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Hi, I'm jj
Old 11-30-2004, 06:23 AM   #1
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Hi, I'm jj

Hi y'all,
I've been lurking on this board off and on since March and thanks go to all regular posters for the wealth of information discussed here. It's difficult to talk to friends about a lot of the personal stuff that is posted here but when making the decision about when to retire it's crucial to be able to bounce those thoughts off someone else. With this board I hope I've found how to do that anonymously.

We are aged 50 and 45, with three sons (6th, 8th and 10th grades) and we think we have "enough" to be able to retire. In fact, we are in a similar situation to Blake who posted here in the last couple of weeks. We have run Fire-Calc and barring an absolute catastrophe at our current levels of expenditure (6 years of MS Money data) we can easily survive.

Other complications in our situation are that we are British citizens (green card holders). We have only been here for 6 years and therefore have not built up enough credits for either Medicare or Social Security yet. From looking at the government site it appears that the US govt will look at the social security record from another country in which there is a work record and pick up credits from there. Does anyone have experience of this? In any event it may not matter if SS bites the dust within the next 15 years.

Furthermore, we are not completely comfortable with how the tax system works here. We have always had someone else prepare our taxes and are unsure of our understanding of the rules. Using MS Money's retirement calculator it tells us that in retirement our tax rate would be in excess of 20%. I cannot see how it could be so much when all our living expenses will come from dividends, capital gain and a small amount of interest from cash accounts. In addition, we have property taxes of $12,500 (Texas!) and presumably all our medical insurance and expenses will be tax deductible. My view is that we will not be able to generate enough income to offset the allowances we have each year - but am I missing something? (DH thinks I am) Can anyone recommend a good tax program to purchase which will allow us to model our tax situation in retirement and give us some peace of mind on the tax front?

I think there are enough issues here for my first post! I await your replies with curiosity.

jj
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Re: Hi, I'm jj
Old 11-30-2004, 07:44 AM   #2
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Re: Hi, I'm jj

Hi jj,

Welcome and congratulations on your eminent retirement.

I like TurboTax as tax computation software. I haven't compared it to other programs because I get TurboTax free. But it is very simple to use. The program interviews you much like a tax advisor would then computes tax. There is a tax estimator portion of the program that would help you answer your tax expectation questions fairly easily. You used to be able to download a version of the program for free to try it out.

Good luck.
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Re: Hi, I'm jj
Old 11-30-2004, 07:54 AM   #3
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Re: Hi, I'm jj

salaryguru,

Thanks for replying, I must admit TurboTax is the only tax software I've heard of. Good to hear that you like it. Just out of interest, how do you get it free?
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Re: Hi, I'm jj
Old 11-30-2004, 09:15 AM   #4
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Re: Hi, I'm jj

Quote:
Other complications in our situation are that we are British citizens (green card holders).
Are you going to stay in the US in retirement, return to Britain, or go somewhere else? *That answer changes a lot of things. *I'm a Canadian/Scot (dual citizenship) and I'll be leaving the US when I FIRE.

Quote:
We have only been here for 6 years and therefore have not built up enough credits for either Medicare or Social Security yet. *From looking at the government site it appears that the US govt will look at the social security record from another country in which there is a work record and pick up credits from there. *Does anyone have experience of this?
No experience but I have read all the docs on this (the specific treaty for my country of work history plus the general docs and a glance at the other treaties) and it is essentially ZERO dollar credit years from your work experience in other countries. *Those ZERO dollar years give you zero dollars to your SS calculations but enable you to have the required 40 quarters (10 years).

You can read the general docs here:
http://www.socialsecurity.gov/intern...l/your_ss.html

and the treaties here:
http://www.ssa.gov/international/agr...criptions.html
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Re: Hi, I'm jj
Old 11-30-2004, 01:02 PM   #5
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Re: Hi, I'm jj

I'm Canadian, born St. Thomas On 1943. Mrs. Zipper was born in Harrogate England in 1949 and emigrated to Canada in 1952.

She has a UK/EU passport, and technically is still a landed immigrant, even though she was 3 when she came here, was educated, married me (Canadian) in 1969, and had 2 children.

She has always voted, so Ottawa thinks she is Canadian.

Since 9-11 though, the cracks have been filling in at the border, so she will probably have to get a Citizenship card if we head to FL or whatever.

She will continue with her UK passport, however, like Hyper. Our sons can claim UK/EU access because of their mother.

Mrs. Zipper goes to the head of the line when entering customs in the UK. Canadians like me are lumped in with "the others".

Mrs. Zipper has aunts living in Albuquerque and Napa. Long since citizens after marrying Americans.

jj, you seem to be paying a sh*tload of property taxes in Texas!

You would have to put up with snow in ON for 3 mo. My son lives in Vancouver and they really don't get much.

Health care is world class and free.

Retire here and winter back in Texas!
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Re: Hi, I'm jj
Old 11-30-2004, 03:27 PM   #6
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Re: Hi, I'm jj

Thank you Hyper/Zipper for replying.

I had spent many hours previously on the ssa.gov site looking for information on how exactly they compute the figures for foreigners who haven't quite earned enough credits to get a pension. So thanks for that.

Although nothing is ever finally decided, I think we'll end up staying in the US after we retire. We shall certainly stay until the boys finish high school, after that who knows? I see a scenario where the boys marry american girls (or guys, let's not be discriminatory here ) and then the grandchildren will follow and we'll never leave. The cold European winters don't thrill us after 6 years in Texas. What's the opposite of a snow bird? We could always travel up to Canada for the beautiful summers to get away from the oppressive heat here. I have been interested recently in the threads to do with the various tax consequences of living in different states. Having a big house in Texas is not a good thing with property taxes the way they are here. I know this is running into a parallel thread but our prop taxes here are $12,500 pa on a $475,000 assessed value house which would probably sell for $550,000 at most, then there would be the realtor's fees. In addition to that we have "assessments" - which can't be claimed against income taxes - of an additional $2750 pa from the Homeowner's Association. We are not gated or anything like that - in case you were wondering. It makes this part of Texas an expensive place to own property. But... they have very good schools here and we don't have to pay private tuition. We've moved around enough - the Netherlands and Germany before here - and relish staying for a goodly amount of time in one house. After the kids have graduated high school we'll down-size to a smaller cheaper house.

I hadn't picked up before that you are Canadian Zipper. Say Hi to your wife from me. It certainly can be useful to have a dual nationality - it leaves your options open. Now that we have green cards getting through immigration at the airports has been easier. The lines for the visa holders when I last came through in March were horrendously long and I suspect I would've missed my onward connection had I not been able to go through as a resident.

Zipper, do your sons think they might ever go live in Europe? As for the prospect of moving to Canada for the free healthcare, notwithstanding that we might not be let in, aren't the income taxes very high there?
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Re: Hi, I'm jj
Old 11-30-2004, 04:35 PM   #7
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Re: Hi, I'm jj

Quote:
Although nothing is ever finally decided, I think we'll end up staying in the US after we retire.
Ok, you do run into the issue of eligibility for Medicare then. You will have to make sure that you work long enough for this (roughly 10 years of a job paying Medicare taxes). If not then you will have the very costly prospect of buying health insurance for the rest of your lives.

Quote:
We shall certainly stay until the boys finish high school, after that who knows?
Ok, but be aware that the US is one of the few countries in the world that taxes their citizens and green card holders no matter where they live. To maintain that hold over their "citizens" the US maintains a very large exit tax called the expatriation tax. If you have enough to retire nicely then you have enough to fall under this tax. If you've had a green card for 7 of the last 15 calendar years then you will be subject to this if you decide to leave. You can "request" a ruling to get out of this in some special cases but it is expensive and not guaranteed.
http://www.irs.gov/publications/p519/ch04.html#d0e4115

Quote:
aren't the income taxes very high there?
Not in general. The rules of the tax system are different and that will produce different results for some. Overall, after experiencing the two I would say that they are roughly comparable.
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Re: Hi, I'm jj
Old 11-30-2004, 08:32 PM   #8
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Re: Hi, I'm jj

Hello jj

WRT health care issues, would the UK National Health System not still provide a fall back in the event of (God forbid) any serious health issues?? I understood that even though you have been outside the UK (and presumably not paying UK Tax nor making NI contributions) that the right to universal health care was inalienable. Thus repatriation to the UK for major health issues would always be available (though less desirable). Correct??

Best wishes

Simon


To digress somewhat on the tax issue mentioned by Hyperborea, I have always observed it to be almost obscene the way the US Gov. seeks to tax it's citizens wherever on the face of planet they happen to live and earn.
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Re: Hi, I'm jj
Old 11-30-2004, 08:48 PM   #9
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Re: Hi, I'm jj

jj,

- Welcome-- I hope you stay.

-- TaxCut is another program which, like TurboTax, is very easy to use. Both are solid programs that are intuitive.

Simon8888,

-- So, some countries don't tax their citizens living abroad but will provide them medical care? Sounds like a bad deal for the folks back in the old country footing the bill.


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Re: Hi, I'm jj
Old 11-30-2004, 09:42 PM   #10
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Re: Hi, I'm jj

Quote:
* -- So, some countries don't tax their citizens living abroad but will provide them medical care? *Sounds like a bad deal for the folks back in the old country footing the bill. *


samclem
samclem,

Two parts to that question: Firstly, for the perpetual health care provision, as I said, I understand that to be the case with the UK, but I am not 100% certain. Perhaps jj / someone could clarify, because if my understanding is correct, it would provide a safety net absent US Medicare qualification??

''Most'' countries do not tax their citizens/subjects if they live/work/earn outside of their home country - the US (possibly Japan and Canada??) are the only ones to my knowledge that do. Certainly the UK doesn't tax citizens after the first 12 months abroad, and if you stay outside the country thereafter then the tax paid for the first 12 months overseas is refundable.

A bad deal for the folks back in the old country footing the bill?? Absolutely it is a bum deal.

Simon888
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Re: Hi, I'm jj
Old 11-30-2004, 09:54 PM   #11
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Re: Hi, I'm jj

Quote:
''Most'' countries do not tax their citizens/subjects if they live/work/earn outside of their home country - the US (possibly Japan and Canada??) are the only ones to my knowledge that do.
I think there are only 2 countries other than the US that tax based on citizenship and they were small countries (one was central European IIRC). *So that "most" is pretty much an "all other". *It's a pretty strong claim from the US government that US citizens are owned by the US government - you owe them taxes on whatever you do no matter where in the world you are and they make it difficult to impossible to fully break that tie.

Canada and Japan do not tax on citizenship only on residency though there are some requirements needed to "break" residency.
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Re: Hi, I'm jj
Old 11-30-2004, 09:58 PM   #12
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Re: Hi, I'm jj

Thanks, Hyperborea, for the clarification.

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Re: Hi, I'm jj
Old 12-01-2004, 02:43 AM   #13
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Re: Hi, I'm jj

It is my understanding that you are correct that UK citizens can return home for free medical care. In fact we even joked about it recently at home when our son had a broken bone which had to be surgically pinned and it cost us a fortune in co-pays etc. However, the Britsh Inland Revenue (approximates to the IRS) gets you with inheritance tax in the end! All British citizens are assumed to be "domiciled" in the UK, even if they haven't lived there for "x" years! This concept of "domicile" is a legal one, but in essence it implies that unless you have taken up domicile in another country permanantly and indefinitely the UK will assess your estate for inheritance tax. Inheritance taxes in the UK are steep (40%) above an allowance of 263,000PS (tax year 2004/5) which is about $500,000 at the current exchange rates (in more normal times about $400,000). Anyway, my point is - going back to the UK for a hip replacement on the NHS would likely scupper your attempts at losing your UK domicile and avoiding UK inheritance tax! if somebody knows otherwise please let me know.
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Re: Hi, I'm jj
Old 12-01-2004, 05:10 AM   #14
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Re: Hi, I'm jj

This
Quote:
So, some countries don't tax their citizens living abroad but will provide them medical care? Sounds like a bad deal for the folks back in the old country footing the bill.
ergo
Quote:
(returning to) UK for major health issues would always be available (though less desirable)
There is no free lunch.

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Re: Hi, I'm jj
Old 12-01-2004, 05:29 AM   #15
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Re: Hi, I'm jj

[quote]This


There is no free lunch.

Absolutely!!
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Re: Hi, I'm jj
Old 12-01-2004, 05:39 AM   #16
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Re: Hi, I'm jj

Quote "Ok, you do run into the issue of eligibility for Medicare then. *You will have to make sure that you work long enough for this (roughly 10 years of a job paying Medicare taxes). *If not then you will have the very costly prospect of buying health insurance for the rest of your lives."

Thanks for the heads-up on this Hyper. We shall have to seriously consider this before we pull the plug - we have been told (by someone?) that you can buy medicare coverage, but maybe they were referring to the Part B, and not the hospital Part A. You're right, if we are going to stay, to minimize our costs we really ought to make sure we have the 40 credits for SS and Medicare Part A otherwise we fall into a hole in the system.

I can't get the quote box to work - what am I doing wrong?
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Old 12-01-2004, 06:18 AM   #17
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Re: Hi, I'm jj

Quote:
Thanks for the heads-up on this Hyper. *We shall have to seriously consider this before we pull the plug - we have been told (by someone?) that you can buy medicare coverage, but maybe they were referring to the Part B, and not the hospital Part A. *You're right, if we are going to stay, to minimize our costs we really ought to make sure we have the 40 credits for SS and Medicare Part A otherwise we fall into a hole in the system.
Hah, you learn something new every day! *I took a look around the Medicare site (http://www.medicare.gov/default.asp) and apparently you can buy Part A. *That's the good news. *The bad news is that the premium in your case (less than 30 quarters) is $375 / month each - that's $9000 / year for the two of you and that's just for Part A.

You could downsize your job and do just about anything else where you pay Medicare taxes - i.e. work two days a week at the local library. *It's not quite retirement but it's a lot closer and if you are stressed out enough to want to retire it might be close enough. *I wouldn't worry about staying on the job for the SS improvement. *You'll be eligible (using the SS treaties) and the amount may be small but if you have enough in your savings the improvement won't be huge compared to the extra number of years.

As for quote, you can hit the quote button when you reply (upper left corner of the message you want to reply to) and all of the other person's message will be quoted. *Delete whatever bits aren't relevant - don't quote the whole thing if it's not pertinent. *You can also just stick in a quote by putting a [ quote ] at the beginning of the quoted text and a [ /quote ] at the end. *Remove the spaces between the brackets and the quote or /quote (I had to leave them in or the board software would interpret them). *It's somewhat like HTML if you are famiilar with that.
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Re: Hi, I'm jj
Old 12-01-2004, 06:48 AM   #18
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Re: Hi, I'm jj

Quote:
Anyway, my point is - going back to the UK for a hip replacement on the NHS would likely scupper your attempts at losing your UK domicile and avoiding UK inheritance tax!
That's reasonable. If you wish to use the services of the UK then you are a UK resident - that's reasonable. If I were to use the UK or Canadian health care systems then I too would become a resident and subject to their tax laws.

The US has decided that if you have US citizenship that alone is enough reason to tax you no matter where you live and no matter what you do for life. It could be that your parents where US citizens and you were born and grew up somewhere else. Or born in the US say to expat parents on short term work visa. It doesn't matter the US "owns" you and wants their pound of flesh.

You can try and get up and leave and with all the hoo-haw in the US about "freedom" you think you could. Nope, if you want to cease being a US possession then you've got an enormous number of hoops to jump through and they'll take the pound of flesh for 10 more years after you've gone. If the country is so great and nobody should want to leave why are they trying to lock the exit door?
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Re: Hi, I'm jj
Old 12-01-2004, 06:12 PM   #19
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Re: Hi, I'm jj

Hyper, I am getting sick and tired of you slamming the
US all the time. OBLAY EMAY!
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Re: Hi, I'm jj
Old 12-01-2004, 06:48 PM   #20
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Hyper, I am getting sick and tired of you slamming the US all the time.
So, which of the statements I made above upsets you? *Which facts should I leave out so that I don't upset your tender sensibilities? Or are you really upset about the "shoes in the house"?

Quote:
OBLAY EMAY!
Converse back at you!
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