Advice for a recent US immigrant

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generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Advice for a recent US immigrant

Post by generallyspeaking » Wed May 16, 2018 1:13 pm

I've been a loyal reader of Bogleheads for some time now, but now find I have some questions I am having troubling answering.

First my personal details:
  • My wife and I are in our late 20s
  • We are both maxing out our 401(k) contributions, mine is split 50-50 between a 401(k) and a Roth 401(k)
  • For the past year we have been investing $4,500 a month into a taxable Wealthfront account.
  • My investment goal is to simply put money away for retirement. I have no intention of withdrawing any of the money before retirement.
  • Emergency funds: For both my wife and I
  • Debt: Car loan 3-year, (0.024% APR)
  • Tax Filing Status: Married filing jointly
  • Tax Rate: 22% Federal, 7% State
  • State of Residence: CA
  • Age: Late 20s
  • Desired Asset allocation: 90% stocks / 10% bonds
  • Desired International allocation: 40%
Current retirement assets

Taxable
11.3% cash (for investing – does not include emergency funds)
15.9% company stock (all vested, but I usually sell these as they become long-term)

8.41% Wealthfront:
Funds:
15.60% iShares Core MSCI Emerging Markets ETF (IEMG)
18.74% Schwab U.S. Broad Market ETF (SCHB)
3.73% Schwab Dow Jones U.S. Dividend 100 Index (SCHD)
13.78% Schwab International Equity ETF (SCHF)
2.09% Vanguard Energy ETF (VDE)
8.45% Vanguard FTSE Developed Markets ETF (VEA)
1.25% Vanguard Dividend Appreciation (VIG)
5.01% VANGUARD MUN BD FD INC TAX EXEMPT BD (VTEB)
15.89% Vanguard Total Stock Market ETF (VTI)
12.55% Vanguard FTSE Emerging Markets ETF (VWO)
2.91% State Street Energy Select Sector ETF (XLE)

His 401k
4.28% VANG TARGET RET 2050 (VFIFX) (0.15%)
Employer match: 4%, upto 1% of annual salarycompensation

Her 401K
0.61% VANG TARGET RET 2050 (VFIFX) (0.15%)

Foreign accounts:
Retirement fund: 16.48%
CD: 2.68%
Fixed income: 33.11%

New annual Contributions
$18,500 his 401k (employer match of $1500)
$18,500 her 401k
$54,000 taxable (for retirement)

Funds available in her/her 401(k)
BLKRK EQUITY DIV K (MKDVX) 0.6%
FID CONTRAFUND K6 (FLCNX) 0.45%
VANG 500 INDEX ADM (VFIAX) 0.04%
CRLN E MID CAP GR R6 (HRAUX) 0.69%
VANG MIDCAP IDX ADM (VIMAX) 0.05%
VICTORY S ESTB VAL I (VEVIX) 0.62%
CRLN E SM CAP GR R6 (HSRUX) 0.66%
VANG SM CAP IDX ADM (VSMAX) 0.05%
AF CAP WORLD G&I R6 (RWIGX) 0.45%
OPP DEVELOPING MKT I (ODVIX) 0.88%
VANG TOT INTL STK AD (VTIAX) 0.11%
VAN REAL EST IDX ADM (VGSLX) 0.12%
VANG TARGET RET 2055 (VFFVX) 0.15% <---- This is the fund we've invested in
VANG TARGET RET INC (VTINX) 0.13%
LOOMIS CORE PL BD N (NERNX) 0.39%
TMPL GLOBAL BOND R6 (FBNRX) 0.63%
VANG TOT BD MKT ADM (VBTLX) 0.05%
VANG VMMR-FED MMKT (VMFXX) 0.11%


Here are my questions:

(1) What brokerage account should I use?
  • I have read a lot about the disadvantages of Wealthfront (high ER, unsustainable business model, move towards active investment, etc) and so I no longer feel it is the best option for the bulk of my investments.
  • While I like reading about finance, I am scared of actively buying and selling ETFs even for the purposes of rebalancing.
  • I do like the ability to have a simple web interface and mobile app for tracking how my investments are performing
  • From everything I have read Vanguard seems like the safest/simplest option, but is there something else I should be looking at?
(2) What funds or fund of funds should I invest in?
  • Since I will be moving off Wealthfront I need some advice on what funds to invest in.
  • As I mentioned I want to take a totally hands-off approach, I don't even want to have to rebalance if possible.
  • Currently, my 401(k) is invested in a Vanguard Target Date fund and I am leaning towards the same for my taxable investment account
(3) Should I invest in a ROTH IRA?
  • Based on everything I have read, investing the additional $5,500 in a Roth IRA makes sense.
  • However, I am confused about the AGI and income limits. The Roth IRA website seems to suggest I cannot make a contribution. I might be misreading this entirely.


(4) Any other advice for a young, newbie investor?

I know some of these points have been covered before, so I appreciate your thoughts and time on this post.
Last edited by generallyspeaking on Thu May 17, 2018 4:03 pm, edited 9 times in total.

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Duckie
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Re: Advice for a recent US immigrant

Post by Duckie » Wed May 16, 2018 7:01 pm

generallyspeaking, welcome to the forum.
generallyspeaking wrote:What brokerage account should I use?
Vanguard, Fidelity, or Schwab.
What funds or fund of funds should I invest in?
Since this is a taxable account choose a total US stock market index fund and/or a total international stock index fund. Put your bonds in tax-sheltered accounts.
As I mentioned I want to take a totally hands-off approach, I don't even want to have to rebalance if possible.
Rebalancing takes 10 minutes once a year. You can certainly handle that.
Currently, my 401(k) is invested in a Vanguard Target Date fund and I am leaning towards the same for my taxable investment account
No. Target-date funds have taxable bonds and they do not belong in a taxable account.
Should I invest in a ROTH IRA?
Yes. You should both max your Roth IRAs before adding to taxable.
I am confused about the AGI and income limits. The Roth IRA website seems to suggest I cannot make a contribution. I might be misreading this entirely.
At joint income of $250K you are above the income limit for direct Roth IRA contributions. However you can contribute indirectly using the Backdoor Roth IRA method. Since you show no non-Roth IRAs, the pro-rata rule should not be an issue.
Any other advice for a young, newbie investor?
Not advice, but questions:

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Wed May 16, 2018 7:55 pm

generallyspeaking, welcome to the forum.
Thanks!
generallyspeaking wrote:What brokerage account should I use?
Vanguard, Fidelity, or Schwab.
Are there any differences/advantages?
What funds or fund of funds should I invest in?
Since this is a taxable account choose a total US stock market index fund and/or a total international stock index fund. Put your bonds in tax-sheltered accounts.
I don't understand why this is important or beneficial to put bonds in tax-sheltered accounts.
As I mentioned I want to take a totally hands-off approach, I don't even want to have to rebalance if possible.
Rebalancing takes 10 minutes once a year. You can certainly handle that.
As I understand it, rebalancing requires buying and selling assets so my portfolio is at my target mix. Is that about right? When I buy and sell the assets would I have to report the gains and losses as taxable?
Currently, my 401(k) is invested in a Vanguard Target Date fund and I am leaning towards the same for my taxable investment account
No. Target-date funds have taxable bonds and they do not belong in a taxable account.
Again I don't really understand the reasoning behind this.

On another note, since you're suggesting that taxable bonds do not in taxable accounts should I buy the majority of my bonds in my 401(k) account?
I am confused about the AGI and income limits. The Roth IRA website seems to suggest I cannot make a contribution. I might be misreading this entirely.
At joint income of $250K you are above the income limit for direct Roth IRA contributions. However you can contribute indirectly using the Backdoor Roth IRA method. Since you show no non-Roth IRAs, the pro-rata rule should not be an issue.
Thanks for the articles, I've been doing my best to understand but the whole process seems convoluted and complex to me unfortunately :(
Any other advice for a young, newbie investor?
Not advice, but questions:
  • What are the options (fund names, ticker symbols, plan expense ratios) in your two 401k plans?
Available 401(k) funds:
BLKRK EQUITY DIV K (MKDVX) 0.6%
FID CONTRAFUND K6 (FLCNX) 0.45%
VANG 500 INDEX ADM (VFIAX) 0.04%
CRLN E MID CAP GR R6 (HRAUX) 0.69%
VANG MIDCAP IDX ADM (VIMAX) 0.05%
VICTORY S ESTB VAL I (VEVIX) 0.62%
CRLN E SM CAP GR R6 (HSRUX) 0.66%
VANG SM CAP IDX ADM (VSMAX) 0.05%
AF CAP WORLD G&I R6 (RWIGX) 0.45%
OPP DEVELOPING MKT I (ODVIX) 0.88%
VANG TOT INTL STK AD (VTIAX) 0.11%
VAN REAL EST IDX ADM (VGSLX) 0.12%
VANG TARGET RET 2055 (VFFVX) 0.15% <---- This is the fund we've invested in
VANG TARGET RET INC (VTINX) 0.13%
LOOMIS CORE PL BD N (NERNX) 0.39%
TMPL GLOBAL BOND R6 (FBNRX) 0.63%
VANG TOT BD MKT ADM (VBTLX) 0.05%
VANG VMMR-FED MMKT (VMFXX) 0.11%
[*]What is your desired Asset allocation?
Desired asset allocation:
50% US stocks
40% International stocks
10% bonds
[*]Have you seen the Asking Portfolio Questions thread?[/list]
No I hadn't! Thanks for sharing, I'll update my first post with more details shortly.

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Duckie
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Joined: Thu Mar 08, 2007 2:55 pm

Re: Advice for a recent US immigrant

Post by Duckie » Wed May 16, 2018 9:37 pm

generallyspeaking wrote:
Duckie wrote:
generallyspeaking wrote:What brokerage account should I use?
Vanguard, Fidelity, or Schwab.
Are there any differences/advantages?
They all have decent low-cost index funds. I prefer Vanguard. Fidelity and Schwab have local offices.
Since this is a taxable account choose a total US stock market index fund and/or a total international stock index fund. Put your bonds in tax-sheltered accounts.
I don't understand why this is important or beneficial to put bonds in tax-sheltered accounts.
Taxable bond funds kick out non-qualifed dividends which are taxed at your top marginal rate (22%). The dividends for stock funds are most often qualified and are taxed at a lower rate (15%). Plus if you buy good stock index funds they won't kick out nearly as many dividends as bonds.
As I understand it, rebalancing requires buying and selling assets so my portfolio is at my target mix. Is that about right? When I buy and sell the assets would I have to report the gains and losses as taxable?
Yes and yes if in taxable. The way around that is to do all rebalancing in tax-sheltered accounts. In taxable you turn off automatic reinvestment of dividends and have all dividends funneled to a money market or settlement fund. That way you only buy what and when you specifically want to. You do the selling in the 401k plans and IRAs.
Target-date funds have taxable bonds and they do not belong in a taxable account.
Again I don't really understand the reasoning behind this.
Reasoning above.
On another note, since you're suggesting that taxable bonds do not in taxable accounts should I buy the majority of my bonds in my 401(k) account?
Yes. Try to put all bonds in tax-sheltered accounts.
Available 401(k) funds:
The best options are:
  • VANG 500 INDEX ADM (VFIAX) 0.04% -- Large caps, 80% of US stocks
  • VANG MIDCAP IDX ADM (VIMAX) 0.05% -- Mid caps, 6% of US stocks
  • VANG SM CAP IDX ADM (VSMAX) 0.05% -- Small caps, 14% of US stocks
  • VANG TOT INTL STK AD (VTIAX) 0.11% -- Complete international stocks
  • VANG TOT BD MKT ADM (VBTLX) 0.05% -- US bonds
  • Or for simplicity, the Target Retirement fund that meets your 90/10 AA when you include the taxable stock funds
I just added up your retirement assets. You have:
  • Taxable -- 24.70%
  • His 401k -- 4.65%
  • Her 401k -- 0.66%
  • Foreign accounts -- 23.79%
Those add up to 53.8%. Where is the other 46.2%?

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Wed May 16, 2018 11:51 pm

Since this is a taxable account choose a total US stock market index fund and/or a total international stock index fund. Put your bonds in tax-sheltered accounts.
I don't understand why this is important or beneficial to put bonds in tax-sheltered accounts.
Taxable bond funds kick out non-qualifed dividends which are taxed at your top marginal rate (22%). The dividends for stock funds are most often qualified and are taxed at a lower rate (15%). Plus if you buy good stock index funds they won't kick out nearly as many dividends as bonds.
I didn't really understand this, but I'll take your word for it :D.
As I understand it, rebalancing requires buying and selling assets so my portfolio is at my target mix. Is that about right? When I buy and sell the assets would I have to report the gains and losses as taxable?
Yes and yes if in taxable. The way around that is to do all rebalancing in tax-sheltered accounts. In taxable you turn off automatic reinvestment of dividends and have all dividends funneled to a money market or settlement fund. That way you only buy what and when you specifically want to. You do the selling in the 401k plans and IRAs
Doing the rebalancing in a tax sheltered account makes sense, but the vast majority of my contributions will be in my taxable account. I guess one way around it is to rebalance when I put in additional funds (I normally make monthly deposits) - in addition to your money market suggestion.
Available 401(k) funds:
The best options are:
  • VANG 500 INDEX ADM (VFIAX) 0.04% -- Large caps, 80% of US stocks
  • VANG MIDCAP IDX ADM (VIMAX) 0.05% -- Mid caps, 6% of US stocks
  • VANG SM CAP IDX ADM (VSMAX) 0.05% -- Small caps, 14% of US stocks
  • VANG TOT INTL STK AD (VTIAX) 0.11% -- Complete international stocks
  • VANG TOT BD MKT ADM (VBTLX) 0.05% -- US bonds
  • Or for simplicity, the Target Retirement fund that meets your 90/10 AA when you include the taxable stock funds
Thanks for the breakdown! That's helpful. Alternatively, since your suggestion was to buy bonds in a tax-sheltered account, should I just use 100% of this account for VBTLX?
I just added up your retirement assets. You have:
  • Taxable -- 24.70%
  • His 401k -- 4.65%
  • Her 401k -- 0.66%
  • Foreign accounts -- 23.79%
Those add up to 53.8%. Where is the other 46.2%?
[/quote]
My mistake I left out a few things which I can't use to invest (stock options and some cash in foreign accounts). I've updated my original post to reflect the changes.

TedSwippet
Posts: 1767
Joined: Mon Jun 04, 2007 4:19 pm

Re: Advice for a recent US immigrant

Post by TedSwippet » Thu May 17, 2018 12:18 pm

generallyspeaking wrote:
Wed May 16, 2018 1:13 pm
Any other advice for a young, newbie investor?
One other thing to consider. Do you plan to -- and will you be able to -- remain in the US forever; that is, up to and beyond retirement?

If yes, then invest like any other of your US citizen neighbours, friends and colleagues.

If no however, you will want to look closely at how anything you invest in now will be viewed by your future country of residence. Some countries honour the tax deferral of US 401k's and traditional IRAs, others do not. A smaller number honour the tax deferral of a US Roth account.

In the best cases, these accounts will function for you in another country more or less as they do now in the US. In the worst cases, you could find yourself paying annual local-country taxes on money that you effectively cannot touch for decades (and may in fact never receive), and with effective double-tax on cross-border pensions.

Better to do your homework now, and while it is relatively easy to change direction or strategy. I have a pension that is 'hostage' in the US, yet I no longer live there and am neither a US citizen nor a green card holder. If I had my time over again I would think very carefully indeed before saving into one the second time around.

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Thu May 17, 2018 12:22 pm

TedSwippet wrote:
Thu May 17, 2018 12:18 pm
generallyspeaking wrote:
Wed May 16, 2018 1:13 pm
Any other advice for a young, newbie investor?
One other thing to consider. Do you plan to -- and will you be able to -- remain in the US forever; that is, up to and beyond retirement?

If yes, then invest like any other of your US citizen neighbours, friends and colleagues.

If no however, you will want to look closely at how anything you invest in now will be viewed by your future country of residence. Some countries honour the tax deferral of US 401k's and traditional IRAs, others do not. A smaller number honour the tax deferral of a US Roth account.

In the best cases, these accounts will function for you in another country more or less as they do now in the US. In the worst cases, you could find yourself paying annual local-country taxes on money that you effectively cannot touch for decades (and may in fact never receive), and with effective double-tax on cross-border pensions.

Better to do your homework now, and while it is relatively easy to change direction or strategy. I have a pension that is 'hostage' in the US, yet I no longer live there and am neither a US citizen nor a green card holder. If I had my time over again I would think very carefully indeed before saving into one the second time around.
That's a really good point. For now I see myself being in the US long term, but life changes, so anything could happen. What's your advice on "simplification"? Should I just avoid Roth altogether? All other accounts are basically "taxable" upon distribution anyway.

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Duckie
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Re: Advice for a recent US immigrant

Post by Duckie » Thu May 17, 2018 12:26 pm

generallyspeaking wrote:Doing the rebalancing in a tax sheltered account makes sense, but the vast majority of my contributions will be in my taxable account. I guess one way around it is to rebalance when I put in additional funds (I normally make monthly deposits) - in addition to your money market suggestion.
That works. You can buy funds in taxable, but avoid selling.
Alternatively, since your suggestion was to buy bonds in a tax-sheltered account, should I just use 100% of this account for VBTLX?
Yes, your two 401k plans should probably be all VBTLX. It will depend on your foreign assets, whether they will count toward the retirement portfolio, are tax-sheltered, and have good fixed income options.
I just added up your retirement assets.
My mistake I left out a few things which I can't use to invest (stock options and some cash in foreign accounts). I've updated my original post to reflect the changes.
For our purposes remove from your portfolio any assets not earmarked for retirement then refigure the account percentages.

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Thu May 17, 2018 1:17 pm

generallyspeaking wrote:
Duckie wrote:
generallyspeaking wrote:What brokerage account should I use?
Vanguard, Fidelity, or Schwab.
Are there any differences/advantages?
They all have decent low-cost index funds. I prefer Vanguard. Fidelity and Schwab have local offices.
My current stock plan is on Schwab and I've had good experiences with them so I am leaning towards them.

However, I had a couple of questions about using it:
  • Buying Schwab funds are free, but I understand there are costs for buying the Vanguard Funds and ETFs. Based on this would you recommend I just use Schwab and buy the Schwab funds?
  • I'm planning on transferring my assets from Wealthfront in kind to Schwab. Any advice on selling vs holding these?

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Thu May 17, 2018 1:29 pm

I just added up your retirement assets.
My mistake I left out a few things which I can't use to invest (stock options and some cash in foreign accounts). I've updated my original post to reflect the changes.
For our purposes remove from your portfolio any assets not earmarked for retirement then refigure the account percentages.
Just to clarify: Everything I have listed is earmarked for retirement (foreign accounts, stock plan, etc). However, not all can be used for investing right now. Should I leave out the portions that cannot be used to invest? For example, unvested stock, foreign cash, etc?

TedSwippet
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Joined: Mon Jun 04, 2007 4:19 pm

Re: Advice for a recent US immigrant

Post by TedSwippet » Thu May 17, 2018 2:20 pm

generallyspeaking wrote:
Thu May 17, 2018 12:22 pm
That's a really good point. For now I see myself being in the US long term, but life changes, so anything could happen. What's your advice on "simplification"? Should I just avoid Roth altogether? All other accounts are basically "taxable" upon distribution anyway.
The first thing to do is investigate thoroughly the tax treaties, if any, between the US and whatever country (or countries) you might move to. This will give you a basic overview of how any 'lingering' US pensions and US investments might be treated. Pay special attention to the distinction between 'normal' income tax treaties and US estate tax treaties; there is a decent network of the former, but only a very small handful of the latter. For non-resident aliens, the US estate tax begins at a miserly $60k of 'US situs' holdings, and a 401k or IRA is 'US situs' no matter what you actually hold inside it.

While you are at it, you might want to look into the issues -- many significant -- that you will hit if you take out US citizenship or a green card before leaving the US. Key terms would be 'citizenship based taxation', 'US exit tax', 'PFIC', and 'FATCA'.

401ks and IRAs are indeed taxable on distribution, but it would be galling to be faced with the choice of paying annual double-tax to your country of residence for holding one to age 59.5 or paying a hefty one-off lump sum tax plus a 10% penalty to the US for early withdrawal of the balance. As it happens, Roths tend to be one of the more flexible (and so, useful) types of accounts to hold if you think you might not remain in the US forever. Relatively easy to entirely cash in before leaving the US. There is a potential penalty for cashing Roths early too, but the timescales over which it operates are generally shorter than for traditional accounts, and in any case the bulk of the Roth will be post-tax and so not affected by these penalties.

All in all, moving to the US can sometimes be treacherous exercise (are you certain your current non-US retirement fund is not already taxable annually by the US? -- the US only rarely recognises non-US pensions as pensions), but moving out of it nearly always is. Like you, I thought I might stay in the US up to retirement, and certainly for a couple of decades, but the passage of a single unpalatable US tax law effectively forced me to leave in short order and many years earlier than planned.

I am not saying this will happen to you to, but then I did not see the problems coming either until they had more or less arrived. Over the two decades that I have been watching them, US tax laws for 'foreigners' have done nothing but worsen, and I see no signs of a trend reversal on the horizon.

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Duckie
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Re: Advice for a recent US immigrant

Post by Duckie » Thu May 17, 2018 3:13 pm

generallyspeaking wrote:Buying Schwab funds are free, but I understand there are costs for buying the Vanguard Funds and ETFs. Based on this would you recommend I just use Schwab and buy the Schwab funds?
If you use Schwab don't buy Vanguard. Go with the broad market index funds/ETFs such as SWTSX/SCHB for total US stock, SWISX/SCHF for developed markets international, and SWAGX/SCHZ for US bonds.
I'm planning on transferring my assets from Wealthfront in kind to Schwab. Any advice on selling vs holding these?
I'd sell everything with a loss and anything with a gain up to the loss, then see what's left. Not because most of the ETFs are bad but because you need to clean things up and simplify. Whenever you get around to selling start with SCHD, VDE, VIG, and XLE.

Wealthfront is silly. They've got you in two emerging markets, two total US markets, two developed markets, two dividend ETFs, two energy ETFs. What are they thinking?
Everything I have listed is earmarked for retirement (foreign accounts, stock plan, etc). However, not all can be used for investing right now. Should I leave out the portions that cannot be used to invest? For example, unvested stock, foreign cash, etc?
Unvested stock doesn't count because you have no control over until it vests. Foreign cash counts as fixed income.

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Thu May 17, 2018 3:25 pm

TedSwippet wrote:
Thu May 17, 2018 2:20 pm
generallyspeaking wrote:
Thu May 17, 2018 12:22 pm
That's a really good point. For now I see myself being in the US long term, but life changes, so anything could happen. What's your advice on "simplification"? Should I just avoid Roth altogether? All other accounts are basically "taxable" upon distribution anyway.
The first thing to do is investigate thoroughly the tax treaties, if any, between the US and whatever country (or countries) you might move to. This will give you a basic overview of how any 'lingering' US pensions and US investments might be treated. Pay special attention to the distinction between 'normal' income tax treaties and US estate tax treaties; there is a decent network of the former, but only a very small handful of the latter. For non-resident aliens, the US estate tax begins at a miserly $60k of 'US situs' holdings, and a 401k or IRA is 'US situs' no matter what you actually hold inside it.

While you are at it, you might want to look into the issues -- many significant -- that you will hit if you take out US citizenship or a green card before leaving the US. Key terms would be 'citizenship based taxation', 'US exit tax', 'PFIC', and 'FATCA'.

401ks and IRAs are indeed taxable on distribution, but it would be galling to be faced with the choice of paying annual double-tax to your country of residence for holding one to age 59.5 or paying a hefty one-off lump sum tax plus a 10% penalty to the US for early withdrawal of the balance. As it happens, Roths tend to be one of the more flexible (and so, useful) types of accounts to hold if you think you might not remain in the US forever. Relatively easy to entirely cash in before leaving the US. There is a potential penalty for cashing Roths early too, but the timescales over which it operates are generally shorter than for traditional accounts, and in any case the bulk of the Roth will be post-tax and so not affected by these penalties.

All in all, moving to the US can sometimes be treacherous exercise (are you certain your current non-US retirement fund is not already taxable annually by the US? -- the US only rarely recognises non-US pensions as pensions), but moving out of it nearly always is. Like you, I thought I might stay in the US up to retirement, and certainly for a couple of decades, but the passage of a single unpalatable US tax law effectively forced me to leave in short order and many years earlier than planned.

I am not saying this will happen to you to, but then I did not see the problems coming either until they had more or less arrived. Over the two decades that I have been watching them, US tax laws for 'foreigners' have done nothing but worsen, and I see no signs of a trend reversal on the horizon.
Thanks for sharing your experience - this is really helpful. You're absolutely right the future is completely uncertain and I have no idea where I will be in 30 years time! I'll do the research you suggest and for now stick to a 401(k) plan but decide on changes for the future. Perhaps split between a Roth and traditional 401(k).

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Thu May 17, 2018 3:40 pm

generallyspeaking wrote:Buying Schwab funds are free, but I understand there are costs for buying the Vanguard Funds and ETFs. Based on this would you recommend I just use Schwab and buy the Schwab funds?
If you use Schwab don't buy Vanguard. Go with the broad market index funds/ETFs such as SWTSX/SCHB for total US stock, SWISX/SCHF for developed markets international, and SWAGX/SCHZ for US bonds.
Thanks, I was planning on going 50% SWTSX and 50% SWISX in Schwab and then using our 401(k) for (mostly) bonds.
I'm planning on transferring my assets from Wealthfront in kind to Schwab. Any advice on selling vs holding these?
I'd sell everything with a loss and anything with a gain up to the loss, then see what's left. Not because most of the ETFs are bad but because you need to clean things up and simplify. Whenever you get around to selling start with SCHD, VDE, VIG, and XLE.

Wealthfront is silly. They've got you in two emerging markets, two total US markets, two developed markets, two dividend ETFs, two energy ETFs. What are they thinking?
Thanks - that makes sense. I am assuming they did it for tax loss harvesting, but yes it's already such a mess I'd rather get out early than when I have a hundred funds.
Everything I have listed is earmarked for retirement (foreign accounts, stock plan, etc). However, not all can be used for investing right now. Should I leave out the portions that cannot be used to invest? For example, unvested stock, foreign cash, etc?
Unvested stock doesn't count because you have no control over until it vests. Foreign cash counts as fixed income.
OK got it that makes sense. I've updated the numbers to reflect your suggestions. The only call-out is that everything under "company stock" is vested but I'm waiting for a year before selling so capital gains becomes long-term.

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Thu May 17, 2018 4:05 pm

Thanks to the excellent advice from Duckie I'm looking at the following for my investments going forward:

Current Asset Allocation

Taxable:
11.3% cash (for investing – does not include emergency funds)
15.9% company stock (all vested, but I usually sell these as they become long-term)

Schwab:
4.21% Schwab Total Stock Market Index Fund (SWTSX)
4.21% Schwab International Index Fund (SWISX)

His 401(k)
4.28% VANG TARGET RET 2050 (VFIFX) (0.15%)

Her 401(k)
0.61% VANG TARGET RET 2050 (VFIFX) (0.15%)

Foreign:
Retirement fund: 16.48%
CD: 2.68%
Fixed income: 33.11%

Contributions:
His 401(k)
100% VANG TARGET RET 2055 (VFFVX) 0.15%

Her 401(k)
100% VANG TARGET RET 2055 (VFFVX) 0.15%

Schwab:
50% Schwab Total Stock Market Index Fund (SWTSX)
50% Schwab International Index Fund (SWISX)

This is different from my original asset allocation, but I think it meets my goals of aggressive growth, while keeping the allocations relatively straightforward. Over time I will look at buying more bonds in our 401(k)s to provide fixed income sources closer to retirement.

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Duckie
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Re: Advice for a recent US immigrant

Post by Duckie » Thu May 17, 2018 5:31 pm

generallyspeaking wrote:I'm looking at the following for my investments going forward:
Your AA is 90/10. You already have over 35% of your retirement assets in fixed income. Put VTIAX in your 401k plans instead of the target-date funds.

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Thu May 17, 2018 5:34 pm

Duckie wrote:
Thu May 17, 2018 5:31 pm
generallyspeaking wrote:I'm looking at the following for my investments going forward:
Your AA is 90/10. You already have over 35% of your retirement assets in fixed income. Put VTIAX in your 401k plans instead of the target-date funds.
Good point! Thanks

TedSwippet
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Re: Advice for a recent US immigrant

Post by TedSwippet » Thu May 17, 2018 5:36 pm

generallyspeaking wrote:
Thu May 17, 2018 3:25 pm
... I'll do the research you suggest and for now stick to a 401(k) plan but decide on changes for the future. Perhaps split between a Roth and traditional 401(k).
This section of one of our wiki pages outlines some of the issues around investing in US retirement savings plans when you are not a US citizen and you are unsure that you will retire in the US.

You can find more on US income tax treaties here, and US estate tax treaties here. There is a steep learning curve, unfortunately.

generallyspeaking
Posts: 19
Joined: Wed May 16, 2018 12:57 pm

Re: Advice for a recent US immigrant

Post by generallyspeaking » Thu May 17, 2018 5:39 pm

TedSwippet wrote:
Thu May 17, 2018 5:36 pm
generallyspeaking wrote:
Thu May 17, 2018 3:25 pm
... I'll do the research you suggest and for now stick to a 401(k) plan but decide on changes for the future. Perhaps split between a Roth and traditional 401(k).
This section of one of our wiki pages outlines some of the issues around investing in US retirement savings plans when you are not a US citizen and you are unsure that you will retire in the US.

You can find more on US income tax treaties here, and US estate tax treaties here. There is a steep learning curve, unfortunately.
Thanks, that's a lot of reading :shock: :shock:

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