American in Denmark, just sold NY house... how should I invest?

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Topic Author
Ionchamp99
Posts: 9
Joined: Wed Jul 03, 2019 12:33 pm

American in Denmark, just sold NY house... how should I invest?

Post by Ionchamp99 » Thu Jul 04, 2019 1:43 pm

My wife and I are US citizens, now living and both working in Denmark. So far, my wife and I have separate finances, and just use a shared account for shared expenses like food and rent. I just sold my rental property in the US in time to avoid capital gains tax and to avoid further double taxation of rental income by Denmark. Now I’m educating myself on investing and trying to figure out a savvy but simple early-ish retirement plan.
  • Debt: none

    Tax Filing Status: Married Filing Jointly

    Tax Rate: 24% Federal, 3% State 25%+ in Denmark

    State of Residence: PA, but living abroad in Denmark

    His age: 34
    Her age: 32
  • Desired Asset Allocation: 70% stocks / 30% bonds
    Desired International Allocation: 50% of stocks

His Assets and Investments:
mid six figures net worth (USD)
  • Emergency funds: 6 months worth of cash
    9% Investable cash in Danish Kroner
    49% Investable cash in USD (just sold house in NY)
    36% Betterment Individual Taxable Account (87% stocks, 13% bonds, 0.25% management fee)
    1.2% Betterment Traditional IRA
    2.2% GOOG stock
    1.6% AMZN stock
    0.5% TSLA stock
Plus a low 5 figure (USD) Danish retirement fund that will lose 60% to taxes when withdrawn when we leave Denmark. No 401K or prior US retirement accounts.

Her Assets and Investments:
low five figure net worth (just spent savings on graduate degree)
  • Emergency fund: 3 months worth of cash
    30% NYS government retirement fund
    70% Investable cash in Danish Kroner

Contributions
We both have comparable middle manager salaries and are each saving 40% of our after-tax income.

Upcoming life events:
  • Planning to have one kid in the next year or so
    Expect to buy a house, likely a multifamily rental, when we move back to USA in 2-4 years
    I’m considering splurging on a Tesla Model 3 in the not too distant future

Questions:
  • 1. How should I invest the proceeds from selling my NY house?

    2. Does my desired asset allocation make sense for my situation?

    3. How should we invest current and future cash while living in Denmark? Should we just use Transferwise.com to move money to the US and invest as normal?

    4. Should I keep things as-is with Betterment, or do something different?

    5. What else should we do to optimize our financial situation living and earning in Denmark? Become zero income tax state residents?
Many thanks (mange tak in Danish) for your time and advice!

gtd98765
Posts: 453
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Re: American in Denmark, just sold NY house... how should I invest?

Post by gtd98765 » Thu Jul 04, 2019 3:03 pm

Assume you know if you have more than $10k in a foreign financial institution you will have to file an FBAR form with US Treasury: https://www.fincen.gov/purpose-fbar, which usually involves hiring a US accountant versed in these rules.

Else no useful advice other than enjoy the architecture.

ivk5
Posts: 989
Joined: Thu Sep 22, 2016 9:05 am

Re: American in Denmark, just sold NY house... how should I invest?

Post by ivk5 » Thu Jul 04, 2019 3:07 pm

gtd98765 wrote:
Thu Jul 04, 2019 3:03 pm
Assume you know if you have more than $10k in a foreign financial institution you will have to file an FBAR form with US Treasury: https://www.fincen.gov/purpose-fbar, which usually involves hiring a US accountant versed in these rules.

Else no useful advice other than enjoy the architecture.
There are many complexities of being a US citizen living in another country that may warrant a good accountant, but this isn’t one of them. FBAR filing is pretty trivial, if done in a timely fashion...

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grabiner
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Re: American in Denmark, just sold NY house... how should I invest?

Post by grabiner » Thu Jul 04, 2019 9:17 pm

Note that you will need to pay NY tax on the capital gain on your NY house. (You can then take the NY tax as a credit against your PA tax, but it will be limited to the PA tax on the same income, which should be less because the PA state tax rate is lower.)
Wiki David Grabiner

ivk5
Posts: 989
Joined: Thu Sep 22, 2016 9:05 am

Re: American in Denmark, just sold NY house... how should I invest?

Post by ivk5 » Fri Jul 05, 2019 12:49 am

I would see if you can break PA residency. NY for example has a bright line test, don’t know if PA does.
3. How should we invest current and future cash while living in Denmark? Should we just use Transferwise.com to move money to the US and invest as normal?
As US citizens you are very restricted in what you can invest in overseas, mainly due to PFIC. (Avoid non-US domiciled funds/ETFs.) Also you clearly intend to move back to the states, so the future liabilities you’re saving for are going to primarily be USD-denominated. So I would suggest, apart from perhaps a small EF in local currency, transferring investable funds back to US/USD and investing in your brokerage acct there.

I would avoid giving US brokerage your overseas address, unless it’s one of the explicitly expat-friendly ones like Schwab Intl. Better to use a relative’s/friend’s address if possible. Lots of expat reports of unwanted acct closure.

TransferWise is pretty good, and trivially easy. For me (CHF/USD) Revolut is better value: about same rate as TransferWise without their added fee. It adds up, esp if you’re saving aggressively. Compare their weekday rate to TransferWise for kroner/USD and also do some research to see if you’ll be able to transfer to them from your local acct for free. In Switzerland, this used to be tougher but they now have a pooled acct with CH IBAN that makes it a free local transfer for me. After some fiddling, I now have a monthly standing order to transfer a fixed amount of CHF to Revolut a day or two after my salary posts; when I get the alert on my phone, I manually do the currency conversion on my phone and transfer to my US accts (some to online checking to pay US CC/etc, rest to Vanguard brokerage direct deposit). Pretty painless.

Incidentally I prefer to use US CCs with no foreign transaction fee rather than local CC or debit card. Much better rewards. One of my US cards is contactless, although not my preferred one, but I pay in stores almost exclusively by Apple Pay. US cards for online orders work 80-90% for me; for the rest I launder via PayPal (excepting just one site that has a CC/PayPal surcharge, so I use a local app that debits my CHF acct).

Topic Author
Ionchamp99
Posts: 9
Joined: Wed Jul 03, 2019 12:33 pm

Re: American in Denmark, just sold NY house... how should I invest?

Post by Ionchamp99 » Fri Jul 05, 2019 5:12 am

Thanks lvk5 and others for very helpful replies.

Have been NY resident. Now that I don't own property there, default option is to use family address for documents. That could be PA, MD, MA, NH, MT, CA, WA. How do I choose the best option?

Any recommendations on contactless CC's?

ivk5
Posts: 989
Joined: Thu Sep 22, 2016 9:05 am

Re: American in Denmark, just sold NY house... how should I invest?

Post by ivk5 » Fri Jul 05, 2019 5:57 am

Ionchamp99 wrote:
Fri Jul 05, 2019 5:12 am
Have been NY resident. Now that I don't own property there, default option is to use family address for documents. That could be PA, MD, MA, NH, MT, CA, WA. How do I choose the best option?
I’m no tax expert (perhaps grabiner will be back). That said, using a relative’s address for mail may not make you a statutory resident of that state, though it may trigger an inquiry. It may be beneficial to choose a state where you will be able to clearly and easily demonstrate that you are a non-resident (eg bright line test). Note that this may require carefully counting the number of days you spend there visiting. I’d avoid CA for example... Here’s NY’s definition: https://www.tax.ny.gov/pit/file/pit_definitions.htm

Actually I would think the income-tax-free states in your list would be no brainers (NH, WA) but again not an area I’m particularly knowledgeable about so hopefully others can comment.
Ionchamp99 wrote:
Fri Jul 05, 2019 5:12 am
Any recommendations on contactless CC's?
I’m no expert here either. My Chase United MileagePlus Explorer Business card (picked up only for initial bonus) happens to be contactless. I’ll cancel it after a year though and go back to using phone (Chase Sapphire Reserve) to pay everywhere. My wife still uses Chase Sapphire via chip + signature, I haven’t gotten her to switch to phone yet. Anyway if you search a bit (maybe doctorofcredit?) you should be able to get a lead on other US contactless cards with your preferred rewards scheme.

runner540
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Joined: Sun Feb 26, 2017 5:43 pm

Re: American in Denmark, just sold NY house... how should I invest?

Post by runner540 » Fri Jul 05, 2019 6:53 am

Ionchamp99 wrote:
Thu Jul 04, 2019 1:43 pm

5. What else should we do to optimize our financial situation living and earning in Denmark? Become zero income tax state residents? [/list]

Many thanks (mange tak in Danish) for your time and advice!
Agree with keeping things as simple as possible and US funds.
Given plans for a child in a year, do NOT splurge on a Tesla. Wait until you have 7 figure net worths, have gotten through the conception/pregnancy/birth process, and have a good start on college saving. It's a very expensive toy and you will have other huge financial obligations coming. Also start talking with wife about how/whether separate finances would work with a child in the picture. Then your working/time decisions and spending decisions (Tesla) start to affect much more than just you.

Topic Author
Ionchamp99
Posts: 9
Joined: Wed Jul 03, 2019 12:33 pm

Re: American in Denmark, just sold NY house... how should I invest?

Post by Ionchamp99 » Fri Jul 05, 2019 7:36 am

Thanks again for the good advice! This forum is amazing!

I've decided to hold off on the Tesla (even though having a child in Denmark is very low cost)... and I've created my first real financial plan. I use Schwab for banking (no ATM fees global is great) so I plan to invest there unless someone can make a strong argument for Vanguard or otherwise.

Thinking to invest:
40% - SWTSX Total US stock market (0.03% gross expense ratio)
35% - SWISX Total International stock market (0.06% gross expense ratio)
25% - SWAGX Aggregate Bond Index Fund (0.04% gross expense ratio)

Does this seem sensible?

Since I'm an American living and working in Denmark, I don't have a 401(k). I'm a little confused about what I can do in regards to maxing out an IRA or HSA. Any help figuring that out before I start investing this cash would be greatly appreciated!

runner540
Posts: 1078
Joined: Sun Feb 26, 2017 5:43 pm

Re: American in Denmark, just sold NY house... how should I invest?

Post by runner540 » Fri Jul 05, 2019 7:43 am

Ionchamp99 wrote:
Fri Jul 05, 2019 7:36 am
Thanks again for the good advice! This forum is amazing!

I've decided to hold off on the Tesla (even though having a child in Denmark is very low cost)... and I've created my first real financial plan. I use Schwab for banking (no ATM fees global is great) so I plan to invest there unless someone can make a strong argument for Vanguard or otherwise.

Thinking to invest:
40% - SWTSX Total US stock market (0.03% gross expense ratio)
35% - SWISX Total International stock market (0.06% gross expense ratio)
25% - SWAGX Aggregate Bond Index Fund (0.04% gross expense ratio)

Does this seem sensible?

Since I'm an American living and working in Denmark, I don't have a 401(k). I'm a little confused about what I can do in regards to maxing out an IRA or HSA. Any help figuring that out before I start investing this cash would be greatly appreciated!
The IRA and tax question is very complex for expats: not a DIY project even for a Boglehead. If you are working in Denmark as an expat your company should pay for tax prep in both Denmark and US and they can help with this question. If you don't have tax preparers (Big Four accounting firm that knows both countries inside and out), get some. Enjoy your time working and living abroad!

jayk238
Posts: 612
Joined: Tue Jan 31, 2017 1:02 pm

Re: American in Denmark, just sold NY house... how should I invest?

Post by jayk238 » Fri Jul 05, 2019 7:51 am

Ionchamp99 wrote:
Thu Jul 04, 2019 1:43 pm
My wife and I are US citizens, now living and both working in Denmark. So far, my wife and I have separate finances, and just use a shared account for shared expenses like food and rent. I just sold my rental property in the US in time to avoid capital gains tax and to avoid further double taxation of rental income by Denmark. Now I’m educating myself on investing and trying to figure out a savvy but simple early-ish retirement plan.
  • Debt: none

    Tax Filing Status: Married Filing Jointly

    Tax Rate: 24% Federal, 3% State 25%+ in Denmark

    State of Residence: PA, but living abroad in Denmark

    His age: 34
    Her age: 32
  • Desired Asset Allocation: 70% stocks / 30% bonds
    Desired International Allocation: 50% of stocks

His Assets and Investments:
mid six figures net worth (USD)
  • Emergency funds: 6 months worth of cash
    9% Investable cash in Danish Kroner
    49% Investable cash in USD (just sold house in NY)
    36% Betterment Individual Taxable Account (87% stocks, 13% bonds, 0.25% management fee)
    1.2% Betterment Traditional IRA
    2.2% GOOG stock
    1.6% AMZN stock
    0.5% TSLA stock
Plus a low 5 figure (USD) Danish retirement fund that will lose 60% to taxes when withdrawn when we leave Denmark. No 401K or prior US retirement accounts.

Her Assets and Investments:
low five figure net worth (just spent savings on graduate degree)
  • Emergency fund: 3 months worth of cash
    30% NYS government retirement fund
    70% Investable cash in Danish Kroner

Contributions
We both have comparable middle manager salaries and are each saving 40% of our after-tax income.

Upcoming life events:
  • Planning to have one kid in the next year or so
    Expect to buy a house, likely a multifamily rental, when we move back to USA in 2-4 years
    I’m considering splurging on a Tesla Model 3 in the not too distant future

Questions:
  • 1. How should I invest the proceeds from selling my NY house?

    2. Does my desired asset allocation make sense for my situation?

    3. How should we invest current and future cash while living in Denmark? Should we just use Transferwise.com to move money to the US and invest as normal?

    4. Should I keep things as-is with Betterment, or do something different?

    5. What else should we do to optimize our financial situation living and earning in Denmark? Become zero income tax state residents?
Many thanks (mange tak in Danish) for your time and advice!
What brought you to denmark? How much do you make there and what do you two do?

ivk5
Posts: 989
Joined: Thu Sep 22, 2016 9:05 am

Re: American in Denmark, just sold NY house... how should I invest?

Post by ivk5 » Fri Jul 05, 2019 1:20 pm

Ionchamp99 wrote:
Fri Jul 05, 2019 7:36 am
I'm a little confused about what I can do in regards to maxing out an IRA or HSA. Any help figuring that out before I start investing this cash would be greatly appreciated!
I don’t believe you can contribute to HSA unless perhaps you are on a US HSA-qualifying HDHP, which I assume you are not.

For IRA. If you claim the FEIE you need to have earned income in excess of the FEIE (excluded income not eligible). I’m guessing Denmark won’t give you a tax deduction for the IRA contribution even if you’re eligible for deduction in the US, so backdoor Roth may be better for you (depending on whether you are claiming FEIE or FTC, and if FTC, whether you will be able to use up excess FTC carryover before the 10y expiration).

Re excess FTC carryover. If you have ever fantasized about working for a few years in a low-tax island country, you will benefit greatly from doing it before your FTC credits from your Danish life expire. Maybe Cayman Islands on your way back to the states? Only partly tongue in cheek. A little harder with a kid admittedly.

You’ll largely be investing in taxable. Do it the usual way, nothing special, for the most part. Just be careful about municipal bonds- not subject to US tax but likely taxed in Denmark. I’d stick to Total Bond, along with Total US and Total non-US. Schwab is an excellent place to do it.

I Bonds deserve a mention. You can each buy 10k/yr (20k total) electronically, plus 5k jointly in paper bonds with tax refund if you want to deal with the hassle. You may need to check with a specialist but since they don’t distribute interest until maturity/redemption they may benefit from tax deferral in DK as well as US. So a lot more tax-efficient than Total Bond in taxable. Different from nominal bonds though, and from TIPS. YMMV.

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