How to Move to Switzerland and Still be a Boglehead

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FIBoston
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Joined: Fri Feb 10, 2017 11:41 am

How to Move to Switzerland and Still be a Boglehead

Post by FIBoston » Thu Feb 13, 2020 5:17 pm

Hi Bogleheads,

I'm making a move to Zurich later this year (sometime between October and December depending on my employer). I've been researching hard and am starting to put things together, but it's not easy to understand everything.

I'm wondering if there's anybody here who has moved from the US to Switzerland and would be willing to talk about the steps they took to continue investing simply and cheaply. Additionally, I'd love to get answers to some of the specific questions below.

Basic info:
Current Location: USA (Boston)
Future Location: Zurich area (probably in the Zurich canton)
Salary: CHF 18200 between myself and my wife
Age: Both 29
Long Term Plan: Open ended - we're both US and EU citizens (me Ireland/UK, her Italian) and could potentially move back to the US one day. Not sure really.

Some questions I have:

1. Retirement system: as far as I can tell, we should max out my Pillar 3A but shouldn't touch 3B after contributing to the compulsory Pillars 1 and 2

Once we've maxed out all the pillars, where should we go to continue contributing to retirement up to our goal of 35% retirement savings rate?

2. Banking: We will definitely need to open a Swiss bank and can't continue relying on Ally for all our banking needs

3. General investing: We currently hold a joint taxable account at Vanguard invested entriely in VTSAX. I would like to keep this account and keep investing in it from Switzerland. I'm thinking to do this I could just change the account address to my parent's US address and assume they will never actually go through the process of checking up on my location. I think I could get tripped up if I switch to a Swiss Bank (which so far in my research seems to be something I pretty much have to do) they will notice that my contributions are coming from a CHF account.

Anybody have insights on this?
If we can't keep Vanguard, where should we go and what should we do with the money currently there?


4. Current assets: we each hold our 401ks through the company we currently work for. We are moving to Switzerland with this company, but will not be able to keep contributing to our 401ks once we move. We also each have a Roth IRA with Vanguard.

I'm assuming we should just roll our 401ks into traditional IRAs and invest in the appropriate Vanguard Funds?
Is there anyway we can keep contributing to our IRA's?


Those are all the questions I can think of for now. Thanks for any and all insight! This is a complicated process :confused

123
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Re: How to Move to Switzerland and Still be a Boglehead

Post by 123 » Thu Feb 13, 2020 5:29 pm

If you employer has significant operations in both the US and Switzerland they may have some tax (which means investment) advice available through their accounting firm or HR department. It never hurts to ask. There can be many issues that you might not think of until it's too late to do anything about it. Of course if you haven't already google "moving from USA to Switzerland" (without quotes). Switzerland is not part of the EU but it is now in the Schengen Area (joined in 2008).
The closest helping hand is at the end of your own arm.


TedSwippet
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Location: UK

Re: How to Move to Switzerland and Still be a Boglehead

Post by TedSwippet » Fri Feb 14, 2020 11:46 am

imperia wrote:
Fri Feb 14, 2020 11:38 am
https://forum.mustachianpost.com/
Indeed. However, a US citizen living in Switzerland would need to be very careful indeed about acting on anything they read here.

A lot of the discussion revolves around Ireland domiciled ETFs, all of which are PFICs and a possible US tax death-sentence for US citizens, no matter where on (or off) the planet they live.

Grt2bOutdoors
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Location: New York

Re: How to Move to Switzerland and Still be a Boglehead

Post by Grt2bOutdoors » Fri Feb 14, 2020 11:49 am

Is that your annual salary or monthly salary? Switzerland is quite expensive to visit, let alone live in.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

imperia
Posts: 204
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Re: How to Move to Switzerland and Still be a Boglehead

Post by imperia » Fri Feb 14, 2020 3:50 pm

TedSwippet wrote:
Fri Feb 14, 2020 11:46 am
imperia wrote:
Fri Feb 14, 2020 11:38 am
https://forum.mustachianpost.com/
Indeed. However, a US citizen living in Switzerland would need to be very careful indeed about acting on anything they read here.

A lot of the discussion revolves around Ireland domiciled ETFs, all of which are PFICs and a possible US tax death-sentence for US citizens, no matter where on (or off) the planet they live.
For Swiss resident is better to invest in US domicile ETF.
On that link you can find that most of them invest in VT-Vanguard All World ETF

sfmurph
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Re: How to Move to Switzerland and Still be a Boglehead

Post by sfmurph » Fri Feb 14, 2020 4:58 pm

Buy this book: Living and Working in Switzerland: A Survival Handbook by David Hampshire.

There's a lot about Switzerland that is unique, and this covers a lot of it, in English. It's a very good place to start.

sfmurph
Posts: 32
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Re: How to Move to Switzerland and Still be a Boglehead

Post by sfmurph » Fri Feb 14, 2020 5:14 pm

FIBoston wrote:
Thu Feb 13, 2020 5:17 pm
2. Banking: We will definitely need to open a Swiss bank and can't continue relying on Ally for all our banking needs
Credit Suisse and UBS are the Wells Fargo and BofA of Switzerland, for the good and bad.
Each canton has a "cantonal bank" (almost). These have some kind of federation, so the work similarly to the big national banks. Part of their mission is to develop local businesses. Zürcher Kantonalbank (zkb.ch) is the Zurich cantonal bank.
Raiffeisen (raiffeisen.ch) is a kind of national credit union.
There are also some new, Ally-like online only banks. The Mustachian Post guy has more current info on these.
FIBoston wrote:
Thu Feb 13, 2020 5:17 pm
3. General investing: We currently hold a joint taxable account at Vanguard invested entriely in VTSAX. I would like to keep this account and keep investing in it from Switzerland. I'm thinking to do this I could just change the account address to my parent's US address and assume they will never actually go through the process of checking up on my location. I think I could get tripped up if I switch to a Swiss Bank (which so far in my research seems to be something I pretty much have to do) they will notice that my contributions are coming from a CHF account.

Anybody have insights on this?
If we can't keep Vanguard, where should we go and what should we do with the money currently there?
Take a look at Interactive Brokers. It seems that they know what they need to do for US citizens living abroad. I don't have direct experience with this, but it came up in my research.
FIBoston wrote:
Thu Feb 13, 2020 5:17 pm
4. Current assets: we each hold our 401ks through the company we currently work for. We are moving to Switzerland with this company, but will not be able to keep contributing to our 401ks once we move. We also each have a Roth IRA with Vanguard.

I'm assuming we should just roll our 401ks into traditional IRAs and invest in the appropriate Vanguard Funds?
Is there anyway we can keep contributing to our IRA's?
It may be that it would be better to leave the 401(k) assets there. Moving to an IRA would make it impossible to do a backdoor Roth IRA contribution. This is likely to all get very complicated come tax time.

ge1
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Re: How to Move to Switzerland and Still be a Boglehead

Post by ge1 » Fri Feb 14, 2020 5:17 pm

We spent a year in Switzerland on a work assignment some time back. Following feedback:

- At the time we kept our house in the US, which we rented to a friend, so I kept all my US accounts and didn’t even change the address. I don’t even know if Vanguard would have an issue if you changed your address to a Non-US address? In any event, I agree you certainly want to keep your US accounts and changing address to the parents is a good idea.

- We always knew we would come back to the US, so we didn‘t bother with the Swiss pension system. You will have to contribute to the AHV (equivalent to social security), the company pension system is another matter you will want to discuss with your employer. I wouldn‘t bother with individual Swiss retirement accounts unless you have the intention of staying there long term.

- Don‘t forget you will have to keep filing US tax returns, even if you work and live in Switzerland. International companies usually pay for somebody to do your taxes, certainly in the year when you move there.

- It‘s been a while, but low cost investing is even starting in Europe including Switzerland. There are cheaper alternatives to the big banks (the big banks charge ridiculously high fees), for example Swissquote is a Swiss broker where you can invest fairly broadly. To the first point, if you can I would keep investing with your US accounts, but if not there should be alternatives.

- Not sure where you live now in the US but be ready for a massive sticker shock - Zurich is one of the most expensive places in the world.

- Health care is mandatory but private, pretty ingenious system which works very well. Of course, being Switzerland it’s not cheap, but the quality of service is outstanding.

Feel free to PM me with other question. Switzerland is a great place, you will love it.

ge1
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Re: How to Move to Switzerland and Still be a Boglehead

Post by ge1 » Fri Feb 14, 2020 5:20 pm

One additional point: If you end up contributing to your companies‘ Swiss pension system (2. pillar), it‘s actually not a big deal to have it paid out when you leave the country. It will simply be taxed and you can then invest as after-tax money.

German Expat
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Re: How to Move to Switzerland and Still be a Boglehead

Post by German Expat » Sat Feb 15, 2020 3:19 pm

We moved to Switzerland more then 5 years ago and are both US citizens (I am also EU citizen as well). There is no point to invest in a 3a pillar because it will be taxable in the US and even the 2nd pillar in the Swiss retirement system including the employers part is taxable too.
I stayed 5 years with social security in the US and kept participating in the US 401k (which is not taxable in Switzerland). My wife did not have this option with a Swiss contract.
Funds here are not attractive (high fees) and it is not that easy to open a bank account or being able to invest. e.g. we use Postfinance and they are not even allowing US citizens to buy a fund (not that I would want to, google PFIC).
We did keep a US address and keep investing at Vanguard but also have an account and Fidelity and Schwab (We use Schwab as our main US account and e.g. pay anything outside Switzerland with my US credit cards for the no foreign fee and also the higher cash back or Chase points. I still play once in a while the credit card sign up game with our US address).
Also make sure that your state is not one of the ones that will try to get you for state taxes. Follow their rules well not to get caught up in having to pay state taxes as well.

Here is a short summary:
1. Keep a US address and do not tell your banks you move to Switzerland
2. Open other brokerage account(s), e.g. Schwab is very good with no fee ATM options
3. Pillar 2 is fully taxable in the US (Pillar 3a as well, we don't have one). Pillar 2 also allows low, regular and high own participation (without influencing the employers part) and we picked low on both of our accounts.
4. Get a google voice number and setup all your 2 factor authentication in the US with it (we transferred our old home phone number to google voice)
5. Get good US credit card(s) with no foreign transaction fees (e.g. if you travel to a county using Euro)
6. Keep excellent records how your pillar 2 was taxed in the US to avoid double taxation
7. When leaving there are way to reduce the Swiss tax when pulling it out early (move it to Canton Zug, plenty of companies that will help)
8. I assume you will get a B permit (we have C permits) so taxation will be at the source. Then location will not make a big difference for you. For Swiss the city of Zurich itself has quite a lot higher taxes compared to the Small towns right next to it on the lake.
9. We use tax prepares. One for Switzerland, not that big a deal since it won't help us that much to find the best deductions since then we just pay more in the US). Another one for the US. You could do both yourself but I would not have known how to the first time but could probably figure it out by now.
10. US has a double taxation agreement and also a social security agreement with the US. It is a bit complicated
11. You can send money to the US with e.g. Revolut (up to 6k a a month without any fees), Transferwise or other services and just keep investing there (this is what we do). Schwab has a european account
12. Switzerland also has a wealth tax
13. Try to get a Swiss bank account quickly and you might even need to transfer some money ahead of time to e.g. pay for the apartment deposit which tends to be 3 month of rent)
14. The 2nd pillar in Switzerland has really low returns (1% to 2% depends on the company plan) and you have no influence how it is invested
15. Evaluate what to do about all your electric things (toaster, tv, xbox, ...). A lot of them might not work or need an inverter (not exactly worth it on a toaster). Computers are usually ok especially laptops.
16. Do not send money direct to Vanguard (not sure that is even possible, we didn't bother) from Switzerland. We send it to Schwab (either via Revolut or their European bank account).
17. Unfortunately with the US taxation of the 2nd pillar you will most probably pay higher US taxes compared to your Swiss taxes.
18. Don't forget to file your FBAR (easy online, just did it for 2019 last weekend) yearly

Not sure what you plan to do about housing but Zurich is very expensive. Switzerland in general is very expensive. We are very close to Zurich Good luck finding an apartment.

Let me know if you have any specific questions or drop me a private message. Also try to see if your employer couldn't send you as an expat (up to 5 years allowed) and you keep the US 401k's and US social security. I assume you have no children yet because this is then a whole separate discussion about schools.

German Expat
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Re: How to Move to Switzerland and Still be a Boglehead

Post by German Expat » Sun Feb 16, 2020 4:36 am

Forgot to add one more thing, look at insurance yourself, I got a broker recommended by my company but paid a bit more for the first 2 years for health insurance. Health insurance you pay yourself so it does make a difference. The plans are more or less the same for the basic insurance so you can pick based on price and service (the very cheapest ones can make it a bit painful to submit claims).

https://en.comparis.ch/krankenkassen/default

You can buy additional insurance (which looks at your health status) for e.g. single bed room in the hospital. Dental insurance is not that common and requires underwriting, most people just pay out of pocket (and some go abroad for expensive treatments to save money).

Any other insurance also make sure to price shop e.g. via comparis. I assume you probably already looked at apartment prices but in case you didn't yet comparis also has a good search engine (it searches across multiple web sites):

https://en.comparis.ch/immobilien/default

Also learn to understand how rental contracts work here with move in and move outs (very few dates per year, usually locked in for 1 year etc.) so spend a bit of time understanding it so you don't need to move right away by picking something you don't like.

What does your company pay for? Did they offer relocation services with temporary housing? Furniture rental until your stuff arrives? Or a fixed amount (could work out quite well in case you just go to Ikea and buy a bed and table and a kitchen set with pans, pots, plates etc)?

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PurpleArc
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Re: How to Move to Switzerland and Still be a Boglehead

Post by PurpleArc » Sun Feb 16, 2020 7:54 pm

Hi, on an unrelated note for those with Swiss knowledge, do you guys know which banks are actually open to allowing non resident to open a bank account. I am a mobile person and have always wanted to have a Swiss bank account.

German Expat
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Re: How to Move to Switzerland and Still be a Boglehead

Post by German Expat » Mon Feb 17, 2020 3:59 am

PurpleArc wrote:
Sun Feb 16, 2020 7:54 pm
Hi, on an unrelated note for those with Swiss knowledge, do you guys know which banks are actually open to allowing non resident to open a bank account. I am a mobile person and have always wanted to have a Swiss bank account.
If you are not a US citizen pretty much any bank. If you are it is relative painful. Also what do you want with a Swiss bank account? Fees are relative high. no interest (or negative dependent on the amount), bad exchange rates if you use your ATM card abroad and so on.
I can't see a single reason to have a Swiss bank account and if you try to dodge taxes or are a dictator that tries to hide money outside their country its not a good country anymore either (that was a long time ago).

ivk5
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Re: How to Move to Switzerland and Still be a Boglehead

Post by ivk5 » Mon Feb 17, 2020 4:19 pm

FIBoston wrote:
Thu Feb 13, 2020 5:17 pm
1. Retirement system: as far as I can tell, we should max out my Pillar 3A but shouldn't touch 3B after contributing to the compulsory Pillars 1 and 2

Once we've maxed out all the pillars, where should we go to continue contributing to retirement up to our goal of 35% retirement savings rate?
A US person generally doesn't want to contribute any more than is necessary to Pillar 2 (some employers have programs that allow some employees to contribute more to Pillar 2) or to contribute to Pillar 3a. As noted above, the US does not accord these vehicles any tax-advantaged treatment.
FIBoston wrote:
Thu Feb 13, 2020 5:17 pm
2. Banking: We will definitely need to open a Swiss bank and can't continue relying on Ally for all our banking needs
Yes, I cannot imagine living here without a local account (to pay orange-slip bills via mobile app, make TWINT payments, etc). Most banks here will not do business with US persons (at the retail level - HNW / private banking is another story). When we moved here 3 years ago, we were advised that PostFinance was about the only option. We had no major difficulty opening or maintaining our account with them.
FIBoston wrote:
Thu Feb 13, 2020 5:17 pm
3. General investing: We currently hold a joint taxable account at Vanguard invested entriely in VTSAX. I would like to keep this account and keep investing in it from Switzerland. I'm thinking to do this I could just change the account address to my parent's US address and assume they will never actually go through the process of checking up on my location. I think I could get tripped up if I switch to a Swiss Bank (which so far in my research seems to be something I pretty much have to do) they will notice that my contributions are coming from a CHF account.

Anybody have insights on this?
If we can't keep Vanguard, where should we go and what should we do with the money currently there?
Keep Vanguard. That's what we've done, without issue. We transfer funds back using Revolut - cheaper than TransferWise, close to spot rate and no other fees (well, if you have the good fortune of transferring large amounts, you have to pay CHF 9/mo to get around the transfer limits German Expat mentioned). We actually transfer from Revolut to Ally or CapOne360 and then to Vanguard - have had hit or miss experience going direct to Vanguard. Then invest as usual in US-domiciled funds to avoid PFIC issues.

Using your parents' address may work, although their state of residence may be confused as to why you have 1099 income that appears to be sourced to them yet you don't file a return there. May want to talk to a tax professional about that.
FIBoston wrote:
Thu Feb 13, 2020 5:17 pm
4. Current assets: we each hold our 401ks through the company we currently work for. We are moving to Switzerland with this company, but will not be able to keep contributing to our 401ks once we move. We also each have a Roth IRA with Vanguard.

I'm assuming we should just roll our 401ks into traditional IRAs and invest in the appropriate Vanguard Funds?
Is there anyway we can keep contributing to our IRA's?
Why not keep the 401ks? I would not roll them over to traditional IRAs if I could help it (future backdoor Roth issues etc).

If you do not have any US-sourced earned income, I am not sure if you can make IRA contributions. (I do have some US-sourced earned income so it was never an issue for me.)

Good luck with the move!

ivk5
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Re: How to Move to Switzerland and Still be a Boglehead

Post by ivk5 » Mon Feb 17, 2020 4:36 pm

I should have mentioned, +1 to just about everything German Expat wrote. A couple comments to add to German Expat's:
German Expat wrote:
Sat Feb 15, 2020 3:19 pm
8. I assume you will get a B permit (we have C permits) so taxation will be at the source. Then location will not make a big difference for you. For Swiss the city of Zurich itself has quite a lot higher taxes compared to the Small towns right next to it on the lake.
Even with a B permit you'll have to file a return at your income level (IIRC the cutoff is CHF 120k/year). Location may in fact make a difference - unlike non-US persons, if you move to a lower-tax municipality (eg gold coast or silver coast), you may not get a net benefit from the tax savings if it reduces your Swiss liability below US tax level. (We live in the city of Zurich.)
German Expat wrote:
Sat Feb 15, 2020 3:19 pm
13. Try to get a Swiss bank account quickly and you might even need to transfer some money ahead of time to e.g. pay for the apartment deposit which tends to be 3 month of rent)
I think you won't be able to open a bank account until you have arrived and registered. We had to show the proof that we had done so in order to open the account.
German Expat wrote:
Sat Feb 15, 2020 3:19 pm
18. Don't forget to file your FBAR (easy online, just did it for 2019 last weekend) yearly
Very important - and Form 8938 if you meet the requirements.
German Expat wrote:
Sat Feb 15, 2020 3:19 pm
Not sure what you plan to do about housing but Zurich is very expensive. Switzerland in general is very expensive. We are very close to Zurich Good luck finding an apartment.
Agree finding an apt is no picnic, but whether Zurich and Switzerland are "very expensive" depends somewhat on your frame of reference. Restaurants are expensive. Many services with a high embedded labor cost are comparatively expensive, due to the high wages. Rent may or may not seem expensive depending on what you are used to in Boston.
German Expat wrote:
Sat Feb 15, 2020 3:19 pm
Also try to see if your employer couldn't send you as an expat (up to 5 years allowed) and you keep the US 401k's and US social security.
A very good suggestion, particularly since you both have EU nationalities so permits aren't an issue. Not the end of the world if you end up on a local contract (I did, though not for permit reasons - I also have an EU nationality).

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PurpleArc
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Re: How to Move to Switzerland and Still be a Boglehead

Post by PurpleArc » Tue Feb 18, 2020 1:36 am

German Expat wrote:
Mon Feb 17, 2020 3:59 am
PurpleArc wrote:
Sun Feb 16, 2020 7:54 pm
Hi, on an unrelated note for those with Swiss knowledge, do you guys know which banks are actually open to allowing non resident to open a bank account. I am a mobile person and have always wanted to have a Swiss bank account.
If you are not a US citizen pretty much any bank. If you are it is relative painful. Also what do you want with a Swiss bank account? Fees are relative high. no interest (or negative dependent on the amount), bad exchange rates if you use your ATM card abroad and so on.
I can't see a single reason to have a Swiss bank account and if you try to dodge taxes or are a dictator that tries to hide money outside their country its not a good country anymore either (that was a long time ago).
That's something I never thought of - the low (or no) interest rates. I have a few hundred thousand USD expendable cash and I'd like to keep it in a safer jurisdiction, say Switzerland. But I also don't want it to be just sitting there.

I have accounts in Singapore and HK and the USD interest rates are giving me 1.5-2.5% which is low.

Now Boarding
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Re: How to Move to Switzerland and Still be a Boglehead

Post by Now Boarding » Tue Feb 18, 2020 2:18 am

I don't live in Switzerland, but I have been working overseas for a few years. I don't tell banks and I also always use a US-based VPN I trust to log into my brokerage accounts. I've read too many stories here of firms closing out accounts of US citizens living and investing while overseas.

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