US Citizen living in Europe - mid-life transition and plan

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laotzu
Posts: 5
Joined: Fri Apr 08, 2016 3:13 am

US Citizen living in Europe - mid-life transition and plan

Post by laotzu » Fri Apr 21, 2017 7:03 am

I am a US Citizen living in Czech Republic

Emergency funds: 3 months of expenses in CZK and USD - total of 6 months across the two currencies
Debt: No debt other than legal liability for a house in US. Home is occupied by soon-to-be ex-wife, she is paying mortgage
Tax Filing Status: Married Filing Separately transitioning to Single at some point
Tax Rate: US: 10% Federal (with FEIE, without FEIE, 25% - income will go down in future years)
CZ: 15% flat tax in Czech Republic, 0% on gains from securities held more than 3 years
State of Residence: not applicable - no state of residence.
Age: 44
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 40% of stocks and 30% of bonds

Current Retirement Assets (~400K with new cash below)

Taxable (Vanguard Brokerage)
5.66% Newly Investible Cash
21.81% Vanguard Total International Stock Index Fund Admiral Shares - VTIAX - ER: 0.12%
16.44% Vanguard Total Stock Market Index Fund Admiral Shares - VTSAX - ER: 0.05%

Vanguard IRA
8.22% Vanguard Total Bond Market Index Fund Admiral Shares - VBTLX - ER: 0.07%
5.01% Vanguard Total International Bond Index Fund Admiral_x001A_ Shares - VTABX - ER: 0.14%

Vanguard Roth IRA
15.79% Vanguard Total Stock Market Index Fund Admiral Shares - VTSAX - ER: 0.05%

TIAA-CREF 403b w/Employer Match (former employer)
10.94% TIAA-CREF Equity Index Fund - Institutional Class - TIEIX - ER: 0.05%
3.52% TIAA-CREF International Equity Fund - Institutional Class - TIIEX - ER: 0.12%
0.9% TIAA Traditional

TIAA-CREF 403b Voluntary (former employer)
3.87% CREF Bond Market R3 - QCBMIX - ER: 0.37%
5.23% TIAA-CREF Equity Index Fund - Institutional Class - TIEIX - ER: 0.05%
2.6% TIAA-CREF International Equity Fund - Institutional Class - TIIEX - ER: 0.12%

Availability of annual contributions is hazy as income is being reduced, however the hope is to have 5-10K each year.

Note: The taxability of gains in the IRA, Roth IRA, and 403b by Czech Republic is a question mark, current thinking is they are not taxable.

Questions:
1. Is the desired allocation good? I can't decide if I am invested in
international bond because it is a good idea or because VG does it and
I live internationally. While I would like to retire early, I don't
think it is a reality for non-money reasons for at least 10 years.

2. How would you reallocate the funds for optimization while investing
the new 23K in cash? I feel like the right answer is to move things
like the TIAA-CREF accounts to all stock and the IRA/Roth IRA for
bonds because of the ER. Almost all positions have gains so wash
sales are not an issue (and are apparently not a thing in Czech law).

Diogenes
Posts: 529
Joined: Sat Mar 03, 2012 3:58 pm

Re: US Citizen living in Europe - mid-life transition and plan

Post by Diogenes » Fri Apr 21, 2017 3:42 pm

Laotzu,

Your questions appear to be independent of where you happen to live. That said, how long have you been in the CR? Do you have residency, employee card, or a long-stay Schengen visa? Do you have dual EU citizenship?
To get a good summary of your actual holdings breakdown instead of fund names, you might try something like Financial Engines, if you qualify for a free account. That will quickly answer question one for you.
There are other similar products, but FE is good.
For a small amount of cash like 23k, it really will not matter where in your allocation you plug it in. Your new Forex risks, now that the CZK I think is no longer pegged to the Euro, is also a consideration on how liquid you may wish to remain.

_D_

laotzu
Posts: 5
Joined: Fri Apr 08, 2016 3:13 am

Re: US Citizen living in Europe - mid-life transition and plan

Post by laotzu » Sat Apr 22, 2017 5:37 am

Diogenes wrote: Your questions appear to be independent of where you happen to live. That said, how long have you been in the CR? Do you have residency, employee card, or a long-stay Schengen visa? Do you have dual EU citizenship?
I have LT Residency in the CR. Dual Citizenship or PR status may happen. I have been here 4 years.
Diogenes wrote: To get a good summary of your actual holdings breakdown instead of fund names, you might try something like Financial Engines, if you qualify for a free account. That will quickly answer question one for you.
There are other similar products, but FE is good.
Is this going to show me similar information to what Personal Capital does when it breaks down holdings? Given that I am holding index funds, I am not sure how this information is going to help me answer the question any further about tilting toward int'l bonds.

Allocation per PC
Cash 0.72%
Intl Bonds 6.31% (82% comes from VTABX - hence the tilt question)
U.S. Bonds 11.12%
Intl Stocks 29.25%
U.S. Stocks 48.81%
Alternatives 3.78%
Diogenes wrote: For a small amount of cash like 23k, it really will not matter where in your allocation you plug it in.
The question really was along the lines of, should I try to avoid putting bond funds in my taxable account by doing some gymnastics of seeling stock funds in my IRAs/403b and buying bonds and then buying those "same" funds back in the taxable account or does it not matter.

Since my taxable account is ... taxable, should I shift my bond allocation in that account to something like a TIP that I believe has better Federal tax protection and may even enjoy special taxing under the US-CR treaty. (This may also be true for a REIT which would allow me to avoid CR 15% flat tax, I think, but still pay US Federal tax, if any due.)
Diogenes wrote: Your new Forex risks, now that the CZK I think is no longer pegged to the Euro, is also a consideration on how liquid you may wish to remain.
For PFIC/Tax reasons, I keep my investment money in USD. My life is in CZK, however my current salary is also in CZK. I don't really need to worry about short-term liquidity, in my opinion as my income exceeds my expenses so I am transferring CZK->USD when I have a sufficiently large excess. I keep emergency funds in both currencies as I tend to spend USD in lieu of CZK as non-CZK spends in USD get me a better exchange rate. My current work is stable so I am not worried about needing to suddenly tap the money. Taken together I have 6 months of emergency funds, as noted, because I keep the total expense amount for 3 months in both currencies (to account for the USD spend).

Yes, the CZK is slowly moving away from the EUR and it is still an open guess as to how it will swing, although the current thinking from most organizations seems to be that we will see an increase in value from a 27CZK EUR to a 25CZK EUR. Forex risk is a concern in the long term however, but I am not sure what I can realistically do to hedge it. I also am not certain that my drawdown/retirement years will be in the CR or the US.

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