Dear Boglehead community,
I've found myself in a research rabbit hole given my complicated tax and employment situation. For context, I'm a US, French and Canadian citizen. I've lived in France, Canada and the UK, and my current fiscal residence is in the UK. I've worked in both Canada and the UK as an employee for certain periods of time, and self-employed for the remainder. I'm currently in my early 30s.
I would love to partake in a simple but effective investment strategy, eg investing 70% in stocks (ideally US ETFs), and keeping 30% in Money Market Funds. However, I've found that classic "no-brainer" strategies don't work for me given my international background. The following Boglehead statement sums up well my catch 22:
• US PFIC tax rules make ownership of UK domiciled and EU domiciled (UCITS) funds, and UK investment trusts, very painful.
• UK PRIIPs KID rules make it very challenging to buy US domiciled funds, and if they are not HMRC reporting funds, holding them is somewhat painful.
I've attempted to thread the needle doing the following:
• Maximizing my UK workplace pensions and SIPPs (when I was self-employed)
• Opened a Schwab International account to invest in individual US stocks, as I'm not allowed to buy ETFs from this account.
• From various forum threads, I'm realizing that I should also open a US Roth IRA and buy HMRC reporting funds. I will try to do so through Schwab international and max out the $7,000 annual contribution.
• I've tried previously to open a US bank account to buy US ETFs, which has proven difficult given I've never lived in the country so I've been rejected by a few banks
Questions
1. I think I may have made a mistake when signing up for a Vanguard account while residing in the UK. They asked if I was a US citizen and I incorrectly answered "no" (I mistook citizenship with residency at the time). In this account, I have both a SIPP (90% of value) and a regular investment account (10% of value).
a. What's the risk of keeping this account open?
b. If I want to correct this mistake, I think my best bet would be to transfer my pension to my current employer's workplace pension and reallocate the funds that are currently in the regular investment account. Does this sound right?
2. For contributions to the US Roth IRA, I'm seeing on the below Boglehead link that in order to contribute, I must have US "earned income". What does this mean exactly?
3. I'm stumped by this statement from Ted Swippet: " Hold UK HMRC reporting funds that are not US PFICs. However, it is tricky to accomplish. Brokers generally refuse to allow UK and EU residents to trade US domiciled funds, and anything non-US domiciled is a US PFIC. Additionally, you will find that most UK brokers will refuse you as a customer anyway, courtesy of FATCA." If I want to follow the advice on investing in HMRC reporting funds while based in the UK, what's my best option?
a. Interactive Brokers?
b. Wait and hope that fundmanagers like Schwab will be able to sell US-domiciled ETFs to UK Investors in the near future?
4. Given I don't plan to stay in the UK for the long-term, I'd like to confirm whether this statement holds true: "Aside from your UK pension, there's not much point in using a UK broker for anything".
5. If I plan to make a real-estate investment in the short-term (ie next 1-2 years), is the most prudent path to keep the total downpayment amount in a MMF for ease of access? I've understood by now that the ability to act quickly can be a make-or-break a transaction in competitive real-estate markets.
Thanks very much for your advice.
I've found myself in a research rabbit hole given my complicated tax and employment situation. For context, I'm a US, French and Canadian citizen. I've lived in France, Canada and the UK, and my current fiscal residence is in the UK. I've worked in both Canada and the UK as an employee for certain periods of time, and self-employed for the remainder. I'm currently in my early 30s.
I would love to partake in a simple but effective investment strategy, eg investing 70% in stocks (ideally US ETFs), and keeping 30% in Money Market Funds. However, I've found that classic "no-brainer" strategies don't work for me given my international background. The following Boglehead statement sums up well my catch 22:
• US PFIC tax rules make ownership of UK domiciled and EU domiciled (UCITS) funds, and UK investment trusts, very painful.
• UK PRIIPs KID rules make it very challenging to buy US domiciled funds, and if they are not HMRC reporting funds, holding them is somewhat painful.
I've attempted to thread the needle doing the following:
• Maximizing my UK workplace pensions and SIPPs (when I was self-employed)
• Opened a Schwab International account to invest in individual US stocks, as I'm not allowed to buy ETFs from this account.
• From various forum threads, I'm realizing that I should also open a US Roth IRA and buy HMRC reporting funds. I will try to do so through Schwab international and max out the $7,000 annual contribution.
• I've tried previously to open a US bank account to buy US ETFs, which has proven difficult given I've never lived in the country so I've been rejected by a few banks
Questions
1. I think I may have made a mistake when signing up for a Vanguard account while residing in the UK. They asked if I was a US citizen and I incorrectly answered "no" (I mistook citizenship with residency at the time). In this account, I have both a SIPP (90% of value) and a regular investment account (10% of value).
a. What's the risk of keeping this account open?
b. If I want to correct this mistake, I think my best bet would be to transfer my pension to my current employer's workplace pension and reallocate the funds that are currently in the regular investment account. Does this sound right?
2. For contributions to the US Roth IRA, I'm seeing on the below Boglehead link that in order to contribute, I must have US "earned income". What does this mean exactly?
3. I'm stumped by this statement from Ted Swippet: " Hold UK HMRC reporting funds that are not US PFICs. However, it is tricky to accomplish. Brokers generally refuse to allow UK and EU residents to trade US domiciled funds, and anything non-US domiciled is a US PFIC. Additionally, you will find that most UK brokers will refuse you as a customer anyway, courtesy of FATCA." If I want to follow the advice on investing in HMRC reporting funds while based in the UK, what's my best option?
a. Interactive Brokers?
b. Wait and hope that fundmanagers like Schwab will be able to sell US-domiciled ETFs to UK Investors in the near future?
4. Given I don't plan to stay in the UK for the long-term, I'd like to confirm whether this statement holds true: "Aside from your UK pension, there's not much point in using a UK broker for anything".
5. If I plan to make a real-estate investment in the short-term (ie next 1-2 years), is the most prudent path to keep the total downpayment amount in a MMF for ease of access? I've understood by now that the ability to act quickly can be a make-or-break a transaction in competitive real-estate markets.
Thanks very much for your advice.
Statistics: Posted by Echarreyron — Tue Dec 24, 2024 12:59 pm