Swiss bank accounts 101, or something different?
October 7, 2008 1:56 AM Subscribe
Where should I keep my money (to protect it from the US economy)? I'm American and it's in US$, but I don't live there and don't have any good reason to keep it there.
I don't have that much, but am about to receive an inheritance, which is why this is an issue. Let's say that about half of what I receive will be in either cash or liquid assets, and half will be in Beneficial IRAs (the amounts are significant to me, but probably wouldn't make an international financial planner/accountant blink).
We all know about the US economy. The relative value of the dollar is decreasing, we can count on some inflation, the stock market, etc. etc. I plan on either investing or saving most of my money, but I am unlikely to ever use it in the US (I'm actually thinking about buying a flat in Europe as an investment right now). I may use a small chunk of it for some traveling/living expenses in the near future, and would generally prefer to have all of it secure but accessible and earning some income.
I realize that selling securities/investments/etc. that are part of the portfolios these assets consist of (some of the liquid assets and some of the IRA) will lock in my losses now; however, I'm also concerned that, even if the value recovers over time, the long-term depreciation of the dollar and the effect of inflation may negate any rebound. Is there any real advantage to not moving these assets out of the US (i.e. out of US banks, the US investment market, etc.) right away?
If I do move my money abroad, how should I actually do this? What are the logistics? And where to: Swiss bank account? Investments? What currency should I go with? I may have the option to invest the assets of the Beneficial IRA in foreign markets; should I think about this, or just cash them out, take the penalty, and run with the cash? If I can invest the contents of the IRA internationally, does that really preserve it from the US market?
I currently live, work and have a bank account in Oman; the local currency (as in most GCC states) is pegged to the US dollar. There has been lots of talk about unpegging the currencies, or re-pegging them to the Euro (Kuwait already unpegged theirs). I'm no economist, but things seem pretty stable locally, and it seems to me that if I exchanged all my dollars for Omani rials while they are still pegged - i.e. the value of the dollar has not decreased against the rial as it has against every other world currency that is not pegged to it - that I could stand to benefit immensely from this transaction by either maintaining the value of my money in rials if the currencies are unpegged while the dollar drops, or even seeing it increase for the same reason. Is this foolish or a good opportunity?
I don't have a long-term commitment to Oman, however - it's just where I happen to be living right now. I don't have a long-term commitment to any place, and specifically not to the US (despite my citizenship). I'm essentially a nomad (though I may well stay where I am forever - only time will tell). So the real question is, for the long-term, where should I make my "financial home" - where should I maintain my savings and investments not knowing where I will be living for the foreseeable future? How can I educate myself about this?
I don't know what to ask more specifically because I have never had to deal with finances in excess of a few thousand dollars before, so any advice as to where to start and how to prepare myself for this kind of decision-making will be appreciated. I need to 1) protect my money from the US economy (maintain as much of its value as possible regardless of where it is invested/what currency it is denominated in); 2) make money if possible by investing/earning interest; 3) ensure that I am not vulnerable to taxation/residency or citizenship requirements for any country I keep my accounts in/maintain my investments from.
I don't have that much, but am about to receive an inheritance, which is why this is an issue. Let's say that about half of what I receive will be in either cash or liquid assets, and half will be in Beneficial IRAs (the amounts are significant to me, but probably wouldn't make an international financial planner/accountant blink).
We all know about the US economy. The relative value of the dollar is decreasing, we can count on some inflation, the stock market, etc. etc. I plan on either investing or saving most of my money, but I am unlikely to ever use it in the US (I'm actually thinking about buying a flat in Europe as an investment right now). I may use a small chunk of it for some traveling/living expenses in the near future, and would generally prefer to have all of it secure but accessible and earning some income.
I realize that selling securities/investments/etc. that are part of the portfolios these assets consist of (some of the liquid assets and some of the IRA) will lock in my losses now; however, I'm also concerned that, even if the value recovers over time, the long-term depreciation of the dollar and the effect of inflation may negate any rebound. Is there any real advantage to not moving these assets out of the US (i.e. out of US banks, the US investment market, etc.) right away?
If I do move my money abroad, how should I actually do this? What are the logistics? And where to: Swiss bank account? Investments? What currency should I go with? I may have the option to invest the assets of the Beneficial IRA in foreign markets; should I think about this, or just cash them out, take the penalty, and run with the cash? If I can invest the contents of the IRA internationally, does that really preserve it from the US market?
I currently live, work and have a bank account in Oman; the local currency (as in most GCC states) is pegged to the US dollar. There has been lots of talk about unpegging the currencies, or re-pegging them to the Euro (Kuwait already unpegged theirs). I'm no economist, but things seem pretty stable locally, and it seems to me that if I exchanged all my dollars for Omani rials while they are still pegged - i.e. the value of the dollar has not decreased against the rial as it has against every other world currency that is not pegged to it - that I could stand to benefit immensely from this transaction by either maintaining the value of my money in rials if the currencies are unpegged while the dollar drops, or even seeing it increase for the same reason. Is this foolish or a good opportunity?
I don't have a long-term commitment to Oman, however - it's just where I happen to be living right now. I don't have a long-term commitment to any place, and specifically not to the US (despite my citizenship). I'm essentially a nomad (though I may well stay where I am forever - only time will tell). So the real question is, for the long-term, where should I make my "financial home" - where should I maintain my savings and investments not knowing where I will be living for the foreseeable future? How can I educate myself about this?
I don't know what to ask more specifically because I have never had to deal with finances in excess of a few thousand dollars before, so any advice as to where to start and how to prepare myself for this kind of decision-making will be appreciated. I need to 1) protect my money from the US economy (maintain as much of its value as possible regardless of where it is invested/what currency it is denominated in); 2) make money if possible by investing/earning interest; 3) ensure that I am not vulnerable to taxation/residency or citizenship requirements for any country I keep my accounts in/maintain my investments from.
Iceland. A nice stable country with an excellent banking system. Whoops.
Seriously, it's a global economic crisis. You're probably about as safe in a US FDIC insured account (and at the moment, in dollars) as anywhere else, unless you can open an account in China.
posted by fourcheesemac at 5:21 AM on October 7, 2008
Seriously, it's a global economic crisis. You're probably about as safe in a US FDIC insured account (and at the moment, in dollars) as anywhere else, unless you can open an account in China.
posted by fourcheesemac at 5:21 AM on October 7, 2008
1) Talk to a financial advisor before you get the money; planning appropriately before you get the $$ will help minimize taxes.
2) Don't make unqualified financial decisions based on your readings of the state of the economy ("I'm scared of the US economy so I'm investing in Mackerel")- there are lots of ways to stash money that are protected and that will provide you with longer-term upside. The key word here is diversification. The whole world is having issues now, which- paradoxically- may make it a better time to buy in the US, if buy and hold is a viable strategy.
Do see a professional financial planner as soon as you can- and express your concerns. If they can't answer them, find one who can.
posted by jenkinsEar at 6:04 AM on October 7, 2008
2) Don't make unqualified financial decisions based on your readings of the state of the economy ("I'm scared of the US economy so I'm investing in Mackerel")- there are lots of ways to stash money that are protected and that will provide you with longer-term upside. The key word here is diversification. The whole world is having issues now, which- paradoxically- may make it a better time to buy in the US, if buy and hold is a viable strategy.
Do see a professional financial planner as soon as you can- and express your concerns. If they can't answer them, find one who can.
posted by jenkinsEar at 6:04 AM on October 7, 2008
Bonds, treasury bonds. This is not going to be a good longe term solution, but it's a safe port in a storm. Otheriwse an intrest bearing US dollar account in an FDIC insured bank is another low yeild safe harbor right now.
We all know about the US economy.
It's not the US economy that is in crisis, it is the world's economy.
unless you can open an account in China.
Not exactly a good idea. These banks are not insured and the Chinese are tied to the US economy for at least $1 trillion, not to mention the US is their biggest customer. Lose the US market and you lose everything. I sure do wish I had bought a big ole sack of Yuan about a year ago though. Incidentally to open a true Chinese account you have to have an excuse, such as a job in China and a Chinese co-signator, otherwise these are "international" accounts and they aren't treated in the same way (tarriffs and fees apply that don't to Chinese accounts, the values may be pegged in dollars or Euro, etc). If you want to open a Chinese account, go live in China for a while and teach English. The school will likely set up an account for direct deposit and you can start stuffing away the RMB.
posted by Pollomacho at 6:09 AM on October 7, 2008
We all know about the US economy.
It's not the US economy that is in crisis, it is the world's economy.
unless you can open an account in China.
Not exactly a good idea. These banks are not insured and the Chinese are tied to the US economy for at least $1 trillion, not to mention the US is their biggest customer. Lose the US market and you lose everything. I sure do wish I had bought a big ole sack of Yuan about a year ago though. Incidentally to open a true Chinese account you have to have an excuse, such as a job in China and a Chinese co-signator, otherwise these are "international" accounts and they aren't treated in the same way (tarriffs and fees apply that don't to Chinese accounts, the values may be pegged in dollars or Euro, etc). If you want to open a Chinese account, go live in China for a while and teach English. The school will likely set up an account for direct deposit and you can start stuffing away the RMB.
posted by Pollomacho at 6:09 AM on October 7, 2008
First of all, I'm not an expert on the financial issues around US citizens living abroad. I do know that the taxes involved can be very complicated, so make sure you talk to a tax expert who knows the details of your specific situation.
I realize that selling securities/investments/etc. that are part of the portfolios these assets consist of (some of the liquid assets and some of the IRA) will lock in my losses now; however, I'm also concerned that, even if the value recovers over time, the long-term depreciation of the dollar and the effect of inflation may negate any rebound.
Especially in accounts like IRAs where you are not taxed for gains, there is absolutely no such thing as "locking in" your losses. The value has already been lost, selling shares is just trading your assets for the equivalent amount of money. Also, the depreciation of the dollar and inflation do not directly affect investments like stocks. If you buy a barrel of oil and the dollar depreciates, your oil is just worth more dollars. If you buy a share of an oil company and the dollar depreciates, you share is just worth more dollars. It's obviously much more complicated than that, but the bottom line is that investments that pay off in dollars are not necessarily tied to the swings of the currency itself.
Is there any real advantage to not moving these assets out of the US (i.e. out of US banks, the US investment market, etc.) right away?
US banks are some of the safest places to store cash. FDIC insurance covers you up to $100k, and regardless of your opinion of the current crisis, the US government is going to pay off that amount unless it completely collapses. If you're concerned about US investments, put some money into a broad international index fund, such as Vanguard's. As others have said, though, international markets are not immune from the US crisis. The more important lesson to learn is that long term investments should not be affected by short-term panics. Decide what you want to invest in, and stick to it, rather than getting scared and dumping everything when the news tells you to.
I'm no economist, but things seem pretty stable locally, and it seems to me that if I exchanged all my dollars for Omani rials while they are still pegged - i.e. the value of the dollar has not decreased against the rial as it has against every other world currency that is not pegged to it - that I could stand to benefit immensely from this transaction by either maintaining the value of my money in rials if the currencies are unpegged while the dollar drops, or even seeing it increase for the same reason.
The point of pegging to the dollar is that Oman is conservative about their monetary policy, and wants to limit inflation by piggy-backing on the US monetary policy through the fixed dollar exchange rate. This underscores the most important issue here: a small country's currency is by definition more vulnerable than a large country's currency. Argentina is a relatively large country, and they had their currency pegged to dollars, but when their economy had serious problems a few years ago, the value of their currency plunged. If you put a significant amount of your money in a small country's currency, you have a much larger than average chance of losing most of the value of it.
Overall, you should probably talk to a financial advisor about this. Make sure that you're smart about using this money, especially with regard to taxes and retirement. You may be able to see significant tax benefits by keeping your inherited IRA tax-deferred rather than receiving the money as a lump sum, for example. The important thing is to really think this through, and consider the long term. I've seen people spend a huge windfall in a few years, and regret it for the rest of their lives.
posted by burnmp3s at 7:14 AM on October 7, 2008
I realize that selling securities/investments/etc. that are part of the portfolios these assets consist of (some of the liquid assets and some of the IRA) will lock in my losses now; however, I'm also concerned that, even if the value recovers over time, the long-term depreciation of the dollar and the effect of inflation may negate any rebound.
Especially in accounts like IRAs where you are not taxed for gains, there is absolutely no such thing as "locking in" your losses. The value has already been lost, selling shares is just trading your assets for the equivalent amount of money. Also, the depreciation of the dollar and inflation do not directly affect investments like stocks. If you buy a barrel of oil and the dollar depreciates, your oil is just worth more dollars. If you buy a share of an oil company and the dollar depreciates, you share is just worth more dollars. It's obviously much more complicated than that, but the bottom line is that investments that pay off in dollars are not necessarily tied to the swings of the currency itself.
Is there any real advantage to not moving these assets out of the US (i.e. out of US banks, the US investment market, etc.) right away?
US banks are some of the safest places to store cash. FDIC insurance covers you up to $100k, and regardless of your opinion of the current crisis, the US government is going to pay off that amount unless it completely collapses. If you're concerned about US investments, put some money into a broad international index fund, such as Vanguard's. As others have said, though, international markets are not immune from the US crisis. The more important lesson to learn is that long term investments should not be affected by short-term panics. Decide what you want to invest in, and stick to it, rather than getting scared and dumping everything when the news tells you to.
I'm no economist, but things seem pretty stable locally, and it seems to me that if I exchanged all my dollars for Omani rials while they are still pegged - i.e. the value of the dollar has not decreased against the rial as it has against every other world currency that is not pegged to it - that I could stand to benefit immensely from this transaction by either maintaining the value of my money in rials if the currencies are unpegged while the dollar drops, or even seeing it increase for the same reason.
The point of pegging to the dollar is that Oman is conservative about their monetary policy, and wants to limit inflation by piggy-backing on the US monetary policy through the fixed dollar exchange rate. This underscores the most important issue here: a small country's currency is by definition more vulnerable than a large country's currency. Argentina is a relatively large country, and they had their currency pegged to dollars, but when their economy had serious problems a few years ago, the value of their currency plunged. If you put a significant amount of your money in a small country's currency, you have a much larger than average chance of losing most of the value of it.
Overall, you should probably talk to a financial advisor about this. Make sure that you're smart about using this money, especially with regard to taxes and retirement. You may be able to see significant tax benefits by keeping your inherited IRA tax-deferred rather than receiving the money as a lump sum, for example. The important thing is to really think this through, and consider the long term. I've seen people spend a huge windfall in a few years, and regret it for the rest of their lives.
posted by burnmp3s at 7:14 AM on October 7, 2008
Response by poster: Ok. New question: what would be the safest currency to be holding right now, as a short-term way to minimize losses and a long-term way to achieve security? Then, how to go about converting everything to that, and where to keep it?
I don't think Renminbi is a feasible solution for me. Chinese bureaucracy is exactly the sort of obstacle I need to avoid; having to manage things from the US is also no more convenient than anywhere else, so I'd really like to hear about other options to be considered equally, not default to FDIC-insured whatever.
posted by xanthippe at 7:43 AM on October 7, 2008
I don't think Renminbi is a feasible solution for me. Chinese bureaucracy is exactly the sort of obstacle I need to avoid; having to manage things from the US is also no more convenient than anywhere else, so I'd really like to hear about other options to be considered equally, not default to FDIC-insured whatever.
posted by xanthippe at 7:43 AM on October 7, 2008
New question: what would be the safest currency to be holding right now, as a short-term way to minimize losses and a long-term way to achieve security? Then, how to go about converting everything to that, and where to keep it?
Short term: Nobody knows. Making short-term currency trades to make money is basically impossible for an individual investor. Sure, trading currency is easy, but there is no secret source of information that will tell you which one is better than any other in the short term. Everyone has opinions, but that very rarely leads to profits. You can have a very well thought-out plan to buy X currency and see it appreciate versus Y currency, but there is always a large amount of risk because currency markets are very erratic. For example, there are a lot of people expecting the dollar to continue to depreciate versus other major currencies, but it has ben up significantly in the past few months.
Long term: The safest currencies are those from large counties with a good monetary policies. I would suggest sticking to the few largest, such as the dollar and euro, if you have large amounts of cash. Just as important, put your money in a safe place. Right now, if your bank does not have any insurance similar to FDIC insurance, it is not a safe place. Make sure you know what happens if a your bank goes under, because unless there are protections in place the most likely outcome is that you will not get your money back.
Also, do not convert "everything" to any one currency. Cash is not really an investment, so don't treat it like one. All money devalues due to inflation, so holding cash and expecting it to gain or even maintain value is a losing battle. Keep enough cash on hand to handle short term emergencies and savings, but for the long term the smartest move is generally to invest in assets such as stocks and bonds.
posted by burnmp3s at 8:28 AM on October 7, 2008
Short term: Nobody knows. Making short-term currency trades to make money is basically impossible for an individual investor. Sure, trading currency is easy, but there is no secret source of information that will tell you which one is better than any other in the short term. Everyone has opinions, but that very rarely leads to profits. You can have a very well thought-out plan to buy X currency and see it appreciate versus Y currency, but there is always a large amount of risk because currency markets are very erratic. For example, there are a lot of people expecting the dollar to continue to depreciate versus other major currencies, but it has ben up significantly in the past few months.
Long term: The safest currencies are those from large counties with a good monetary policies. I would suggest sticking to the few largest, such as the dollar and euro, if you have large amounts of cash. Just as important, put your money in a safe place. Right now, if your bank does not have any insurance similar to FDIC insurance, it is not a safe place. Make sure you know what happens if a your bank goes under, because unless there are protections in place the most likely outcome is that you will not get your money back.
Also, do not convert "everything" to any one currency. Cash is not really an investment, so don't treat it like one. All money devalues due to inflation, so holding cash and expecting it to gain or even maintain value is a losing battle. Keep enough cash on hand to handle short term emergencies and savings, but for the long term the smartest move is generally to invest in assets such as stocks and bonds.
posted by burnmp3s at 8:28 AM on October 7, 2008
I'm not a financial adviser and this isn't financial advice. Here's a couple of thoughts.
First, contrary to what you say in your question, the dollar has been doing very well recently. It's risen from about £1 = $2 to about £1 = $1.75. It's also improved similarly against the euro. If you'd checked out of the dollar a couple of monhs ago you'd have lost a significant sum by now. If anyone knew which way currencies would move, and when, they'd make an easy fortune. Fact is, no-one knows. So talk about the "safest" currency is guesswork, no matter how well informed.
If you do want to buy a property in Europe, and insure yourself against a future decline of the dollar against the euro, and not risk losing your money in a bank crash, you might like to investigate euro-denominated European government bonds, for example German bunds. These are issued in denominations of €100 and backed by the German government. You can buy them through a stockbroker, or maybe even yourself online, and sell them ditto. They pay a bit of interest, say 3.5%, so you'll have a tax bill on that.
posted by londongeezer at 8:33 AM on October 7, 2008
First, contrary to what you say in your question, the dollar has been doing very well recently. It's risen from about £1 = $2 to about £1 = $1.75. It's also improved similarly against the euro. If you'd checked out of the dollar a couple of monhs ago you'd have lost a significant sum by now. If anyone knew which way currencies would move, and when, they'd make an easy fortune. Fact is, no-one knows. So talk about the "safest" currency is guesswork, no matter how well informed.
If you do want to buy a property in Europe, and insure yourself against a future decline of the dollar against the euro, and not risk losing your money in a bank crash, you might like to investigate euro-denominated European government bonds, for example German bunds. These are issued in denominations of €100 and backed by the German government. You can buy them through a stockbroker, or maybe even yourself online, and sell them ditto. They pay a bit of interest, say 3.5%, so you'll have a tax bill on that.
posted by londongeezer at 8:33 AM on October 7, 2008
what would be the safest currency to be holding right now
The US Dollar. For the last year, the dollar was decimated by the fears of recession, but other global currencies were largely unaffected. Now that the crisis has spread worldwide, the dollar isn't getting "stronger" but other currencies are getting weaker. Before this pans out, I'd expect Dollar/Euro parity, or close thereto.
Though, with strong banking regulations and increasing oil production, the Canadian Dollar might be a good place, too.
posted by hwyengr at 8:40 AM on October 7, 2008
The US Dollar. For the last year, the dollar was decimated by the fears of recession, but other global currencies were largely unaffected. Now that the crisis has spread worldwide, the dollar isn't getting "stronger" but other currencies are getting weaker. Before this pans out, I'd expect Dollar/Euro parity, or close thereto.
Though, with strong banking regulations and increasing oil production, the Canadian Dollar might be a good place, too.
posted by hwyengr at 8:40 AM on October 7, 2008
Keep half in dollar-denominated savings like US treasuries.
Move the other half into the currencies you intend to spend the money in.
posted by troy at 10:43 AM on October 7, 2008
Move the other half into the currencies you intend to spend the money in.
posted by troy at 10:43 AM on October 7, 2008
This thread is closed to new comments.
I am not a financial planner and I'm more or less making this up, but it certainly is sound and quite workable.
posted by DarlingBri at 3:23 AM on October 7, 2008