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Old 16-07-2019, 08:35 AM   #1321
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Bank interest is not hard at all. Just look at your bank statements, tally up the interest — DBS even does this for you on your December statement — convert using the official exchange rate that the IRS publishes, and report the number.
I am really lazier than I care to admit (haha)

I have to take another look at whether non-U.S. source income is U.S. taxable on an H-1B1 by the way. “Stay tuned.”
Thanks!

Not true, especially at Schwab which has an office in Singapore after all.

Nope, it’s rather the opposite. NRA decedents’ 401(k)s and IRAs are U.S. estate tax exempt (and estate tax favored quite often for U.S. person decedents). The Roth variants are U.S. tax free at withdrawal, as long as the withdrawal is qualified (meet minimum withdrawal age in particular). And the default heir is your legal spouse. Indeed, you need your spouse’s explicit permission to name anybody else. You can be helpful to the fund administrator to keep your spouse’s contact details up-to-date, but that’s it.

Absolutely you want to do this, and to max both out if you can afford it. It’s one of the big advantages of working in the U.S.
Thank you for correcting my misunderstanding, I was under the wrong impression that IRA is subject to the inheritence tax.
At least now IRA looks more attractive now, which means I get to be less firm on salary demands.
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Old 16-07-2019, 01:56 PM   #1322
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What U.S. state will you be working in, paradizreef?

The rules are a bit complicated (involving the "Substantial Presence Test" and a possible exception to that test), but, to net it out, if you're working full-time in the U.S. for ~5 years on a H-1B1 visa then it's extremely likely you're going to be taxed on a worldwide income basis eventually. Given that likelihood, I suggest you look at all assets across the household and see if you can make them "U.S. tax friendly" strictly before you step foot in the U.S. For example, I don't think it's a good idea to hold anything that the U.S. tax code treats as a Passive Foreign Investment Company (PFIC) holding. Typical examples you might have coming from Singapore include unit trusts, several of the SGX-listed securities (not all but many), non-U.S. ETFs (including IWDA), and non-U.S. REITs. You might also consider resetting the cost basis of appreciated assets before you step foot in the U.S., although this has to be done a little carefully if you do it.

Last edited by BBCWatcher; 16-07-2019 at 02:05 PM..
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Old 16-07-2019, 03:15 PM   #1323
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Hi BBCWatcher,
My mum and I are on the NTUC Advantage Heath shield and rider since year 2006. She is 61 and I am 38 this year.
What are your thoughts on having a rider tagged to our health shield plans from private insurer? I am inclined to keep the rider for my mum as she does not have any source of income and has zero insurance (besides the healthshield).

Will it be wise for me to deploy the cash used for my rider into a Disability Income insurance?
I only have a Tokio Marine whole life insurance (sum assured $75,000) with a critical illness rider, which was bought in year 2006.
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Old 16-07-2019, 05:02 PM   #1324
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I am a US person and my Singapore employer is moving me from a defined benefit plan (lump sum payout) to a defined contribution plan (SRS). Only the company is contributing to the SRS, so this will be tax deductible on Singapore but not on US taxes. I know the highest SRS account balance needs to be reported to the US annually. Seems fairly straightforward (hopefully) up to that point. Let me know if I’m missing anything.

My main question is what is the best “US person appropriate” investments for this account? I believe unit trusts or ETFs are considered PFICs and should be avoided.
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Old 16-07-2019, 07:54 PM   #1325
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Hi BBCWatcher,
My mum and I are on the NTUC Advantage Heath shield and rider since year 2006. She is 61 and I am 38 this year.
What are your thoughts on having a rider tagged to our health shield plans from private insurer? I am inclined to keep the rider for my mum as she does not have any source of income and has zero insurance (besides the healthshield).
Would you double check the plan and rider names for me. I’m not finding that one, at least not easily.

Will it be wise for me to deploy the cash used for my rider into a Disability Income insurance?
I think DII is quite important, as you probably know. Ordinarily it’d be higher priority, but I’ll hold off until I learn more.

I am a US person and my Singapore employer is moving me from a defined benefit plan (lump sum payout) to a defined contribution plan (SRS). Only the company is contributing to the SRS, so this will be tax deductible on Singapore but not on US taxes.
Any chance they could offer you a decent or better 401(k) plan instead? Assuming not....

I know the highest SRS account balance needs to be reported to the US annually. Seems fairly straightforward (hopefully) up to that point. Let me know if I’m missing anything.
Yes, on FinCEN Form 114 and (if you meet the filing threshold) IRS Form 8938.

My main question is what is the best “US person appropriate” investments for this account? I believe unit trusts or ETFs are considered PFICs and should be avoided.
Yes, you’re right.

You could buy Singapore Savings Bonds and/or other Singapore Government Securities using SRS funds, but those are low yielding. The best I can come up with otherwise that’s clearly not going to run afoul of PFIC rules is a collection of individual bank and/or insurance stocks such as DBS, OCBC, and UOB. Those seem to be OK since there’s an exception for legitimate bank and insurance companies (their stocks). They distribute dividends, and if offered scrip dividends I would take those instead of cash dividends back into your SRS. Cash dividends will be unqualified dividends and subject to standard U.S. income tax rates plus Net Investment Income Tax if applicable. Upon SRS withdrawal you might be able to take a foreign tax credit based on what you pay to IRAS then, but the U.S. tax calculation will be very complicated. I think you’ll have to figure out what portion is attributable to excluded income that the U.S. never taxed and exclude that again, and you’ll have foreign tax credit category complexities I expect (which portion is general category and which not). I do not look forward to this.

I think you have to treat the employer’s SRS contributions just as you would any other earned income, reportable and taxable now, when deposited. And the IRS will immediately “claw back” some portion of the upfront Singapore tax savings if you’re above the Foreign Earned Income Exclusion/Foreign Housing Exclusion. How much the IRS will claw back depends on how far above those exclusions you are.

I might even sit down and run the numbers to see if you’re better off withdrawing employer contributions immediately, sucking up the IRAS penalty (which might qualify for a partial foreign tax credit if you’re above the exclusions), and then investing the funds in ordinary, U.S. tax friendlier (and much lower cost and more diversified) ways. If you can persuade your employer to bypass the SRS deposit and just remit that amount directly, then obviously that’d be better than taking the penalty (and your employer shouldn’t care since it’s the same number of dollars).

If any of this discussion is confusing, please let me know.
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Old 16-07-2019, 10:45 PM   #1326
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Hi BBC Watcher,

I had emailed NTUC a few days ago to request for the premium table.

Thank you!

"You have an Enhanced IncomeShield Advantage Plan with Plus Rider.

Please refer to https://www.income.com.sg/insurance/...omeshield#main for the premium table of your main policy. You may refer to the cash outlay column for the details.

For your Plus Rider, please refer to https://www.income.com.sg/insurance/...for-plus-rider. Riders are only payable in cash. "
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Old 16-07-2019, 10:49 PM   #1327
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Thanks for the reply. You have provided some interesting possibilities for me to explore. Asking my employer to forget about SRS and just hand over the cash - I like that one! Unfortunately my employer is very conservative and doesn’t like to make any exceptions... but can’t hurt to ask! I think the max is going to be around $30k annually, and I’m only looking at around 4 more years of that before I move back to the US and seems like the SRS has to be kept open for 10 years to avoid penalties - not sure how the 50% tax thing works if not residing in Singapore at the time of withdrawal (nonresident tax rate?).

In recent years I’ve been running out of exclusions, deductions, exemptions and credits. I will have to start claiming foreign tax credits on my unexcluded income starting this year and am not looking forward to it (I do my own US tax filing by hand). From what I have read, I doubt penalties could be counted for tax credit purposes.
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Old 16-07-2019, 11:42 PM   #1328
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IB is lower cost in most scenarios, including scenarios involving monthly IWDA buys. One big difference is the currency conversion cost.

What other options do we have other than IB, which are comparable or slightly more expensive?
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Old 17-07-2019, 08:12 AM   #1329
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What U.S. state will you be working in, paradizreef?
Current offer I have is from Austin, Texas. I am also exploring options from CA, though the taxes there makes Texas more appealing.


The rules are a bit complicated (involving the "Substantial Presence Test" and a possible exception to that test), but, to net it out, if you're working full-time in the U.S. for ~5 years on a H-1B1 visa then it's extremely likely you're going to be taxed on a worldwide income basis eventually. Given that likelihood, I suggest you look at all assets across the household and see if you can make them "U.S. tax friendly" strictly before you step foot in the U.S. For example, I don't think it's a good idea to hold anything that the U.S. tax code treats as a Passive Foreign Investment Company (PFIC) holding. Typical examples you might have coming from Singapore include unit trusts, several of the SGX-listed securities (not all but many), non-U.S. ETFs (including IWDA), and non-U.S. REITs. You might also consider resetting the cost basis of appreciated assets before you step foot in the U.S., although this has to be done a little carefully if you do it.
Not a big issue in my case, I have closed out all my unit trust positions last year, and will only likely start to build a tiny portfolio of some SG stocks in the coming months. But thanks for the heads up, I will put a big red exclamation mark over all REITS in my watchlist.

PS: On eventual taxes, like say (major if scenario), I work in US for 5 years and build up a tiny IRA account, eg $19,000 x5 years, so about $95,000 discounting appreciation/interest/co-contribution from co & what-so-ever. Fast forward to when I am 60 years old but residing outside US, and I start receiving payouts from IRA..... Do I have to file income tax with US every year? (submitting also my CPF (after 65) allowance/dividend in SG stocks etc)
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Old 17-07-2019, 02:25 PM   #1330
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"You have an Enhanced IncomeShield Advantage Plan with Plus Rider.

Please refer to https://www.income.com.sg/insurance/...omeshield#main for the premium table of your main policy. You may refer to the cash outlay column for the details.

For your Plus Rider, please refer to https://www.income.com.sg/insurance/...for-plus-rider. Riders are only payable in cash. "
OK, if you're looking to save some premium dollars here you and/or she might consider:

1. A switch from this base plan to the public hospital B1 ward plan ("Basic").

2. A switch from the "legacy" Plus rider (which provides "zero dollar" coverage) to one of the new rule compliant riders (which caps your annual co-pays for covered services -- and the co-pays can still typically be paid using MediSave if you wish).

Check the premium tables first, of course.

Asking my employer to forget about SRS and just hand over the cash - I like that one! Unfortunately my employer is very conservative and doesn’t like to make any exceptions... but can’t hurt to ask! I think the max is going to be around $30k annually, and I’m only looking at around 4 more years of that before I move back to the US and seems like the SRS has to be kept open for 10 years to avoid penalties - not sure how the 50% tax thing works if not residing in Singapore at the time of withdrawal (nonresident tax rate?).
If (when) you've left Singapore you can withdraw starting 10 years from SRS account opening. You end up paying an effective tax rate of either 11% (half of 22%) or 7.5% (half of the 15% concessionary rate).

From a dollars point of view your employer shouldn't care about where their deposits land.

Current offer I have is from Austin, Texas. I am also exploring options from CA, though the taxes there makes Texas more appealing.
At equal compensation, yes, but that's not usually the case.

Not a big issue in my case, I have closed out all my unit trust positions last year, and will only likely start to build a tiny portfolio of some SG stocks in the coming months.
Caution: Many individual SGX-listed stocks are clearly PFICs, too. To pick just a few examples, CapitaLand, Jardine Matheson, and SPH sure look to me like they're PFICs as the IRS defines them.

The individual bank stocks (DBS, OCBC, UOB) look like they're exempted from those PFIC-related rules.

PS: On eventual taxes, like say (major if scenario), I work in US for 5 years and build up a tiny IRA account, eg $19,000 x5 years, so about $95,000 discounting appreciation/interest/co-contribution from co & what-so-ever.
IRA, no. The limit is US$6,000 per person (2019 figure, assuming you will be under 50 years of age for all of 2019). Potentially US$12,000 per couple (same year/age) if you can figure out how to get an IRA custodian to open an account for a non-resident alien spouse who has made a Section 6013(g) election and files a joint tax return.

The IRA is in addition to your 401(k). Max out your employer's matching funds into your 401(k) first, then if you can afford more drive both -- to their maximums if allowed. I suggest Roth 401(k) and Roth IRA if you plan to retire in Singapore. Some employers don't offer Roth 401(k)s, so in that case you'd max out your employer's match to a Traditional 401(k) first, then max out your Roth IRA, then your employer's Traditional 401(k), in that order.

If your earnings are "too high" to contribute to a Roth IRA then there's a workaround for that. Ask if that "problem" applies.

Fast forward to when I am 60 years old but residing outside US, and I start receiving payouts from IRA..... Do I have to file income tax with US every year? (submitting also my CPF (after 65) allowance/dividend in SG stocks etc)
The short answer is yes, I believe so. Let's assume you're living in Singapore when you make a qualified withdrawal. You'll make the withdrawal, and the custodian will withhold 30% as I understand it. Then you file IRS Form 1040NR (a non-resident tax return) to claim back all of the withholding if it's a Roth 401(k) and/or Roth IRA distribution -- and assuming the distribution is qualified (you're old enough, basically).

But you only have to do that in the year(s) when you withdraw. A 401(k) has required minimum distributions (RMDs) starting at age 70 1/2, but there's a workaround for that if it's a Roth 401(k): roll it over to your Roth IRA when you're allowed.

....And I might be mistaken. If your custodian doesn't withhold, and if it's a qualified distribution from a Roth 401(k) or Roth IRA (i.e. zero tax owed), then you might be off the hook in filing.

It's helpful to maintain a U.S. bank or U.S. credit union account for these and other purposes, and of course you'll have that opportunity, to open a low cost/fabulous U.S. account and keep it. A Schwab One brokerage account (with its fabulous debit/ATM card) would be on my short list, for example. Though I'd skip the Schwab Bank account since that one won't survive your exit from the U.S.

Last edited by BBCWatcher; 17-07-2019 at 02:29 PM..
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Old 17-07-2019, 07:19 PM   #1331
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Thanks for clearing up the 10 year tax consequences on SRS. If withdrawing in 4 years, the 5% penalty and taxes on the full amount means having to earn about 2.3% additional ROI over 6 years versus what I could earn in the SRS account - might be worth it given the limited options.

The next conundrum is how to handle the large lump sum they are forcing me to take by year end. I want to avoid FATCA reporting if possible and can think of only two ways - either have them break up the payment (if they allow that) and transfer each chunk to the US before the balance hits the threshold... or open an account with Citibank which I’ve been told by the experts (and I’m convinced based on the IRS’s exact words) that being an overseas subsidiary of a US bank does indeed exempt that account from FATCA.

Once I get this cash transferred to the US I’m thinking about putting the bulk of it into MUB which is free of federal tax. I’m already struggling on the US tax front, last thing I need is more taxable income!
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Old 18-07-2019, 10:31 AM   #1332
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The next conundrum is how to handle the large lump sum they are forcing me to take by year end. I want to avoid FATCA reporting if possible and can think of only two ways - either have them break up the payment (if they allow that) and transfer each chunk to the US before the balance hits the threshold...
That could be construed as "structuring," which is illegal. Not recommended. IRS Form 8938 thresholds are quite high, so I'm not sure what you're referring to here anyway. (FinCEN Form 114 maybe? But so what?)

...or open an account with Citibank which I’ve been told by the experts (and I’m convinced based on the IRS’s exact words) that being an overseas subsidiary of a US bank does indeed exempt that account from FATCA.
Citibank is not a SRS account custodian. Your three choices for SRS custodians are DBS, OCBC, and UOB.

Once I get this cash transferred to the US I’m thinking about putting the bulk of it into MUB which is free of federal tax. I’m already struggling on the US tax front, last thing I need is more taxable income!
Uh, more taxable income means you have more income. This isn't the worst problem to have.
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Old 18-07-2019, 05:49 PM   #1333
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Sorry I should have explained better - there are two things happening, one is my employer is cashing me out of an old defined benefit plan by year end with a significant lump sum payment. Second, they are putting me on an SRS based defined contribution program henceforward, with contributions of around $30k annually.

The lump sum is definitely going to exceed FATCA thresholds. I had a look at form 8938 and maybe it’s not too difficult - perhaps I can simply do that rather than messing around with Citibank. I’m already doing FinCEN 114 each year.

I agree with your point on taxable income not being a bad thing, but tax free income is far more desirous. I cringe at the thought of incurring my first federal tax liability and the subsequent pain of having to file quarterly estimated taxes from that point forward.

That could be construed as "structuring," which is illegal. Not recommended. IRS Form 8938 thresholds are quite high, so I'm not sure what you're referring to here anyway. (FinCEN Form 114 maybe? But so what?)


Citibank is not a SRS account custodian. Your three choices for SRS custodians are DBS, OCBC, and UOB.


Uh, more taxable income means you have more income. This isn't the worst problem to have.
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Old 19-07-2019, 12:43 PM   #1334
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I suggest Roth 401(k) and Roth IRA if you plan to retire in Singapore. Some employers don't offer Roth 401(k)s, so in that case you'd max out your employer's match to a Traditional 401(k) first, then max out your Roth IRA, then your employer's Traditional 401(k), in that order.
Any particular reasons why choosing ROTH over traditional? I am not looking at a lot of non US income post retirement. Probably just CPF + a little bit of stocks dividend (scattered over cash/srs/cpf sources)

If your earnings are "too high" to contribute to a Roth IRA then there's a workaround for that. Ask if that "problem" applies.
Unfortunately I do not have this "problem"
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Old 19-07-2019, 01:16 PM   #1335
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Any particular reasons why choosing ROTH over traditional?
Many reasons. In no particular order:

1. There are limits to both 401(k) and IRA contributions based on contribution limits. Roth 401(k) and Roth IRA contributions effectively allow you to expand the limits to some degree.

2. U.S. income tax rates are probably as low as they're ever going to be. Or at least that's a reasonable forecast.

3. Tax filing is likely to be much more complicated with Traditional 401(k) and/or Traditional IRA withdrawals if you're not a U.S. person.

4. You're probably not retiring to a country that both taxes passive income and doesn't respect the Roth aspects of retirement accounts (i.e. doesn't have a "Roth aware" tax treaty with the U.S.) Again, that's a forecast, but it seems like a reasonable one.

5. The workaround if you have "too high" income to make an IRA contribution (see below) effectively requires you to avoid past Traditional IRAs.

This decision might be one that your employer makes for you, specifically whether your employer even offers a Roth 401(k) or only a Traditional 401(k). Some employers don't offer Roth 401(k)s, which are newer. You personally can make that decision for your IRA either way, or both ways. That is, you're allowed to split your IRA decision between Roth and Traditional if you wish, up to the contribution limit -- for example, $3,000 in Roth and $3,000 in Traditional....

....But I think Roth is often the better deal, particularly if you're going to be trying to hit contribution limits.

Unfortunately I do not have this "problem"
You might have this problem if you end up with a Married Filing Separately (MFS) status, which is a decision only your spouse can make independently (and without pressure). It's a problem that can be solved.

Last edited by BBCWatcher; 19-07-2019 at 01:21 PM..
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