US Expat in Germany

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Topic Author
Kamucando
Posts: 2
Joined: Tue Aug 25, 2020 4:00 am

US Expat in Germany

Post by Kamucando »

Hi Everyone,

I'm a US/Austrian dual citizen based in Germany. I haven't really had any issues living here before it came to retirement planning and the joy of FATCA etc.

I have been in Germany for 7 years now, but am not yet sure where I will retire. I'm stuck between a rock and a hard place at the moment. I have a Roth IRA and an SEP IRA in the states. I can continue to make contributions to them, knowing that the Roth will be taxed in Germany if I stay here.

I have explored the highly onerous and limited options for US expats in Germany for investing in retirement accounts like a Rürup, which would be mostly tax deductible in Germany. So far I've received offers from companies here that charge either 1.5% or 2% fees, which I find a bit nuts. I'm essentially being offered to give away my investment returns in return for a tax write off. What a deal!

I'm leaning toward eating the German taxes and continuing to contribute to my IRAs in the states, where at least I can index invest with low fees, then still pay the German taxes here if I stay and decide to make withdrawals. Two questions:

1. Are there better options for Americans in Germany that I am unaware of? I'm aware of Interactive Brokers and other sites that allow you to invest post-tax income in a giant pile of stocks designed to track say, the S&P 500.

Is there anything resembling Vanguard for people like us?

2. Is there any possible way to deduct contributions to an SEP IRA from German taxes?

And since this seems to come up often in these discussion. I am not yet prepared to give up my US citizenship at the moment, though this entire process has definitely made me consider it.

Thanks a million!
Topic Author
Kamucando
Posts: 2
Joined: Tue Aug 25, 2020 4:00 am

Portfolio Advice

Post by Kamucando »

[2nd Introductory post merged into first post so that portfolio can be considered together with residency situation- Mod Misenplace]

Hi Everyone,

I'm still new to investing, though I have greatly benefited from some of the Bogleheads books. I'm 36, so a bit late to the game, but I'm single, have no debt, no children and a fully adequate emergency fund. I would be grateful for your feedback on my portfolio.

I started out with Ramit Sethi's "I Will Teach You To Be Rich," which started me on Target Date funds before I became more invested in the Bogleheads approach. Right now I'm debating switching the target date funds and S&P 500 fund all into a domestic total stock market fund, what do you think?

I think long term I would like to add a small cap value and REIT fund to round out my portfolio. I thought it might be good to keep putting money into my SEP Target Date fund until I have the $3k minimum to do one of those other funds, then transfer it over. Is that a smart strategy, or should I hold the money in a high yield savings account while I wait to save enough to get into another fund?

Here's my current allocation:

Roth IRA

VFIAX S&P 500 Admiral Shares $4,000.00
VFIFX Target Date 2050 $2,000.00

SEP IRA

VGTSX Total International Stock Index Fund $3,000.00
VBTLX Total Bond Market Index Admiral $3,000.00
VFIFX Target Date 2050 $1,000.00

My ideal long term would be to get out of the target date funds, then add a small cap value and an REIT fund. That would put me at a total of five funds (Domestic, International, Bonds, Small Cap, and REIT), which feels like more than enough.

Thank you for your time and feedback!
Skiandswim
Posts: 163
Joined: Tue Dec 21, 2010 3:24 pm

Re: US Expat in Germany

Post by Skiandswim »

A couple of quick resources:
Vangaurd Germany site - good selection of funds with okay expense ratios. https://www.de.vanguard/privatanleger/home/de
General Bogleheads link for Germany - https://www.bogleheads.org/wiki/Investing_from_Germany
Given your dual citizenship, you might consider using Charles Schwab International to access investment choices.

Wish I had more to offer .....
TedSwippet
Posts: 3176
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: US Expat in Germany

Post by TedSwippet »

Skiandswim wrote: Tue Sep 01, 2020 11:38 am Vangaurd Germany site - good selection of funds with okay expense ratios. https://www.de.vanguard/privatanleger/home/de
Unfortunately, everything offered on this site will be, for a US citizen, a "to be avoided at all costs" PFIC.
Skiandswim wrote: Tue Sep 01, 2020 11:38 am General Bogleheads link for Germany - https://www.bogleheads.org/wiki/Investing_from_Germany
Also not useful information for US citizens living in Germany, I'm afraid. See the warning banner at the top of the page. And Schwab international apparently no longer offer US domiciled ETFs or funds to EU residents.

Being a US citizen effectively cuts you off from a lot of entirely vanilla investment options regularly used by non-US citizens living outside the US.
Skiandswim
Posts: 163
Joined: Tue Dec 21, 2010 3:24 pm

Re: US Expat in Germany

Post by Skiandswim »

As a US citizen expat in EU we were able to access Schwab International funds, so maybe something just changed in past few months. Yes, a bit more complicated to be resident in EU and access US investment resources such as Vanguard US (we were able to retain but had an valid US address while in EU for several years).
hilink73
Posts: 476
Joined: Tue Sep 20, 2016 3:29 pm

Re: US Expat in Germany

Post by hilink73 »

Kamucando wrote: Tue Sep 01, 2020 10:48 am

I have explored the highly onerous and limited options for US expats in Germany for investing in retirement accounts like a Rürup, which would be mostly tax deductible in Germany. So far I've received offers from companies here that charge either 1.5% or 2% fees, which I find a bit nuts. I'm essentially being offered to give away my investment returns in return for a tax write off. What a deal!
I'd be very careful with German "tax advantage" models. They mostly only fit a narrow demography. You would really need to investigate which model ""Rürup", "Riester") would fit, if at all.
There's a German forum with a subsection on alternative investments (including real estate, insurances, etc).
It's in German, unfortunately (not sure if you speak it): https://www.wertpapier-forum.de/forum/7 ... alanlagen/
Storamin
Posts: 32
Joined: Sun Jan 15, 2017 6:25 am
Location: Düsseldorf, Germany

Re: US Expat in Germany

Post by Storamin »

Kamucando wrote: Tue Sep 01, 2020 10:48 am I have explored the highly onerous and limited options for US expats in Germany for investing in retirement accounts like a Rürup, which would be mostly tax deductible in Germany. So far I've received offers from companies here that charge either 1.5% or 2% fees, which I find a bit nuts. I'm essentially being offered to give away my investment returns in return for a tax write off. What a deal!
Riester accounts are to be avoided like the plague. Many potential 'investments' in Germany are PFIC and need to be avoided. Be very careful about trusting German StBs, as they are not versed in the US tax laws and cannot give you advice on that.
Kamucando wrote: Tue Sep 01, 2020 10:48 am 1. Are there better options for Americans in Germany that I am unaware of? I'm aware of Interactive Brokers and other sites that allow you to invest post-tax income in a giant pile of stocks designed to track say, the S&P 500.
IB and an after-tax brokerage account with US listed ETFs is probably your best choice. If you have a US address, you could use Vanguard or Schwab to open an account and purchase US listed ETFs. The german tax reporting of these was simplified in 2018
Kamucando wrote: Tue Sep 01, 2020 10:48 am 2. Is there any possible way to deduct contributions to an SEP IRA from German taxes?
Only contribute to your pre-tax SEP IRA if you are allowed to deduct the contributions on your German taxes. Some people have had success with this, it depends on your local Finanzamt.
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