Canadian Guy with more questions

[canadian_guy]

Back in Sept 2006 I posted to this forum and Nords described me as "teetering on the brink of ER". I'm 35, single, and my financial breakdown was:

520K: stocks (I invest myself through Ameritrade)
150K: HSBC direct (5% apy)
225K: 401K/IRAs
75K: home equity (still have 140K mortgage @4.75%)
25K: chequing
------
995K


Despite getting bitch-slapped with a major MREIT holding (IMH), my current situation looks like:

575K: stocks (I invest myself through Ameritrade)
205K: HSBC direct (5% apy)
300K: 401K/IRAs
75K: home equity (still have 140K mortgage @4.75%)
20K: chequing
------
1175K


Growing my net work by about 200K is great, but it leads me to the crux of my problem with ER... there is always that next bonus/stock option/raise around the corner. While I wait for that I'm still getting paid, still growing my savings, etc. Why not hold on just another six months. Of course six months goes by, and the cycle repeats.

How do I get past this?


Another unrelated question is retirement location. I've lived in the USA for the past 10 years, but I'm not yet a citizen. America is a great country, but I don't see it as all that ER-friendly. The main reasons are medical insurance and taxation.

Correct me if I'm wrong, but I could move down to Montevideo, and not pay any tax on my US investment income (of course I would have to abandon my green-card status), have access to cheap and high quality health care, and have a much lower cost of living. I can imagine people saying, "yeah, but you'll be living in URUGAY!". My (limited) research on Uruguay seems to indicate it is a stable, safe, and developed country. Has anyone lived there, or known anyone that has lived there?

Thanks for reading, and I look forward to your feedback!

 

[REWahoo]

Growing my net work by about 200K is great, but it leads me to the crux of my problem with ER... there is always that next bonus/stock option/raise around the corner. While I wait for that I'm still getting paid, still growing my savings, etc. Why not hold on just another six months. Of course six months goes by, and the cycle repeats.

How do I get past this?

Here is a good discussion of the "Ready, Aim, FI...." issue: http://www.early-retirement.org/forums/f35/handling-the-just-one-more-year-syndrome-20091.html

 

[sailor]

Correct me if I'm wrong, but I could move down to Montevideo, and not pay any tax on my US investment income

Sorry - Uncle Sam is greedy, you will be paying quite significant taxes on your US investment income as a non-resident alien. Several posters on this boards are subject to this treatment. When you move you need to fill out a W-8BEN form with your brokerage and they will withheld 30% for taxes (ouch).

 

[canadian_guy]

Sorry - Uncle Sam is greedy, you will be paying quite significant taxes on your US investment income as a non-resident alien. Several posters on this boards are subject to this treatment. When you move you need to fill out a W-8BEN form with your brokerage and they will withheld 30% for taxes (ouch).

I can see that for unrealized gains. I'd probably cash out everything first and take care of the tax liability for that year though.

Once living abroad, I would move from cash to stocks again. From that point on, all dividends, interest and captial gains would be legally free from US taxation. All this is assuming I abandon my green-card and revert to "Canadian only" citizenship.

 

[kcowan]

It seems you have thought through your tax situation. Uruguay is an excellent choice if you speak Spanish. The weather is very temperate with only foggy cold weather in August. It is at the same latitude as Sydney and Capetown (same distance from the Equator as Santa Barbara). Costs will run about 40% of comparable in Canada thanks to the strong C$ and cheap real estate. But be prepared for all your entertainment to be in Spanish.

We have Uruguay as a second fallback plan if Mexico becomes too expensive for us. Currently Mexico is about 40% cheaper than Vancouver. With 10p/C$, it has gotten even cheaper recently (except real estate).

 

[Islandboy]

Once living abroad, I would move from cash to stocks again. From that point on, all dividends, interest and captial gains would be legally free from US taxation. All this is assuming I abandon my green-card and revert to "Canadian only" citizenship.

Capital gains are tax free but dividends and interest are subject to a 30% withholding (depend on the tax treaty between US-Canada)

You are one lucky guy! I also came to work in the US from Canada but i took US citizenship for personal reasons at the time. Now i plan to retire in SE Asia soon, i am stuck with filing US taxes for life. Once you take US citizenship, forget about giving it back unless you are willing to pay all kind of 'departure' taxes on your assets, specially if you are loaded.

 

[nfs]

From that point on, all dividends, interest and captial gains would be legally free from US taxation. All this is assuming I abandon my green-card and revert to "Canadian only" citizenship.

Sorry but no. You've been in the US too long. Google for section 877 of the Internal Revenue Code.

In short, you will be filing US returns for 10 years after you emigrate.

 

[TuckerKatt]

You are one lucky guy! I also came to work in the US from Canada but i took US citizenship for personal reasons at the time. Now i plan to retire in SE Asia soon, i am stuck with filing US taxes for life. Once you take US citizenship, forget about giving it back unless you are willing to pay all kind of 'departure' taxes on your assets, specially if you are loaded.

How does this work (US citizens paying US taxes for life)? I am a Canadian citizen, have lived in the US for close to 10 years. Have a green card through marriage to a US citizen. My family is still in Canada so moving back there at some point is a definite possibility. Would people recommend not getting US citizenship? Paying US taxes for life would be an obvious downside. Are there any major upsides (besides voting) that I don't already get with my green card? What about if I stay in the US -- again, major downsides/upsides to getting citizenship? Thanks.

 

[Calgary_Girl]

How does this work (US citizens paying US taxes for life)? I am a Canadian citizen, have lived in the US for close to 10 years. Have a green card through marriage to a US citizen. My family is still in Canada so moving back there at some point is a definite possibility. Would people recommend not getting US citizenship? Paying US taxes for life would be an obvious downside. Are there any major upsides (besides voting) that I don't already get with my green card? What about if I stay in the US -- again, major downsides/upsides to getting citizenship? Thanks.

Yes, this is true. DH is a U.S. citizen and a permanent resident of Canada. He has to file a U.S. tax return every single year (in addition to the Canadian return) which is a major pain in the a**. Luckily, he's never actually owed any money to the IRS but just filling out the paperwork is a pain.

 

[nfs]

Would people recommend not getting US citizenship? Paying US taxes for life would be an obvious downside.

It was enough of a downside for me that I gave up my green card upon exiting in 2000 (not that I could have kept it legally but they wink at Canajuns). It was enough of a downside that I never seriously considered citizenship.

Are there any major upsides (besides voting) that I don't already get with my green card?

You get to serve on juries too. Oh, you were asking about upsides?

What about if I stay in the US -- again, major downsides/upsides to getting citizenship? Thanks.

Given what the executive branch believes they can do to aliens at the whim of the president, I would say that's a major vote in favor of acquiring citizenship.

 

[kcowan]

Not sure if this still applies, but if you die while in the US as a resident alien, Uncle Sam wanted half of everything over $50k. (This was 20 years ago.) This caused my buddy to immediately apply when a Canuck workmate contracted a rare disease in Japan and died young in Texas.

 

[nfs]

Not sure if this still applies, but if you die while in the US as a resident alien, Uncle Sam wanted half of everything over $50k. (This was 20 years ago.) This caused my buddy to immediately apply when a Canuck workmate contracted a rare disease in Japan and died young in Texas.

Good point. (It's $60k, not $50k, and it's not half any more but it's still onerous.) If Tucker isn't a US citizen, spouse's will had better be written to set up a QDOT.

 

[TuckerKatt]

Thanks for all the answers.

It seems to boil down to: if staying in the US, get US citizenship. If leaving at some point in the future, stick with Canadic citizenship and green card. Yes?

 

[kcowan]

Thanks for all the answers.

It seems to boil down to: if staying in the US, get US citizenship. If leaving at some point in the future, stick with Canadic citizenship and green card. Yes?

Well depending on your age and/or health, read all about Estate Planning with Qualified Domestic Trusts
QDoTs to see how much asset risk you want to take on.