Unplanned retirement dilemma [South Africa]

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Edinvestor
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Unplanned retirement dilemma [South Africa]

Post by Edinvestor » Tue Jan 22, 2019 10:04 am

An unexpected health problem left me medically unfit to continue working in the corporate world. Working from home in my line is also not an option, as I am required to be onsite. It is with this predicament that I seek advice from the ubiquitous SAGE members of this forum. But….( there’s always a but).

I reside in South Africa and am not a US citizen. I mention this because Vanguard has no presence in South Africa and subsequently we are unable to purchase Vanguard Mutual Index funds. We do however, have access via a local broker to purchase selected Vanguard and iShares ETF’s. e.g. VTI, BNDX, VT using US$.

The ‘dilemma’ is that I have to live off my savings for the next 30+ years - I don’t foresee earning additional wages. I did not plan to stop working now, but whether I like it or not I am effectively ‘retired’ at the age of 55. I am also a novice investor but am reading and learning now to rectify this shortcoming. Below is my current financial status: to simplify your assessment, I converted the ZAR (South African Rand) value to USD $.

• I have about $ 600K (in a Money Market account with a local bank) to invest
• $325K in Retirement annuities (can withdraw form them when I'm 60)
• In addition I have about $40K as an emergency/slush fund
• I have no debt and own my house
• I maxed my tax free account for the year
• I have no kids or wife to support
• Given my current finances I am unable to claim a disability from the government
• I need a pre-tax income of $26K p.a. (this amount includes medical costs) to live in South Africa. Inflation in South Africa is around 6% and medical at 10%.

I currently live off the money market interest, but to sustain my income for another 30+ years I have to consider a portfolio that includes some aggressive stocks/ ETF’s/bonds. Growth in the South African market is well below USA/developed world markets, which is why I prefer a dollar based investment. (I am aware that exchange rates may not always favour me when buying and selling US$)

I sought the advice of a local financial advisor but his recommendation was to invest in active managed funds. No surprises there.

I am all for passive investing but I don’t have the investing/financial acumen to put together a portfolio that will provide me with income today whilst growing current investments. My naïve attempt would be 60% stocks (VTI + an all-world etf) and 40% Bonds (US or world?) or Div (?).

All things been equal I am hoping to receive advice from this forum on what is the best strategy I can take to invest my money-market cash, grow my investment value but also be able to withdraw enough funds now to live off.

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laughlinlvr
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Re: Unplanned retirement dilemma [South Africa]

Post by laughlinlvr » Tue Jan 22, 2019 11:45 am

You might want to consider the equal-weight S&P500 ETF: RSP. It has out-performed the cap-weighted S&P500 funds in all its decade-and-a-half existence. (2018 may be an exception.) HOWEVER, in order to maintain its equal weighting, it is rebalanced every quarter. This throws off dividends every quarter. Your post doesn't mention what to do with dividends in dollars, but I'm sure you'll have a plan to deal with them with your broker.
Investing - The hardest way to make an easy living.

TedSwippet
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Re: Unplanned retirement dilemma [South Africa]

Post by TedSwippet » Tue Jan 22, 2019 12:20 pm

Welcome.
Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
I reside in South Africa and am not a US citizen. I mention this because Vanguard has no presence in South Africa and subsequently we are unable to purchase Vanguard Mutual Index funds. We do however, have access via a local broker to purchase selected Vanguard and iShares ETF’s. e.g. VTI, BNDX, VT using US$.
South Africa has good tax treaties (plural) with the US, so unlike residents of quite a few countries, you should actually be in a decent position treaty-wise if you choose to use these ETFs. No entanglements with US estate taxes, and you will pay a 15% US tax rate on dividends.

To the extent that your SA rate of tax exceeds 15% and if you can take a credit for the 15% paid to the US, these holdings will be fine. Otherwise -- that is, if your SA rate is below 15% or you cannot take credits for foreign taxes -- then you would perhaps be better off holding Vanguard's Ireland domiciled ETFs for the non-US stocks and bonds portion of your asset allocation.

The reason is that Ireland domiciled ETFs pay US and other withholding taxes internally, but then pass the remaining dividend on to you without any further tax interference. If you held (say) EU stocks through a US domiciled ETF you still pay 15% of dividends to the US, whereas if you held the exact same stocks through an Ireland domiciled ETF you would avoid that 15% US tax and receive the complete dividend. More in the wiki.
Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
I need a pre-tax income of $26K p.a. (this amount includes medical costs) to live in South Africa. Inflation in South Africa is around 6% and medical at 10%.
$26k is 2.8% of $925k. A 2.8% withdrawal might be a bit of a squeeze, but it's not out of the question either. Mostly this will probably depend on how markets perform for you over the period (for example, 'sequence of return risk').

The part that would perhaps worry me is the 6% inflation rate. Long term, stocks return around 7%, comprising 3% inflation and 4% real. At a 6% inflation rate you would only be getting 1% real return. If you have a play around with calculators that model running down a portfolio, that 1% annual growth figure would indicate a lot less safety for you than for someone with 4% real return. Does SA offer any inflation-protected investments that you could perhaps substitute for some of your bonds?
Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
My naïve attempt would be 60% stocks (VTI + an all-world etf) ...
An all-world ETF by market cap would be a bit over 50% US stocks, and give a large overlap with VTI, also US stocks. Either mix VTI (US) and VXUS (world excluding the US), or just use VT (all-world).


Edited to add: Strike through the part about US tax treaties. South Africa has a usable income tax treaty with the US, but it turns out that the estate tax treaty may be poor, and so not protect US situs investment beyond just $60k. Non-US domiciled ETFs may be the way to go here, then. And US domiciled ones may well not be "fine", after all. Sigh.
Last edited by TedSwippet on Thu Nov 07, 2019 5:30 pm, edited 1 time in total.

TravelGeek
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Re: Unplanned retirement dilemma [South Africa]

Post by TravelGeek » Tue Jan 22, 2019 3:29 pm

TedSwippet wrote:
Tue Jan 22, 2019 12:20 pm
Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
I need a pre-tax income of $26K p.a. (this amount includes medical costs) to live in South Africa. Inflation in South Africa is around 6% and medical at 10%.
$26k is 2.8% of $925k. A 2.8% withdrawal might be a bit of a squeeze, but it's not out of the question either. Mostly this will probably depend on how markets perform for you over the period (for example, 'sequence of return risk').
The 2.8% might also get reduced later in life of the OP was participating in some sort of pension/retirement system/social security plan.

OrangeShark
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Re: Unplanned retirement dilemma [South Africa]

Post by OrangeShark » Tue Jan 22, 2019 5:56 pm

I have no experience with them nor any knowledge whether they are better or worse than what you propose, but index funds are available in SA. For example, Sanlam has Satrix line which includes several Foreign-Denominated index funds.

Valuethinker
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Re: Unplanned retirement dilemma [South Africa]

Post by Valuethinker » Thu Jan 31, 2019 6:38 am

TedSwippet wrote:
Tue Jan 22, 2019 12:20 pm
Welcome.
Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
I reside in South Africa and am not a US citizen. I mention this because Vanguard has no presence in South Africa and subsequently we are unable to purchase Vanguard Mutual Index funds. We do however, have access via a local broker to purchase selected Vanguard and iShares ETF’s. e.g. VTI, BNDX, VT using US$.
South Africa has good tax treaties (plural) with the US, so unlike residents of quite a few countries, you should actually be in a decent position treaty-wise if you choose to use these ETFs. No entanglements with US estate taxes, and you will pay a 15% US tax rate on dividends.

To the extent that your SA rate of tax exceeds 15% and if you can take a credit for the 15% paid to the US, these holdings will be fine. Otherwise -- that is, if your SA rate is below 15% or you cannot take credits for foreign taxes -- then you would perhaps be better off holding Vanguard's Ireland domiciled ETFs for the non-US stocks and bonds portion of your asset allocation.

The reason is that Ireland domiciled ETFs pay US and other withholding taxes internally, but then pass the remaining dividend on to you without any further tax interference. If you held (say) EU stocks through a US domiciled ETF you still pay 15% of dividends to the US, whereas if you held the exact same stocks through an Ireland domiciled ETF you would avoid that 15% US tax and receive the complete dividend. More in the wiki.
Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
I need a pre-tax income of $26K p.a. (this amount includes medical costs) to live in South Africa. Inflation in South Africa is around 6% and medical at 10%.
$26k is 2.8% of $925k. A 2.8% withdrawal might be a bit of a squeeze, but it's not out of the question either. Mostly this will probably depend on how markets perform for you over the period (for example, 'sequence of return risk').

The part that would perhaps worry me is the 6% inflation rate. Long term, stocks return around 7%, comprising 3% inflation and 4% real. At a 6% inflation rate you would only be getting 1% real return. If you have a play around with calculators that model running down a portfolio, that 1% annual growth figure would indicate a lot less safety for you than for someone with 4% real return. Does SA offer any inflation-protected investments that you could perhaps substitute for some of your bonds?
Ted, conceptually I think you have omitted a key factor.

Currency. The real returns (historic) are in real terms and those averages are US/ UK so USD or GBP real. To the extent that SAR inflation exceeds USD inflation, the nominal return of SA equities will be higher, and the currency will depreciate.

The long run USD average of international equities is c. 5.1% (Dimson & Marsh) in USD terms.

Probably a prudent investor aims for 4% going forward, given where valuation levels are (I could make a case for 3% to be honest).

One should not be fooled by the historic SA outperformance - it outperformed the USA in the 20th century. But I think the majority of that outperformance actually came in the 1920s (there was an uprising by miners in 1920-21 from memory, which was put down with air power; so probably a recovery from that) and there was also the recovery from the Boer War (1898-1902?).

It's best to diversify as far away from an economy and currency with issues re stability.
Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
My naïve attempt would be 60% stocks (VTI + an all-world etf) ...
An all-world ETF by market cap would be a bit over 50% US stocks, and give a large overlap with VTI, also US stocks. Either mix VTI (US) and VXUS (world excluding the US), or just use VT (all-world).
[/quote]

Yes, use the All World if one can.

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Re: Unplanned retirement dilemma [South Africa]

Post by TedSwippet » Thu Jan 31, 2019 8:56 am

Valuethinker wrote:
Thu Jan 31, 2019 6:38 am
Ted, conceptually I think you have omitted a key factor. Currency. The real returns (historic) are in real terms and those averages are US/ UK so USD or GBP real. To the extent that SAR inflation exceeds USD inflation, the nominal return of SA equities will be higher, and the currency will depreciate.
Good point. The USD/ZAR forex chart for the past decade indeed shows a fair bit of this type of shift for the first seven years, so holding USD assets would have been a decent hedge by the look of things.

Not so much for the past three years though, making it perhaps a bit unclear whether the inflation rates and currency effects will persist into the future. As ever then, the answer can only boil down to just buying a bit of everything in market-cap weight and sitting tight.

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Watty
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Re: Unplanned retirement dilemma [South Africa]

Post by Watty » Thu Jan 31, 2019 9:27 am

Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
I currently live off the money market interest, but to sustain my income for another 30+ years I have to consider a portfolio that includes some aggressive stocks/ ETF’s/bonds. Growth in the South African market is well below USA/developed world markets, which is why I prefer a dollar based investment. (I am aware that exchange rates may not always favour me when buying and selling US$)
I am not usually one of the people that touts owning real estate as in investment since it is in some ways a part time job but you might consider if owning a rental property might work for you if you would be physically able to manage it yourself. I don't know anything about SA real estate but if you could buy an acceptable property for maybe $100K US or less then that could give you some more diversification since you would own another asset class in addition to stocks and bonds. You would also not have currency risk.

There are lots of factors to consider so it might not be a good choice for you but it would be good to look into that.

Valuethinker
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Re: Unplanned retirement dilemma [South Africa]

Post by Valuethinker » Thu Jan 31, 2019 10:00 am

Watty wrote:
Thu Jan 31, 2019 9:27 am
Edinvestor wrote:
Tue Jan 22, 2019 10:04 am
I currently live off the money market interest, but to sustain my income for another 30+ years I have to consider a portfolio that includes some aggressive stocks/ ETF’s/bonds. Growth in the South African market is well below USA/developed world markets, which is why I prefer a dollar based investment. (I am aware that exchange rates may not always favour me when buying and selling US$)
I am not usually one of the people that touts owning real estate as in investment since it is in some ways a part time job but you might consider if owning a rental property might work for you if you would be physically able to manage it yourself. I don't know anything about SA real estate but if you could buy an acceptable property for maybe $100K US or less then that could give you some more diversification since you would own another asset class in addition to stocks and bonds. You would also not have currency risk.

There are lots of factors to consider so it might not be a good choice for you but it would be good to look into that.
The security situation has a massive impact on prices (& thus rents). So you have to be in a secure neighbourhood (I think usually landlords have a subscription to a private security company that does armed patrols?) e.g. in Jo'burg. And of course a shift can have a big negative impact - it's an additional risk.

I don't know what the situation is with rent controls, but SA's government is intervention minded and given the inequalities in the society, landlords are likely not favourite people. There must be a physical risk re collection from tenants and/ or eviction?

Another risk in Cape Town is water supply. Cape Town has exceeded the capacity of the hydrological system to provide water during a drought (which they just experienced) the so-called "Day Zero" (?) in April which nearly happened, when all municipal water supply would be shut off.

There are issues. There is still not control over groundwater resource which belongs to the landowner but is, in fact, a common resource which can also be exhausted (water comes from somewhere). Vineyards and other water-intensive agricultural (and industrial?) activities are still conducted.

In a First World country they'd probably build a big desalination plant to meet municipal water needs (San Diego?). That's not necessarily feasible in Cape Town.

This is literally a city that could potentially just dry up, come the next bad drought. This drought was a warning.
Last edited by Valuethinker on Thu Jan 31, 2019 10:36 am, edited 1 time in total.

Valuethinker
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Re: Unplanned retirement dilemma [South Africa]

Post by Valuethinker » Thu Jan 31, 2019 10:02 am

TedSwippet wrote:
Thu Jan 31, 2019 8:56 am
Valuethinker wrote:
Thu Jan 31, 2019 6:38 am
Ted, conceptually I think you have omitted a key factor. Currency. The real returns (historic) are in real terms and those averages are US/ UK so USD or GBP real. To the extent that SAR inflation exceeds USD inflation, the nominal return of SA equities will be higher, and the currency will depreciate.
Good point. The USD/ZAR forex chart for the past decade indeed shows a fair bit of this type of shift for the first seven years, so holding USD assets would have been a decent hedge by the look of things.

Not so much for the past three years though, making it perhaps a bit unclear whether the inflation rates and currency effects will persist into the future. As ever then, the answer can only boil down to just buying a bit of everything in market-cap weight and sitting tight.
This is a very volatile currency. Main factor is probably the commodity cycle but there are political-specific factors too.

If you hold international assets in USD you probably get the 5% real, long term pre costs & taxes.

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Edinvestor
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Re: Unplanned retirement dilemma [South Africa]

Post by Edinvestor » Thu Jan 31, 2019 1:17 pm

Thanks to all. I appreciate the feedback.

As alluded to, there are no political guarantees in a 3rd world country such as South Africa. US dollar based investments do seem like the prudent investment approach for us down here in Africa right now.

Valuethinker
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Re: Unplanned retirement dilemma [South Africa]

Post by Valuethinker » Thu Jan 31, 2019 4:52 pm

Edinvestor wrote:
Thu Jan 31, 2019 1:17 pm
Thanks to all. I appreciate the feedback.

As alluded to, there are no political guarantees in a 3rd world country such as South Africa. US dollar based investments do seem like the prudent investment approach for us down here in Africa right now.
If you hold a global equity fund that does not hedge it's currency back to USD you will simply ride the currency waves.

Rather than being 100 per cent USD exposed you will be c 55 per cent. Which is enough. There are other countries and listed companies that will also tend to perform w the USA dollar. For example all oil and gas companies tend to make more money when USD is high so 15 per cent UK market (Shell and BP).

On bonds it's a little different. Generally bond funds are hedged. For a South African something like 60 per cent USD 15 per cent EUR 25 per cent all other currencies is probably some kind of theoretical optimum. But the reality is if you are 100 per cent USD bonds, investment grade, you will get a yield of between 2.7 and day 4 per cent. If the ZAR goes up it will hurt a bit.

It's worth noting the UK index pays around 4 per cent dividend yield right now. I'd have to check European and Japanese indices but they do pay over 3 per cent I am fairly sure.

If you underweight the US index down to say 40 per cent and overweighted the other indices proportionately then you could probably get an income of c 4 per cent and thus enough to live on without actually selling stock. Long run dividend growth would be perhaps 1 per cent less pa than inflation in those currencies.

The problem would be a bear market which would see share prices fall 30 to 50 per cent typically and dividends get cut usually by less. In 2008 all the banks stopped paying dividends and that was a big chunk of the yield on most markets. You might have been forced to sell stocks at the bottom.

For that reason I tend to suggest holding a minimum of 20 to 30 per cent bonds. Investment grade government bonds from feveloped countries. However that might not give you enough income that you need and also no growth in income to meet inflation.

But having that anchor of stability is really nice when it hits the fan.

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Edinvestor
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Re: Unplanned retirement dilemma [South Africa]

Post by Edinvestor » Fri Feb 01, 2019 2:15 am

@Valuethinker : thank you for breaking it down for me. What seems obvious to seasoned investors like you and others on this forum provides a great learning curve for newbies like me. I had to google a few of your terms and then write them down for future reference. The value of this forum to novice investors can never be overstated.

For now I am contemplating (all purchased with USD):

ALL USA (VTI) 40%
World 30%
USA investment grade Government Bonds 30%

You noted that 30% bonds may not provide enough growth in income to meet inflation. Wouldn't VTI and World stocks at 70% be sufficient for growth in income?

Valuethinker
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Re: Unplanned retirement dilemma [South Africa]

Post by Valuethinker » Fri Feb 01, 2019 3:06 am

Edinvestor wrote:
Fri Feb 01, 2019 2:15 am
@Valuethinker : thank you for breaking it down for me. What seems obvious to seasoned investors like you and others on this forum provides a great learning curve for newbies like me. I had to google a few of your terms and then write them down for future reference. The value of this forum to novice investors can never be overstated.

For now I am contemplating (all purchased with USD):

ALL USA (VTI) 40%
World 30%
USA investment grade Government Bonds 30%

You noted that 30% bonds may not provide enough growth in income to meet inflation. Wouldn't VTI and World stocks at 70% be sufficient for growth in income?
Dear Edinvestor

My apologies for using jargon - jargon generally makes things harder to understand, not simpler.

Re your proposed investments:

- US government bonds (Federal ie US Treasury) are by definition the highest credit quality. Investment grade means BBB or higher on the Standard & Poors credit risk grading (Moody's uses a different letter system to mean the same thing). AAA is the gold standard - one of the agencies did downgrade the USA to AA+ I think but the market just ignored it.

There's a small group of countries which are AAA and thus free from any credit/ default risk. Canada, Australia, UK, Germany, USA, Switzerland and a few others. EURozone interest rates are very very low right now (German 10 year government bond pays less than 1.0%) and Japan's have been forever (about 0.5% on the 10 year). By holding USA bonds you will at least get some income (around 2.7%).

I saw Investment Grade because there is a type of bond called "junk/ high yield/ sub investment grade (below BBB-)" which also includes many Emerging Market governments. There is a real risk of default in these bonds, and bond prices tend to move along with stock prices - when you have a bear market or financial crash, these things get hurt. That's not ideal when you want stability in part of your portfolio.

In terms of the world index USA is about 55% and rest of world is about 45%. What you have is 40/70 which is actually a bit more than 55%.

If you have access to a single global equity index fund, I would take that in preference (assuming fees & tax issues are equivalent).

Make sure the world fund you list, above, is world ex USA.

Otherwise, and I don't have a calculator handy, you should be something like 38% USA and 32% world -- I'd need to check what the exact USA percentage is in the world index (from memory it is 55-60%) and then you would take say 0.55 x 70% = US percentage (I get 38.5% in my head without checking).

In the long run I am pretty sure you will get a 5% real return in USD from your equity investments. However the long term is a collection of short terms, and we are almost at the longest bull market in history (since the bottom in March 2009). It's very likely that things are going to be rough at some point in the next few years - however stocks could go up another 20% first. Real returns may disappoint in the short run (I made investments in 2000 that have yet to fully recover their value).

I also don't know how South African tax works re dividend income vs. interest, capital gain, whether there are tax advantages to domestic stock dividends etc.

If you need to increase your yield then you can tilt further away from the USA -- structurally the US index has a low dividend yield because many major companies (Alphabet/ Google, Berkshire Hathaway (Warren Buffett) buy back shares but do not pay a dividend. It's one of the reasons we try to get people here to focus on total return (dividends plus capital gains) not just dividend yield (dividend/ price).

Your proposed portfolio with minor tweaks should be fine. However I need to estimate the dividend income (I would take the relevant ETFs for each market, found out what yield they are producing, then multiply out by the percentages in the portfolio. I have the funeral of a family member to attend to this weekend and so I am not going to be able to do that for a couple of days.

If you could post the ticker symbols of the funds you are proposing to use, and the links to the factsheets (I am guessing these are Irish domiciled funds - ie EU compliant?) that would be really helpful.

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Edinvestor
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Re: Unplanned retirement dilemma [South Africa]

Post by Edinvestor » Fri Feb 01, 2019 6:43 am

G’day Valuethinker:

Thank you for another informative response. BTW jargon is good. It forces us newbies to learn. :happy

Sorry to hear of the passing of your family member.

My broker in South Africa unfortunately does not have many Vanguard ETF’s but does have many iShares ETF’s.

My ETF proposed portfolio (I provide more than one option because I am unsure which one to go with):

Total USA:
VTI - https://investor.vanguard.com/etf/profile/VTI (I only have 54 shares and intend buying more)

US Bonds:
AGG: https://www.ishares.com/us/products/244 ... i-eafe-etf
IUSB: https://www.ishares.com/us/products/264 ... market-etf
Seeking Alpha opinion on the above two: https://seekingalpha.com/article/422217 ... -portfolio

World ex USA:
IEFA: https://www.ishares.com/us/products/244 ... i-eafe-etf
IDEV: https://www.ishares.com/us/products/286 ... s-etf-fund
BNDX: https://investor.vanguard.com/etf/profile/BNDX

Others: - just in case the above aren't suitable
QLTA: https://www.ishares.com/us/products/239 ... e-bond-etf
HDV: https://finance.yahoo.com/quote/HDV/?p=HDV

Thank you for your kind offer to assist.

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Re: Unplanned retirement dilemma [South Africa]

Post by Valuethinker » Fri Feb 01, 2019 6:59 am

Hi

I notice you are using the US domiciled products?

Often from a tax point of view this is often a bad idea for a non US resident who is not a US citizen? Ted Swippett s posts are often the best resource on this.

I think there is a global equity index product but I'd have to look for it.

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Re: Unplanned retirement dilemma [South Africa]

Post by TedSwippet » Fri Feb 01, 2019 8:14 am

Valuethinker wrote:
Fri Feb 01, 2019 6:59 am
Often from a tax point of view this is often a bad idea for a non US resident who is not a US citizen?
South Africa has a good estate tax treaty with the US, and a 15% US tax treaty rate on dividends. Where a South African investor's local tax rate exceeds this 15%, and also where South Africa allows full tax credits for this 15% dividend tax paid to the US, US domiciled ETFs should be okay.

Exceptions would be where a full tax credit for 15% US withholding is not available for some reason (South African rate below 15%, limited or disallowed foreign tax credits, and so on). In these cases, using non-US domiciled ETFs -- typically Vanguard's Ireland domiciled ETFs, traded on the London Stock Exchange and Euronext -- for the non-US part of the asset allocation would generally produce a better tax result.

Topic Author
Edinvestor
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Re: Unplanned retirement dilemma [South Africa]

Post by Edinvestor » Fri Feb 01, 2019 8:43 am

Thanks Ted Swippet. I did some research on the South African Tax site and you are correct. There is a rebate formula used when one receives income from a country, such as the US, that has a tax treaty with South Africa.

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Re: Unplanned retirement dilemma [South Africa]

Post by bartholomewp » Wed Nov 06, 2019 8:25 am

From what i can tell (and i'm busy investigating the same thing myself) South Africans assets directly invested in the US over $60k are subject to 40% tax on death. (Situs tax) . Details can be seen here: https://www.investec.com/en_za/focus/mo ... ained.html

SA tax treaty with the US is an old one, but does include a non-double taxation condition. HOWEVER South African estate tax is 20% and the US tax is 40% so the South African would still be subject to to 40% on the US assets.

Would be very interested to hear if there are other options for this.

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Re: Unplanned retirement dilemma [South Africa]

Post by TedSwippet » Thu Nov 07, 2019 8:01 am

bartholomewp wrote:
Wed Nov 06, 2019 8:25 am
From what i can tell (and i'm busy investigating the same thing myself) South Africans assets directly invested in the US over $60k are subject to 40% tax on death. (Situs tax) . Details can be seen here: https://www.investec.com/en_za/focus/mo ... ained.html
Thanks for the update. I suspect you are right -- my comment above was written before I noticed this same issue with the US/SA estate tax treaty (the treaty with Ireland has similar issues). I updated the wiki after finding this information.

If you can nail this down further, I'd appreciate an update. US estate taxes for nonresident aliens are rapacious and confiscatory, and nobody should pay them when perfectly fine alternative investments that are not subject to this US tax exist.

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