Living Abroad After College

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rdmayo21
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Living Abroad After College

Post by rdmayo21 » Fri May 04, 2012 3:22 pm

Hello Bogleheads,

Although I have posted replies in other threads, this is first time posting a new topic. I was intrigued by the other post about living abroad and thought I would post my own. I'm currently doing an engineering work co-op and will return to school in August. I then plan on graduating in the spring. After that, my plans are somewhat nebulous. Upon graduating, I plan on working in my field for a few of years. During so, I would max out my Roth IRA and contribute the minimum amount to my 401k that would still get the full company match. After living expenses (I live frugally), I would invest everything else in I-bonds: $10,000 each year for my SSN and then another $15,000 or so each year that I would give to my parents to do the same, on my behalf. Once I have saved enough for 2-3 years of living expenses, 2-3 years worth of maxing out my Roth IRA, and an emergency fund of approx. $10,000 (I estimate this all taking 2-3 years to do), I plan on living abroad in multiple countries for 2-3 years. This is something I have always wanted to do and am willing to delay retirement a few years in order to do so. I plan on working some while abroad, but not necessarily in my field.

Below is my current portfolio. The listed 401k annual contributions is for the present moment and will change after getting a full-time job, though I doubt by much.



Emergency funds = $1500 in I-bonds (I also include Roth IRA contributions and parents)

Debt: none

Tax Filing Status: single

Tax Rate: 25% Federal 0% State

Age: 23

Desired Asset allocation: 87/13

Intl allocation: 30% of stocks

Current portfolio: low 5 figures

Taxable: 0%

Roth IRA at Vanguard
63.2% Vanguard Target Retirement 2050 Fund (VFIFX) 0.19%

401k
35.6% Vanguard Target Retirement 2055 Fund (VFFVX) 0.19%
1.2% Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) 0.07%
Company Match: 100% for first 1%, 50% for next 5%

New annual contributions
$4370 401k
$5000 Roth IRA
$0 taxable ($25000 in I-bonds after graduation)

Funds available in 401(k): all Vanguard funds (too lazy to list them all)

Questions:
1. Does this sound like a reasonable plan?
2. Any suggestions on what I could add or change?

Thanks in advance!
Last edited by rdmayo21 on Sun May 06, 2012 11:40 am, edited 1 time in total.

livesoft
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Re: Living Abroad After College

Post by livesoft » Fri May 04, 2012 3:26 pm

Why would living abroad delay your retirement plans? I moved overseas after I got my degree and had a very good time.
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rdmayo21
Posts: 71
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Re: Living Abroad After College

Post by rdmayo21 » Fri May 04, 2012 3:34 pm

livesoft wrote:Why would living abroad delay your retirement plans? I moved overseas after I got my degree and had a very good time.
Mainly because I don't plan on working full time while doing it. Although, I suppose I could increase 401k contributions when I get a job after returning.

RenoJay
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Re: Living Abroad After College

Post by RenoJay » Fri May 04, 2012 3:42 pm

rdmayo21 wrote:Hello Bogleheads,

Although I have posted replies in other threads, this is first time posting a new topic. I was intrigued by the other post about living abroad and thought I would post my own. I'm currently doing an engineering work co-op and will return to school in August. I then plan on graduating in the spring. After that, my plans are somewhat nebulous. Upon graduating, I plan on working in my field for a few of years. During so, I would max out my Roth IRA and contribute the minimum amount to my 401k that would still get the full company match. After living expenses (I live frugally), I would invest everything else in I-bonds: $10,000 each year for my SSN and then another $15,000 or so each year that I would give to my parents to do the same, on my behalf. Once I have saved enough for 2-3 years of living expenses, 2-3 years worth of maxing out my Roth IRA, and an emergency fund of approx. $10,000 (I estimate this all taking 2-3 years to do), I plan on living abroad in multiple countries for 2-3 years. This is something I have always wanted to do and am willing to delay retirement a few years in order to do so. I plan on working some while abroad, but not necessarily in my field.

Below is my current portfolio. The listed 401k annual contribution is for the present moment and will change after getting a full-time job, though I doubt by much.



Emergency funds = $1500 in I-bonds (I also include Roth IRA contributions and parents)

Debt: none

Tax Filing Status: single

Tax Rate: 25% Federal 0% State

Age: 23

Desired Asset allocation: 87/13

Intl allocation: 30% of stocks

Current portfolio: low 5 figures

Taxable: 0%

Roth IRA at Vanguard
63.2% Vanguard Target Retirement 2050 Fund (VFIFX) 0.19%

401k
35.6% Vanguard Target Retirement 2055 Fund (VFFVX) 0.19%
1.2% Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) 0.07%
Company Match: 100% for first 1%, 50% for next 5%

New annual Contributions
$4370 401k
$5000 Roth IRA
$0 taxable ($25000 in I-bonds after graduation)

Funds available in 401(k): all Vanguard funds (too lazy to list them all)

Questions:
1. Do this sound like a reasonable plan?
2. Any suggestions on what I could add or change?

Thanks in advance!
After graduating college in 1994 I spent nine months backpacking the world, and it was way cheaper than living in the US. I wore the same clothes every day, stayed in youth hostels, took red eye flights and saw 30+ countries while doing cool activities like bungy jumping, scuba diving, boating, museums, etc. The best days would be hanging out in a park somewhere and playing pick-up chess games with strangers. The entire trip, including gear, food, transportation, camera, visas, souvenirs, etc. cost $15k. I met lots of vagabonds doing similar stuff, and when they needed money, they'd work on a farm or teach English for a few months. Do it! It's a better learning experience than college. When I came back, I had so much more confidence in myself (after having traveled alone for so long) that I started some companies and made a bunch of money. This is a dream that many people share, so live it up and meet some cool people from other parts of the world. Once you get away from the American mindset for a while, you start to realize that money is not as important as we make it out to be. (Having been back from my trip for over a decade, I now like money a lot.) :?

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skow
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Re: Living Abroad After College

Post by skow » Fri May 04, 2012 3:56 pm

Join the military or join the foreign service and do it on the Gov't dime.

Fallible
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Re: Living Abroad After College

Post by Fallible » Sat May 05, 2012 3:31 pm

I think your plans sounds very reasonable. I lived abroad after college umpteen years ago (1967, when I was in my mid-20s), first with a family in Manchester, England, then with U.S. friends in London, before touring Europe with one of the U.S. friends and newfound friends from Canada. I would've stayed longer, but while in England, lost some of the money I'd put in a British bank when Britain devalued the pound. The entire experience was one of the most important of my life, changed my outlook on just about everything, and I'm sure it will be for you, too.
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beachplum
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Re: Living Abroad After College

Post by beachplum » Sat May 05, 2012 4:39 pm

skow wrote:Join the military or join the foreign service and do it on the Gov't dime.
Many european countries have programs where they hire native english speakers for 1 or 2 or 3 year contracts to help teach English in the public schools. My daughter has been doing this in Spain for 3 years now where she works as an assistant teacher and is also given health insurance.

Karamatsu
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Re: Living Abroad After College

Post by Karamatsu » Sun May 06, 2012 8:17 am

Personally I'm a bit wary of the target retirement funds and feel like it's better to manage that oneself, but perhaps that's just a minor point. The only other thing that struck me is that you need to make sure you have ready access to some of that cash while you're abroad. What I did when travelling after graduation was just give my parents a bunch of money and then had my credit card bills (whether for purchases or cash advances) sent to them. They would then pay the bills and all was well. One of the cool things about American Express is that they used to (may still) have offices in most capitals and major cities, so not only would they do stuff for you, but you could receive mail there.

As for living abroad, just be aware that your plan for 2-3 years could easily end up being 20-30. Opportunities come up, and you get drawn into things in strange and unexpected ways. Enjoy, but also trust your instincts. Sometimes it's time to run away...

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rdmayo21
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Re: Living Abroad After College

Post by rdmayo21 » Sun May 06, 2012 11:48 am

Thanks, everyone, for the encouraging posts!
skow wrote:Join the military or join the foreign service and do it on the Gov't dime.
Unfortunately, I think this would limit my flexibility too much.
Karamatsu wrote:Personally I'm a bit wary of the target retirement funds and feel like it's better to manage that oneself, but perhaps that's just a minor point.
The reason I'm doing the target retirement funds is because I've haven't reached the minimum requirements for all of the underlying funds.

halfnine
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Re: Living Abroad After College

Post by halfnine » Mon May 07, 2012 2:33 am

I've indicated my path to life abroad on another thread
http://www.bogleheads.org/forum/viewtop ... 11&t=95355

A couple of thoughts on your plan. Depending on the companies matching amount and vesting period, you might considering working long enough to become fully vested instead of working 2-3 years. Ideally, you might also want to try to find employment with a large international firm which could give you opportunities to live abroad on an expat package which will alleviate many of the problems indicated below.

As far as working abroad without company sponsorship, you'll need to keep a couple of things in mind. First it is increasingly more difficult to get a work visa on ones own for most countries in the developed world. Its generally easier to do so if one has some combination of being under 30, making near 6 figures, and having an advanced degree. And, even then, one still has to find a company to hire them afterwards. Keep in mind, it can be like starting all over again. You won't have a credit history or references which makes it difficult for many things including renting. If you drive a car insurance premiums will be high since you won't have any history. Also, after a period of time you may need to get a local drivers license which could involve re-testing. The list of nuisances and bureaucratic issues goes on. It's not the end of the world, but it is something that is part of the lifestyle and in many ways is like being 18 all over again and starting from scratch.

Now, instead, if you choose to live and not work abroad (on a tourist visa instead of a work visa) then you'll often be limited to 90-180 days in a country. Even worse, in the Schengen countries in Europe you'd actually be limited to 90 out of 180 days within the Schengen Area itself.

Of course, if Europe, Australia, New Zealand, or Japan are not your thing life does become easier as your money will go a lot farther and talk a lot louder making life abroad simpler. But then you are not likely going to be working in those countries either as the pay wouldn't make it worthwhile. The exception to that would be teaching English in a place maybe like Korea where you could live and work and still put away 10K USD/year while doing it.

Another option is to forget the idea of working or living more than 90 days in one place altogether. There are people who basically spend the year living in 3-4 different countries. Each year returning to the same countries or maybe adding a different one each year for a little bit of variety. And generally following summer or the dry seasons across the globe. This is a very common practice for people who do not work or do their work online.

One final option is just to take one year off every 5 years throughout your life. This is what I started off doing. Although, it will delay your final retirement, it gives you the opportunity to enjoy and reflect on each stage of your life. Kind of a mini-retirement for each stage of your life. In addition to travel that year off can also be spent doing countless other things that are important to you at that time. If you plan it well you may even be able to get a leave of absence and return to work at the same company.

halfnine
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Joined: Tue Dec 21, 2010 1:48 pm

Re: Living Abroad After College

Post by halfnine » Mon May 07, 2012 6:38 am

I should add that you'll want to get a credit card that doesn't charge currency exchange fees. Capital One does this and there maybe others. Additionally, you'll want to setup a bank account that doesn't charge for you international ATM withdrawals. Schwab used to have this but no longer does. Alternatively, there are banks that have alliances with foreign banks which allow you use their ATMs without ATM access fees. Although, it looks like they may now be charging a currency exchange fee which is news to me. For an overview (can't comment on accuracy) see

http://en.wikipedia.org/wiki/Global_ATM_Alliance

If you are in a country long enough, it would be good to open a bank account their. Unfortunately, as an American you may find this prohibitively difficult especially if you are not working there.

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rdmayo21
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Re: Living Abroad After College

Post by rdmayo21 » Wed May 09, 2012 11:37 am

halfnine wrote:I've indicated my path to life abroad on another thread
http://www.bogleheads.org/forum/viewtop ... 11&t=95355

A couple of thoughts on your plan. Depending on the companies matching amount and vesting period, you might considering working long enough to become fully vested instead of working 2-3 years. Ideally, you might also want to try to find employment with a large international firm which could give you opportunities to live abroad on an expat package which will alleviate many of the problems indicated below.

As far as working abroad without company sponsorship, you'll need to keep a couple of things in mind. First it is increasingly more difficult to get a work visa on ones own for most countries in the developed world. Its generally easier to do so if one has some combination of being under 30, making near 6 figures, and having an advanced degree. And, even then, one still has to find a company to hire them afterwards. Keep in mind, it can be like starting all over again. You won't have a credit history or references which makes it difficult for many things including renting. If you drive a car insurance premiums will be high since you won't have any history. Also, after a period of time you may need to get a local drivers license which could involve re-testing. The list of nuisances and bureaucratic issues goes on. It's not the end of the world, but it is something that is part of the lifestyle and in many ways is like being 18 all over again and starting from scratch.

Now, instead, if you choose to live and not work abroad (on a tourist visa instead of a work visa) then you'll often be limited to 90-180 days in a country. Even worse, in the Schengen countries in Europe you'd actually be limited to 90 out of 180 days within the Schengen Area itself.

Of course, if Europe, Australia, New Zealand, or Japan are not your thing life does become easier as your money will go a lot farther and talk a lot louder making life abroad simpler. But then you are not likely going to be working in those countries either as the pay wouldn't make it worthwhile. The exception to that would be teaching English in a place maybe like Korea where you could live and work and still put away 10K USD/year while doing it.

Another option is to forget the idea of working or living more than 90 days in one place altogether. There are people who basically spend the year living in 3-4 different countries. Each year returning to the same countries or maybe adding a different one each year for a little bit of variety. And generally following summer or the dry seasons across the globe. This is a very common practice for people who do not work or do their work online.

One final option is just to take one year off every 5 years throughout your life. This is what I started off doing. Although, it will delay your final retirement, it gives you the opportunity to enjoy and reflect on each stage of your life. Kind of a mini-retirement for each stage of your life. In addition to travel that year off can also be spent doing countless other things that are important to you at that time. If you plan it well you may even be able to get a leave of absence and return to work at the same company.
Thanks for giving me something to think about :D What you discuss in the other thread is very similar to what I'd like to do.

Carl53
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Re: Living Abroad After College

Post by Carl53 » Wed May 09, 2012 11:56 am

halfnine wrote:I should add that you'll want to get a credit card that doesn't charge currency exchange fees. Capital One does this and there maybe others. Additionally, you'll want to setup a bank account that doesn't charge for you international ATM withdrawals. Schwab used to have this but no longer does. Alternatively, there are banks that have alliances with foreign banks which allow you use their ATMs without ATM access fees. Although, it looks like they may now be charging a currency exchange fee which is news to me. For an overview (can't comment on accuracy) see

http://en.wikipedia.org/wiki/Global_ATM_Alliance

If you are in a country long enough, it would be good to open a bank account their. Unfortunately, as an American you may find this prohibitively difficult especially if you are not working there.
In another thread, http://www.bogleheads.org/forum/viewtop ... =2&t=89693 , I reported that the PenFed Rewards Visa CC did not charge currency exhange fees nor did they charge you for international ATM withdrawals. Some foreign banks may charge you but while in Australia I found several that did not. Cash Advances did not generate any cash rewards and purchases came through at the lowest 1% rebate level. Cash advances did start generating interest charges from day 1, but to minimize those you might just go online and make a payment to your cc account so that the amount owed is negative when you make the cash advance.

yobria
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Re: Living Abroad After College

Post by yobria » Wed May 09, 2012 12:04 pm

Might be easier during college (student visa).

halfnine
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Re: Living Abroad After College

Post by halfnine » Wed May 09, 2012 12:32 pm

Carl53 wrote:...Cash advances did start generating interest charges from day 1, but to minimize those you might just go online and make a payment to your cc account so that the amount owed is negative when you make the cash advance.
In the past I've just pre-paid into my credit card before traveling. This alleviated the need to do any banking while on the road to prevent interest charges on a cash advance. Although, you do have to be careful with that, as once my credit card company sent me a check back for my excess balance after two months or so.

coalcracker
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Re: Living Abroad After College

Post by coalcracker » Wed May 09, 2012 12:32 pm

Hi rdmayo21,

I would say your plan sounds great. I would hazard to say that anyone who has spent any significant time outside the US (myself included) would say it had a huge, positive impact on their lives and perspective on the world. Don't worry about delaying your retirement by a couple of years.

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Watty
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Re: Living Abroad After College

Post by Watty » Wed May 09, 2012 1:21 pm

During so, I would max out my Roth IRA .......
It would be much better max out your deductable IRA and 401K then do Roth conversions while you are on the road and in the zero percent tax bracket.

I work in IT and I have known a few people that tried to take a few years off in mid career with the plan of putting their career on hold then restarting it when they returned. What they found was that not only was it very difficult to find a job but the jobs they could find were several steps backward on their career path from where they had left off. There is a pretty good chance that taking a year off will actually set your career and retirement savings back much more than a year so you should be prepared for that tradeoff.

Career wise it might be best to do this when you are right out of school. That way when you came back you would still fit in an entry level position better. You would also stand a better chance of actually taking the trip and not changing your plans because you get into a relationship or something.

If you start studying a second language now and become reasonably proficient in it when you are traveling that could also be a career plus when you get back if you can find an employer that does work in that part of the world.

One thing that I have seen people do with more success is to do consulting or contract work abroad and then take many months off between contracts and then go to someplace else in the world for their next contract. This not only didn't hurt their careers but it actually advanced their careers since the contracting gave them a lot of good experience.

I know of someone who is now teaching math at a university in Kazakhstan. Compared to teaching English somewhere it sounds like he is making VERY good money and his work follows the school year so he also gets lots of time off. Something like that might be an alternative to consider.

You also need to start learning about all the visa requirements.

Even with it is usually easy to enter a country like in most of Europe with the Schengen visa it is not automatic and if you cannot show that you have the means to support yourself, pay for your medical care, and can show that you will leave the country (like a return airplane ticket) then they can and will refuse to let you into the country.

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rdmayo21
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Re: Living Abroad After College

Post by rdmayo21 » Wed May 09, 2012 1:50 pm

Watty wrote:
During so, I would max out my Roth IRA .......
It would be much better max out your deductable IRA and 401K then do Roth conversions while you are on the road and in the zero percent tax bracket.
That's an interesting idea!

stupidkid
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Re: Living Abroad After College

Post by stupidkid » Thu May 10, 2012 9:44 am

Neal wrote:Hi rdmayo21,

I would say your plan sounds great. I would hazard to say that anyone who has spent any significant time outside the US (myself included) would say it had a huge, positive impact on their lives and perspective on the world. Don't worry about delaying your retirement by a couple of years.
Exactly.

FWIW, it took me 7 years to make it through undergraduate because I kept taking time off to travel abroad, and when I graduated I spent a little over 1.5 years traveling & living all over the place, in some places for $1/day (though it was far from the high life, it was a favorite part of my trip). I came back to the states at 25 or 26 and started working hard. I'm 30 now, doing fine, and I find that my experience ex-US has helped me enormously in the business world. I have something in "common" with foreigners whom I work with or meet since I often know where they're from and they appreciate an American with some ex-US awareness; and people that haven't traveled are always fascinated by my stories so it's always a conversation topic fallback.

My parents (specifically my mom) was terrified that all my traveling and delaying my "future" was going to harm my potential growth and so she kept trying to get me back to college or to go to work. Amusingly, her mom, my grandma, would pull me aside and say "Don't listen to her, do it while you're young. Don't wait until you're 70 to see the world. By the time I got to travel I was too old to really enjoy it." Well said Grandma, well said.

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rdmayo21
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Re: Living Abroad After College

Post by rdmayo21 » Fri Jan 11, 2013 3:30 pm

Thanks everyone for the responses!

To update my situation:

1. I have decided to start my adventure immediately after graduation in the spring. I estimate the duration to be around a year, but it's possible that'll change.
2. I will live off of my I-bonds, Roth IRA contributions, and whatever I have left in my checking account.
3. I will do a rollover from my 401k to my Roth for the max amount that I can without having to pay taxes.

A few questions:

1. What all do I have to do when withdrawing from the Roth?
2. How do I figure out how much I can rollover at a 0% tax rate?

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