Soon to be ER & need some help..

[BA]

Glad that I found this forum, I read many of the post here. They’re very helpful and informative.

I am planning to take early retirement at age 50 this year from my current overseas job and I think I have unique case that I appreciate your feedback and comments.

Here is the situation:

• I work for foreign oil company in the Persian Gulf and just decided two months ago to leave when eligible for early retirement.

• My portfolio is only around $ 700K (Mutual funds, stocks, commodities, etc...) excluding kids’ education funds.


• We own our home and have no debt.

• We live in relatively low cost state (TN) and our yearly expenses would probably be $ 30K or less.


• I will have foreign pension of approximately $70K per year (give or take depending on the exchange rate to the US$).

Our concerns are:

1. Do you think that we could live comfortably from the investment and pension? Please remember that this pension is at high risk political wise (i.e. revolution, political unrest…).

2. How to report the pension to the IRS? I checked the IRS site and others but could not find anything on how to report foreign pension.

Appreciate your help,

BA

 

[Martha]

2. How to report the pension to the IRS? I checked the IRS site and others but could not find anything on how to report foreign pension.

This IRS publication might help: http://www.irs.gov/publications/p575/

 

[Mountain_Mike]

BA,

This sounds like a "no brainer" to me...

Let's see... $30,000 expenses.... $70,000 pension....$700,000 investments (4% SWR...$28,000).

I think I could scrape by on that. Actually, what I would do is live off the pension, and let the investments "ride" until that money is needed in the future.

The only possible "gotcha" could be health care, but even so it looks like you have plenty of cushion to buy whatever you might need.

 

[BA]

Martha, thank you for that site and will take the time to look into pub575.

Mike, I see your point but the main concern to me is the pension. I consider it very high risk and we probably will go back someday to work or start up small business or something...since we have no clue how long the pension should keep coming in. Since I follow the political and populace sentiments in that country, I decided to treat this pension (in a yearly basis only). Let’s say it is save this year, moderate risk next year, high risk the 3rd year and so on. I know this pension looks very attractive till you factor in the risk then you’ll realized this deal is a bit dicey 
If this pension was from US sources then we would be in pretty good shape.

Thank you all for the reply,
BA

 

[Mountain_Mike]

BA,

The risk factor changes things.... but if you are able count on at least a few years from it, it sounds like you could retire on the pension, and add to your investments. By the time the pension ends (if it does) you should be in a position to cover your basic expenses. At that point, you could decide about working part time, starting a business, or whatever suits your fancy.

 

[Nords]

Mike, I see your point but the main concern to me is the pension. I consider it very high risk and we probably will go back someday to work or start up small business or something...since we have no clue how long the pension should keep coming in.

Welcome to the board, BA.

Is a DBP the only payout option? Would you be able to have the payer convert that to a one-time lump-sum payment?

Failing that, would you be able to persuade an insurance company or some other viatical to give you a lump sum for signing over the pension rights? I guess the issue would be trading security for a much smaller payout...

 

[BA]

Thanks for the welcome Nords,

I won’t be able to have one-time lump sum payment due to some complicated regulations and the monthly payment is the only option. As for the insurance company, I will check into this, but I doubt the payer would allow it.

This money is transferred to my bank account only from this agency which is equivalent to the Social Security Admn. in the US.

Regards,
BA

 

[Martha]

BA, you might also want to check if there is some kind of tax treaty with the US and the foreign country which will effect how your pension is taxed here.