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Old 31-10-2018, 06:04 PM   #796
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My employer offers both a pre-tax 401k and after-tax Roth 401k (but no after-tax contributions), with a matching contribution of up to 2%. I can contribute a maximum of $19,000 for 2019 to either or both accounts. For now, I plan to retire in Singapore. How should the contributions be allocated?
I'd go with the Roth 401(k), for two reasons. One reason is that I think the tax outcome will be better in the circumstances you describe. That's a guess, but it's a reasonable one. Second, since you seem to be inclined to max out that $19K, the Roth 401(k) variant works better. Pushing in $19K after tax is a bigger effective contribution than $19K pre-tax, so you win.

For health plans, 1 option is a high-deductible plan ($1,500) with a health savings account to which my employer will contribute $500. Given the tax savings, is this a good idea? The other plans are: a high-deductible ($1,000) with a health reimbursement account funded by the employer, and a low-deductible ($300) with no employer contributions.
If they're otherwise identical, and if you're good or better health, the first plan is likely to work out best for you. The health reimbursement account in the second plan is probably a Flexible Spending Account (FSA), and FSAs are not carried over year to year. The HSA can be, and if you never spend it (or only partially spend it) then it becomes another pool of retirement savings.

For long-term investing, should I open an IRA? My annual salary will be above the Roth IRA limit, so I might have to use a backdoor Roth IRA if that's better than a traditional IRA. Or am I better off just paying the additional tax and directly buy IWDA+EIMI through IB, which I am currently doing in Singapore?
Yes, absolutely, I would add to your 401(k) with the Roth IRA, backdoor'ed if need be. That'll get you up to a cool $25K per year of U.S. tax advantaged retirement savings. If you're going to be saving that much or more for retirement anyway, taking the tax benefit is a no brainer. My current favorite is Fidelity's twin FZROX/FZILX mutual funds in some reasonable ratio -- 50-50 is probably correct. Although I like Schwab for their lovely Visa ATM card too, so you might want to grab that deal at some point.

The only "gotcha" is if you end up retiring in a country that doesn't treat Roth 401(k)s and Roth IRAs well from a tax point of view -- where the U.S. tax advantages are "lost" on you. The Roth is a future bet, that the tax code in your retirement country will be, in your retirement years, kind to appreciated assets that are not (except before appreciation) U.S. taxed. If you want to hedge your bets then I'd still take the Roth IRA deal (since that's the best you can do for that leg) but split the 401(k) up into some Traditional 401(k) and some Roth 401(k). For example, if you want to split it right down the middle, you could do this:

Traditional 401(k): 65% of $19,000 (~$12,500)
Roth 401(k): 35% of $19,000 (~$6,500)
Roth IRA: $6,000 (via backdoor if required)

But the disadvantage is you'll effectively reduce your retirement contribution, since the Traditional 401(k) is pre-tax then taxed (at future U.S. ordinary income tax rates) upon withdrawal. (Roth is better if you're pegging at the annual max.) I think the future U.S. tax filings are also more complicated that way.

I don't think I'd do that. I think I'd take the straight Roth bet. In the unlikely event you end up retiring in a Roth hostile country, there are some potentially legal "tricks" you can play, such as withdrawing your Roth funds after age 59 1/2 (qualified withdrawal) but before immigrating into that retirement country.

Note that your tax advantaged accounts should properly hold the most aggressive parts of your portfolio, at least during your accumulation phase, in order to maximize the long-term value of the tax benefit. Leave any bond investing outside your retirement accounts, and if you're in a high tax bracket (sounds like it) you might consider a low cost municipal bond fund for that portion. There's no state income tax in Washington State, so you can choose any non-state specific municipal bond fund. Just be aware that U.S. munis are U.S. dollar denominated, and you'll probably want to augment them with voluntary CPF contributions, notably. (CPF assets are U.S. taxable and U.S. reportable, I'm afraid.)

If you can clock 10 years in the U.S. Social Security system, awesome. That'll vest you in another source of retirement income, assuming the rules don't change. Just be aware of crossing the threshold for long-term residence for purposes of tax expatriation. I'm not saying you shouldn't cross that threshold -- maybe you end up staying in the United States for the rest of your life -- but just be aware of it.

I've mentioned before that it's a good idea to get into a U.S. tax friendly posture strictly before stepping foot in the United States. If you'd like me to elaborate on that, let me know.

Good luck!
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Old 31-10-2018, 08:20 PM   #797
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Thank you for your detailed response!

Note that your tax advantaged accounts should properly hold the most aggressive parts of your portfolio, at least during your accumulation phase, in order to maximize the long-term value of the tax benefit. Leave any bond investing outside your retirement accounts, and if you're in a high tax bracket (sounds like it) you might consider a low cost municipal bond fund for that portion. There's no state income tax in Washington State, so you can choose any non-state specific municipal bond fund.
I will be just within the 35% bracket for the first few years. Would funds like WFCMX from Wells Fargo or BBF from BlackRock be good examples? Sadly can't post links yet, but both can be found on Yahoo Finance.

Just be aware that U.S. munis are U.S. dollar denominated, and you'll probably want to augment them with voluntary CPF contributions, notably. (CPF assets are U.S. taxable and U.S. reportable, I'm afraid.)

...

I've mentioned before that it's a good idea to get into a U.S. tax friendly posture strictly before stepping foot in the United States. If you'd like me to elaborate on that, let me know.
Yes please.

Within Singapore, my financial assets comprise:
  • 36,000 of IWDA and 2,000 of EIMI with IB;
  • 350,000 SGD that I had planned to deploy to IWDA and EIMI, currently sitting in the bank or short-term FDs;
  • 28,000 in SGX stocks (mix of ES3, blue chips, and REITs);
  • 7,000 in bonds (MBH, SSB, SGS, and an odd 700 in A35 before MBH started);
  • 20,000 / 42,000 / 54,500 in CPF OA / SA / Medisave;
  • 60,000 of emergency cash for 12 months; and
  • 25 years left on a 450,000 mortgage that I intend to repay with rental income or cash from my salary. The current value is not great for a 3 year old apartment, and there are planned developments around the area over the next few years which should increase the value if I want to sell it.

I guess 1 or more of these might be taxable, eg. if I make voluntary contributions to SA and Medisave?

Once again, thank you for being so generous with your knowledge. I learnt a lot more in 10 minutes from your post, than over the past few days!

Last edited by quoppy; 31-10-2018 at 08:23 PM..
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Old 31-10-2018, 09:29 PM   #798
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I will be just within the 35% bracket for the first few years. Would funds like WFCMX from Wells Fargo or BBF from BlackRock be good examples? Sadly can't post links yet, but both can be found on Yahoo Finance.
Vanguard's municipal bond index mutual funds (e.g. VWLUX / VWLTX) are such examples.

Within Singapore, my financial assets comprise:[LIST][*]36,000 of IWDA and 2,000 of EIMI with IB;[*]350,000 SGD that I had planned to deploy to IWDA and EIMI, currently sitting in the bank or short-term FDs;[*]28,000 in SGX stocks (mix of ES3, blue chips, and REITs);[*]7,000 in bonds (MBH, SSB, SGS, and an odd 700 in A35 before MBH started);[*]20,000 / 42,000 / 54,500 in CPF OA / SA / Medisave;[*]60,000 of emergency cash for 12 months; and[*]25 years left on a 450,000 mortgage that I intend to repay with rental income or cash from my salary. The current value is not great for a 3 year old apartment, and there are planned developments around the area over the next few years which should increase the value if I want to sell it.
OK, your first problem is that assets such as EIMI, IWDA, ES3, MBH, A35, the REITs, and some of the "blue chips" will be classified as what are called "Passive Foreign Investment Companies" (PFICs). You can hold PFICs as a U.S. person, but in my view they're "tax toxic." If you do hold them then you're supposed to make "mark to market" elections every year, and pay ordinary income tax (35% marginal bracket) on that annual dividend/interest inclusive of the unrealized gains on those holdings. Yuck.

The only "blue chips" that I'm highly confident would not be classified as PFICs are the ordinary stock shares of DBS, OCBC, and UOB. There's a special exception carved out for most financial institutions.

If you want a U.S. tax appropriate analog to ES3 then EWS is available. The idea here is you'd liquidate ES3 (and anything else you're going to liquidate for tax reasons) strictly before stepping foot in the U.S., then redeploy whatever fraction of your portfolio you want to redeploy into Singapore stocks into EWS instead. Hold EWS during and just past your U.S. personhood, then flip back to an offshore posture (ES3).

Direct holding of Singapore Government Securities, including Singapore Savings Bonds (SSBs), is perfectly fine. The interest and any original issue discount (OID) is U.S. taxable at ordinary rates. Fixed deposits are fine, too, and the interest is U.S. taxable (of course).

Real estate.... Well, the rental income will be U.S. taxable, although if you owe some Singapore income tax on that income then you'll pay IRAS first then be allowed a Foreign Tax Credit (IRS Form 1116) that'll reduce your U.S. income tax on that income to account fully for the tax you pay in Singapore. But there might be some ways to improve on even that outcome, especially if you can keep reasonably careful records and (I'd advise) avoid selling the property while a U.S. person (to avoid the possible capital gains tax hit). For example, you might be able to deduct the mortgage interest to some extent.

I guess 1 or more of these might be taxable, eg. if I make voluntary contributions to SA and Medisave?
Your contributions to CPF are out of after tax income, and ordinary/traditional CPF dollars are not PFICs. (The CPF Investment Scheme is a different story.) But the interest on all CPF holdings is U.S. taxable (at your marginal ordinary tax rate), and CPF accounts are FinCEN Form 114/IRS Form 8938 reportable. Or at least CPF sure seems "FBAR"/"FATCA" reportable, and there's no harm in over-reporting.

If your employer is offering competent U.S. tax preparation assistance for at least the first couple years, that'd be awesome. However, tax preparation assistance won't tell you the sort of stuff I'm describing. Sometimes an employer offers an accounting firm's "tax briefing," but they tend to be rather perfunctory and not advisory -- here's how the tax system works (in brief), not here's how to make the system work best (and legally) for you.

One other thing I should mention is that it's useful to have a low cost way to tap Singapore dollar funds (in your bank) when you land in the U.S., to support your "spin up" spending at whatever somewhat unpredictable pace seems prudent. My current two favorite ways to do that are with ICBC's Global Travel Mastercard (for anybody/everybody who accepts Mastercard in the U.S.), and CIMB's Visa ATM card that accompanies their StarSaver savings account. I prefer having automatic monthly full balance GIRO payments on credit cards, especially if you're not in Singapore. If you've got those two cards in your wallet when you land, you're in good shape. You could take a look at Interactive Brokers, Schwab, DBS/POSB ("USA Remit"), Transferwise, and any other currency conversion/transfer paths to see who offers the best deal, and only for "big" stuff, such as tax informed investment repositioning and an apartment rental deposit.
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Last edited by BBCWatcher; 31-10-2018 at 09:33 PM..
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Old 31-10-2018, 11:31 PM   #799
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I will be just within the 35% bracket for the first few years. Would funds like WFCMX from Wells Fargo or BBF from BlackRock be good examples? Sadly can't post links yet, but both can be found on Yahoo Finance.
MUB is the pick for non-state-specific muni-bond ETFs. Low-cost (7bps), super liquid and easy to trade, and minimal exposure to clusterf*cks like Puerto Rico, Chicago, and tobacco bonds.
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Old 01-11-2018, 12:02 AM   #800
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OK, your first problem is that assets such as EIMI, IWDA, ES3, MBH, A35, the REITs, and some of the "blue chips" will be classified as what are called "Passive Foreign Investment Companies" (PFICs). You can hold PFICs as a U.S. person, but in my view they're "tax toxic." If you do hold them then you're supposed to make "mark to market" elections every year, and pay ordinary income tax (35% marginal bracket) on that annual dividend/interest inclusive of the unrealized gains on those holdings. Yuck.

The only "blue chips" that I'm highly confident would not be classified as PFICs are the ordinary stock shares of DBS, OCBC, and UOB. There's a special exception carved out for most financial institutions.

If you want a U.S. tax appropriate analog to ES3 then EWS is available. The idea here is you'd liquidate ES3 (and anything else you're going to liquidate for tax reasons) strictly before stepping foot in the U.S., then redeploy whatever fraction of your portfolio you want to redeploy into Singapore stocks into EWS instead. Hold EWS during and just past your U.S. personhood, then flip back to an offshore posture (ES3).
Ouch. After liquidating whatever's necessary, should I look at re-investing into something more US tax-friendly like a Vanguard Target Retirement Fund (VFIFX)? Probably that and EWS in a 90% to 10% split (or even just 5% EWS) seems reasonable and close to my current allocation.

Another question I missed earlier on what to invest with the retirement accounts. Given your advice on being more aggressive, should I dedicate that to an ETF like VT since VFIFX has a (smallish) bond component?

I do not have much knowledge of the US markets, so I will stay away from individual stocks.
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Old 01-11-2018, 04:40 AM   #801
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I like Vanguard's "Target" fund, but check first to see what your 401(k) offers since you'll need to work that into your overall portfolio mix. For example, you could do something like this:

* 401(k) and IRA: all stocks (mix of U.S. and international, low cost stock index funds), US$25K/year.

* outside 401(k) and IRA: yes, Vanguard's "Target" fund can play a prominent role, but you'll probably want to mix in some bonds/bond-likes to balance the aggressive 401(k)/IRA holdings (SSBs, voluntary CPF, the U.S. muni fund that ST mentioned) and perhaps also add a dash of EWS.

Vanguard's "Target" index fund is really geared best toward those retiring in the U.S. But that doesn't mean you cannot use it and its automatic portfolio rebalancing. You'd just add a bit of Singapore flavor to it, that's all. I do something very much like this, at least in broad outline.

I don't think you bother with REITs at all, even the U.S. tax appropriate ones.
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Old 03-11-2018, 11:36 PM   #802
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Hi BBCWatcher, I just want to update here that after looking at the premiums for both mortgage insurance and term insurance, I concluded that term insurance is cheaper. So, I have decided to increase our term coverage with Aviva Mindef Group Insurance. However, I did hear that such group term insurance policies have a cap on the number of payouts every year. If the insurer has reached the cap for that year, they wonít pay you. Not sure if it is true.
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Old 08-11-2018, 05:09 PM   #803
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BBCW hasn't appeared on this forum for quite sometime. I hope all is well with him.
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Old 10-11-2018, 12:20 AM   #804
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Hi BBC Watcher, thanks for the great insurance tips. Do you have any advice for software engineer and tech workers (class 1) on DII? i've seen software engineers gainfully employed with disabilities like cerebral palsy and even with full blindness. So i'm not sure if its worth it for tech workers to get DII.
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Old 10-11-2018, 02:09 AM   #805
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Hi BBC Watcher, thanks for the great insurance tips. Do you have any advice for software engineer and tech workers (class 1) on DII? i've seen software engineers gainfully employed with disabilities like cerebral palsy and even with full blindness. So i'm not sure if its worth it for tech workers to get DII.
The premium is thus correspondingly lower for that set of professions. Congratulations on that score...and itís still extremely important to defend against the risk of losing what is most likely your biggest asset (by far): your future earning potential. Indeed, the possible loss is bigger in that set of professions because they tend to be well compensated.

If/when youíve amassed ample wealth and can self-insure, congratulations again. Until then....
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Old 10-11-2018, 04:37 AM   #806
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Yeah, I got hit with their changed checking account fees for several months before realising it. Would love to switch, but having neither SSN nor FTIN, I think my choices are limited unless I happen to visit the US.

I'd initially opened the account just to have a US debit card to pay for purchases that are USA-only -- e.g. bestbuy sometimes has good deals. But it turns out to be useful to have an account sometimes. In this case, I'm trying to conver some of my old cryptocurrencies into cash, and that's where I'm concerned about AML red flags being triggered.

Read your post on TransferWise. Are they "safe"?

Are there other banks you'd recommend if I visit the US?
Hi BBC Watcher,

It seems that I may be visiting the US soon for a week or twoafter all, though I still wouldn't have an SSN... Considering to open an account with another bank and close my BoA account. What would you recommend that is not so fee-loving?

Something managed online from Singapore, minimal balance requirements, provides a credit/debit card, can do ACH&wire in/out with preferably low fees... hopefully captured my needs.
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Old 10-11-2018, 04:42 AM   #807
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It seems that I may be visiting the US soon for a week or twoafter all, though I still wouldn't have an SSN... Considering to open an account with another bank and close my BoA account. What would you recommend that is not so fee-loving?
What part(s) of the U.S. will you be visiting?
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Old 10-11-2018, 04:49 AM   #808
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What part(s) of the U.S. will you be visiting?
Vegas, and maybe Washington.
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Old 10-11-2018, 04:56 AM   #809
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Vegas, and maybe Washington.
The state or the District of Columbia?
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Old 10-11-2018, 06:02 AM   #810
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FYI, you might be able to open a Motiv Money account using their smartphone app (Apple App Store or Google Play) if you have these ingredients:

1. A U.S. mobile phone number;
2. A U.S. postal mailing address (long enough to receive the plastic debit card);
3. A form of identification (your passport).

I havenít been able to verify this, though, and would appreciate hearing first hand reports.
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