Retirement savings for Non-US citizen in the US

[noelm]

Hello folks,

Another young dreamer but don't know exactly when will retire, plans to be retire by age of 50 if I manage to stack up enough by that time. I am already 33 so I am late to hop on the train for sure and would like to cover up for lost years as much as I can.

I am an Indian citizen, staying in the US since last Dec. Yearly earnings are moderate, about 60K before taxes. Most likely, this year will pass without major savings due to car payments and other burning issues. I would still like to start my retirement savings. Everywhere the suggestion seems to be IRA 401K or Roth IRA but I am not a US citizen and don't know how long I will stay here or to make matter worse, if I don't stay in the US, I don't know where I will go next. Hence, I am looking for a scheme/option where I could start investing small amount every month and should be able to take away with me as and when I decide to leave the US, without any penalty of any sort. I could not find such yet.
The other option is to invest in stocks and mutual funds and hope for the best.

My current plan is to make Euro and USD CDs in India that will pay me roughly 2% yearly. This will not even cover for inflation but this rate is far better than current offerings in the US and I will not have to pay any tax in India or US on that.

Does anyone have a better suggestion? Thanks in advance.

 

[Meadbh]

Noelm, it occurred to me that someone young and mobile such as yourself might benefit from using a global bank like HSBC. So I googled them and found a specific page for nonresident Indians. Here is the US version:

NRE Term Deposit India. USA NRE fixed term deposit | HSBC Bank India

Interest rates for 36 month term deposits are 3.5%....

Interest rates - NRE Account | HSBC India

I would suggest getting some global financial advice. But it seems to me that relying on US stocks and bonds for the bulk of your portfolio would not be forward looking unless you plan to remain in the US, and maybe not even then. Most experts believe that market growth in the 21st century will be more likely centred in Asia. For bonds, I would be looking to stable goverments and corporations with low default risk. And I would want some real estate, either leveraged and tangible or in REITs, ideally in a market you know.

Disclaimer: I'm not a financial adviser, just someone who has moved around the world like you! Also, I am not a customer of HSBC.

 

[DangerMouse]

Think carefully about what you are doing. What is your real intent with regards to the US. REason I ask is we originally came to the US in 1998. We always said we weren't going to stay, didn't do 401ks, IRAs etc. It wasn't until 2005 that we decided to start a 401k, and now 12 years later we have decided to do our green cards and stay. Looking back we missed so many opportunities to protect our earnings from the taxman.

 

[noelm]

@Meadbh,
Thanks for your suggestion.
The 3.5% rate that you see is for INR. If I remit money to India and disclose my status as non-resident Indian then I will get 3.5% interest rate on my INR deposits (CDs). If I really want to bypass this law, I will transfer my amount to my parents' account and they will get almost 7%. Almost all banks in India have same interest rates, so it doesn't matter which bank you choose.

My goal is not to keep whole amount in INR. With fluctuating currencies, I would like to widen scope to INR, Euro, USD and CAD. This will certainly not earn me a lot of money but as a conservative investment, thought this as a good option. Gold or other hedge is an option but rising price and personal safety related to gold makes me think against it. I am not in favour of hedge bonds. My feeling is, paper is worth just a paper. In case of bad luck, it could go horribly wrong, me losing all my investments.

As I said in my previous post, I have no clue how and where future is going to be. I do really want to go back to India ASAP, for exactly the reasons you said but my wife is more interested in living in North America. That puts me in a very tricky situation. Presence of a 2 year old in a story makes it ever more trickier. Hence, I decided, I better have investments on both shores. I will start investing heavily in Indian stock market for sure, may be by end of the year but side-by-side, I would prefer US investments too, which I should be able to transfer out of US as and when I want.

@DangerMouse,
Thanks for your input.
We will start our 401K rather soon. Financially we are in a tight situation for setting up life here. My wife's employer may file a green card for her next year so it could pretty much go in same direction as yours.

 

[Alan]

Think carefully about what you are doing. What is your real intent with regards to the US. REason I ask is we originally came to the US in 1998. We always said we weren't going to stay, didn't do 401ks, IRAs etc. It wasn't until 2005 that we decided to start a 401k, and now 12 years later we have decided to do our green cards and stay. Looking back we missed so many opportunities to protect our earnings from the taxman.

+1

We came on a 2 year assignment in 87 when I was 32, and by the time we realized that we were staying we'd missed 7 years of being able to invest in an IRA and 401(k).

 

[LOL!]

There is no reason not to do the 401(k)/Roth thing even if you are not a citizen nor intending to stay. Why can't you take it away? The penalty would be only 10% and if you are not in the US when you take it away, there would be no US taxes to pay either, right? The 10% penalty would be less than you would pay on taxes now by not using the 401(k) and the Roth IRA.

 

[DangerMouse]

Well now that you have clarified your wife wants to stay, should warn you that you may as well forget leaving and plan on a life in the US. I would go the 401k route first because of the tax advantages. We did that knowing that if we decided to leave we would wait until we had years with zero income to withdraw the funds to mininimise tax obligations.

If your wife is Indian as well, I believe you are looking at least at a 5 year wait to get the green card in your hand due to the number of Indian citizens who apply. Think there is a backlog for both Chinese and Indian.