Financial Planning Advice for a Financially Clueless Expat
November 5, 2013 7:12 AM   Subscribe

I am a 29 year old American expat, living and working abroad in BRICs for nearly 6 years now, who needs help in getting my financial act together. Due to limitations of my company- I have not been able to contribute to a 401(k) for at least five years now, and in the last few years my salary has exceeded $135k/year, so I can't even contribute to a Roth IRA. As far as I can understand, there isn't really anything more in the basic United States system for retirement that I can take advantage of… so now what? Am I really on my own now? Are there any websites with info geared towards this? Or should I get a financial/wealth planner? Or an "expat" tax accountant? Or both? How do I even start to find one? I have no idea what to look for!

I studied at an engineering school, and as one can stereotypically assume had a very narrow range of studies- I never took ANY basic accounting or finance courses so am financially clueless. I come from a working class non-native English speaking family background, so my parents are clueless when it comes to investment and are stubbornly cash-only people.

Even with that, thanks to being a cheapskate in my early years out of college:

- $0 student loans
- $0 car loans; I don't have a car
- $0 credit card debit
- $300k left to payoff on a $400k mortgage; interest rate at 4.9%
- ~ $200,000 in low index mutual funds with Vanguard. Around 85% in stocks and the rest in low risk investments <-- based off of the internet, this has been strategy for now but there has to be something more than just throwing EVERYTHING here
- ~$50k in savings as emergency funds

In the past two years, I've started to be able to enjoy spending money rather than being stressed out over it- vacationing in Four Season hotel suites, upgrading from $60 H&M winter coats to $1000 quality long-lasting luxury branded ones- but I am still obsessed with saving. Even with that, after taxes, expenses, and fun money, I save around $80k per year. My dream goal, whether it is relevant or not, is to be able to retire by age 55. But that's a flexible, not firm goal. Also, at some point within the next 5 years, to be able to put a downpayment on a $1 million house or apartment.

Basically, I don't have a network of other American expats living abroad, so have been limited to searching for advise and help to the internet. The websites I have been looking at have very generic information (, Does this mean I have to bite the bullet and hire someone or a company rather than trying to manage myself blindly?

* Also, if it is to hire a financial planner, how do people find one? Do you just roll-up to your local bank? I now live in Russia, so besides the language issue and probable lack of understanding of US laws and such, the only way would just be to drop by a random local bank the next time I am visiting my parents in my hometown (it's Hawaii so there aren't really many choices as far as I know. There is no Bank of America anymore, no HSBC).
posted by anonymous to Work & Money (8 answers total) 3 users marked this as a favorite
I've tried finding something similar (Canadian expat living in the US after 7 years in the UK with some UK income and uncertain long range residency) and frankly you are really on your own. I used a website to solicit for fee only financial planners who could meet my stated needs and many contacted me but not a one of them actually knew anything about how to address my specific needs and situations. As far as I could tell there was only one financial adviser in the US who specialized in this area and they were not taking new clients.

The people who really know this kind of stuff are high-end corporate consultancies and their fees for one meeting would gobble up all of a sub-millionaire individual's benefit from financial planning.

Expat forums are going to be your only real source of information and an awful lot of that information is lunatic fringe so you have to verify things for yourself.
posted by srboisvert at 7:33 AM on November 5, 2013 [1 favorite]

You say you have worked in BRIC countries. Which ones? China's largest cities have tons of accountants who work for expatriate Americans, as do Brazil's and India's. I've no idea about Russia, but I would assume that both Moscow and St. Petersberg have large expatriate American communities.

But, the best way for you to proceed is to arm yourself with information. You say you gross $135,000 per year, which is great, but what is your after-tax take-home? Assume it's 50%, to be conservative, or $67,500. What are your monthly expenses (rent, debt payments, etc.)? Subtract those from your monthly after-tax take home. Then you have your free cash flow, which you can spend on: savings & investment, consumption, food, clothes.

Once you have all this information you will be better informed to work with an expatriate accountant in one of the aforementioned BRICs.
posted by dfriedman at 7:42 AM on November 5, 2013

It doesn't answer your question, but one red flag is you not taking advantage of paying off a huge chunk of your mortgage. I doubt your mutual fund will beat 4.9% unless it has some tax advantage.
posted by devnull at 7:42 AM on November 5, 2013

Can you contribute to an IRA? That's something.

OTOH, you are investing money. That's great. Yes, you have to pay taxes on it, but the amount of money you'd be able to put into a tax-deferred account would be limited even if you were able to do it, so the rest of the money would have to go somewhere.

Can you refinance? Assuming no special circumstances, you can do better than 4.9%.

If you want to buy a more expensive house in the next few years then you might wan to move a little more of your money into lower risk investments. Putting money in stocks is fine for the > 5 year horizon, but if you might need the money before then...
posted by It's Never Lurgi at 8:36 AM on November 5, 2013

Do you not have an expat tax accountant? That's, er, problematic. I'd be more concerned with that than retirement, which, yes, it really might be that simple, good retirement planning should not be very adventurous.
posted by Sequence at 8:37 AM on November 5, 2013

You can contribute to an IRA up to the contribution limit. That is your only option for tax deferred savings.
posted by JPD at 8:39 AM on November 5, 2013

You aren't eligible for a Roth IRA, to which you contribute post-tax dollars, but you should be eligible to contribute to a traditional IRA, to which you contribute pre-tax dollars. You can contribute up to $5,500 annually to a traditional IRA. Which isn't all that much, really.

Things you should definitely do:
- Open an IRA and fully fund it.
- Refinance your mortgage. 4.9%? Really? You can probably knock almost two points off that, particularly if you knock it down to a 15 year period and throw another $100-150k at the project. Which you can afford to do.

I think what you probably want to do is hire a firm that does both financial planning and accounting. Most do. Try Angie's List. Pick one in the city in which your house is located. Handle things by phone and email, if necessary. The expat situation isn't as complicated as it may seem at first glance, and any halfway-decent CPA should be able to help you.

Also, I really don't see you being able to retire at age 55 under your current numbers. At your current rate of savings and assuming a modest but consistent return, I see you at around $3.3 million net worth at age 55. Which is awesome! But unless you want to live pretty frugally for the next three decades--no trips to Europe, no stays at the Four Seasons, no $1,000 jackets, etc.--you'd need at least twice that. On $3.3 million you could live comfortably, if modestly, but that's about it. Which is not to say that that isn't a fantastic goal, and you'd be doing far better than 99% of the country, but I get the distinct impression that isn't what you're looking for.
posted by valkyryn at 9:18 AM on November 5, 2013

There was a previously along similar lines not long ago, which basically made that point that as an expat worker, you should assume that any standard retirement schemes offered in your country of citizenship or work/residence aren't going to fit your circumstances, and that there's a subset of the financial planning industry designed for people in your situation.
posted by holgate at 11:32 AM on November 5, 2013

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