fucked around with this message at 19:39 on Jun 5, 2018 |
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Jun 5, 2018 19:08
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Roth IRA and IRA have a combined limit of $5,500/yr, or less depending on your income. 401k has an $18k limit for your contributions but employer contributions can push you over that.
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Jun 5, 2018 20:25
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Hambilderberglar posted:Does owning a mortgaged piece of real property abroad trigger FATCA reporting requirements? From the IRS site: quote:Q2. Does foreign real estate need to be reported on Form 8938? Your house is fine. Just make sure the account you use to pay the mortgage is small potatoes so that you don't accidentally trigger FBAR/FATCA if you don't need to. Which brings up the next point - if you tell your European bank you are moving to the US, that makes you a US person subject to FBAR/FATCA reporting and two things happen: 1)you have to fill out a W-9 to send them every year, and if you forget to do it they'll close your account; 2)if they're a small enough bank they won't want to deal with the US person headache and close your account anyway. Dealing with reporting foreign accounts is the bane of every US expat, so do try to keep that to an absolute minimum.
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Jun 5, 2018 20:27
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Buy a boat so you can commute from the Netherlands. Have your wife get one too in case yours breaks.
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Jun 5, 2018 20:37
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OctaviusBeaver posted:Roth IRA and IRA have a combined limit of $5,500/yr, or less depending on your income. 401k has an $18k limit for your contributions but employer contributions can push you over that.  Thanks.Adar posted:From the IRS site: Most investment account shops in the EU that I've seen straight up will not take US persons, and will tell you politely yet firmly that they can no longer continue their business relationship with you once they find out you are becoming one. Xenocides posted:Buy a boat so you can commute from the Netherlands. Have your wife get one too in case yours breaks.
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Jun 5, 2018 20:45
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Hambilderberglar posted:The plan is for us to be in the US for at least a decade, but in all likelihood not retire in the US due to a variety of factors. Chief of which is that there is universal healthcare in Europe, which will depress our expected spending on healthcare in old age significantly. The United States has universal healthcare for all persons over 65, and most disabled persons under the age of 65. I'm not kidding at all. The program is called "medicare." Secondly, after spending ten years or more in the United States, you may find you no longer wish to leave. I'm just saying: plan for both scenarios, because a lot can change between now and age 65. Hambilderberglar posted:No income until I get a new job in tech, which for my job title, experience and particulars seems to be around $100.000 to $180.000 depending on employer, area and so on. How do you expect this to work, exactly? Have you done your homework on visa status? Even if your wife is a citizen, it can take quite a while to fix up your own visa status based on hers. And you may be required to return to the Netherlands during the process. Also, a warning: working for a foreign firm while living in the United States counts as working illegally in the United States. If you are applying for a green card based on your citizen spouse, they may go over your finances with a fine tooth comb, and if they discover that income, you will get deported. Not removed. Deported. Banned from the United States.
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Jun 23, 2018 19:47
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OctaviusBeaver posted:Roth IRA and IRA have a combined limit of $5,500/yr, or less depending on your income. 401k has an $18k limit for your contributions but employer contributions can push you over that. 401k is $18k for you alone, $53k for the combination of you and your employer. Hambilderberglar posted:On 401k topic, as I understand it these accounts take gross funds, but the disbursal is taxed come distribution time? If so, these accounts are taxed as regular income according to the tax system in the Netherlands, which currently breaks down like so: You can either pay taxes up front, and have it tax free at distribution, or take a tax break up front, and pay taxes on distribution. In general, when available, it is better to pay the taxes up front, because the contribution limit is the same number of nominal dollars in both schemes. (i.e. paying taxes up front is a higher effective limit) It's entirely up to you, and your employer's 401(k) plan administrator. (Bad employers will only offer one option to save a nickel on admin fees.) Notorious b.s.d. fucked around with this message at 19:51 on Jun 23, 2018 |
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Jun 23, 2018 19:49
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Notorious b.s.d. posted:The United States has universal healthcare for all persons over 65, and most disabled persons under the age of 65. I'm not kidding at all. The program is called "medicare."
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Jun 30, 2018 17:31
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Cicero posted:Doesn't Medicare only cover like half of people's medical expenses on average though? Medical expenses are covered rather lavishly, but Medicare will not cover the cost of a retirement home. That has to be paid out of your own pocket. Medicaid, the government program for the poor, covers retirement homes, but you have to be really, really poor to qualify. Like down to your last nickel. You have to have less than $10k in assets or something similarly low. just to keep them straight:
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Jun 30, 2018 19:03
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Notorious b.s.d. posted:The United States has universal healthcare for all persons over 65, and most disabled persons under the age of 65. I'm not kidding at all. The program is called "medicare." On my status - My visa is a K1, I came in, I got married, I now submit two forms to USCIS (I-485 and I-765) The first adjusts my status from a nonimmigrant visa to an immigrant visa, the second is the application for employment authorization. Once these come back in my favour I should be legally allowed to be employed. I should also not be required to return based on what I was told by the consulate, nor am I allowed to without an advance parole notice, which the CBP agent at the border told me to apply for immediately, since they take a bit and you never know if you might need it. I am also not working for a foreign firm right now. I will stand to get one more salary payment in july that settles up any remaining money they owe me, but my last working day was before I left for the US, and I was not planning on chancing that anyway for the reasons you mentioned. Hambilderberglar fucked around with this message at 18:28 on Jul 3, 2018 |
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Jul 3, 2018 16:03
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