I was in a similar position but had lived in the US for four years when I started my PhD. I transferred my taxable investments to Vanguard and did some tax-gain harvesting to max out the 0% capital gains tax bracket in the event that I would stay long-term. I also opened a Roth IRA and maxed it out every year. When I left, I withdrew all my Roth IRA contributions and now have 5-digits in capital gains remaining in the account because I didn't want to pay an early withdrawal penalty.
In hindsight, I don't think the Roth IRA made a lot of sense. Given the low stipend, I could have avoided those capital gains taxes anyway. Now, I need to worry about maintaining an account in the US for 30-ish years, and the cost of an early withdrawal goes up as an NRA (all of it is taxable income with no deductions). Instead, I could have just saved in a taxable brokerage account and, if I had stayed in the US, made some larger contributions to a Roth 401(k) then.
The caveat is that my new home (Hong Kong) does not tax capital gains. Someone returning to Europe may find it easy to max out the available tax-advantaged savings methods, so the Roth IRA would have value. Even so, there's still the hassle of having a US account that you can't do anything with. You also have to make sure it won't become "inactive" because it is then liquidated, you are subject to a penalty tax & income taxes on the early distribution, and you have to fight with the state you lived in to get your money back. Technically, logging in once a year should be fine for it to remain active, but you don't have those access records to establish that you haven't abandoned the account, and you cannot make any trades that would give you some record.
In hindsight, I don't think the Roth IRA made a lot of sense. Given the low stipend, I could have avoided those capital gains taxes anyway. Now, I need to worry about maintaining an account in the US for 30-ish years, and the cost of an early withdrawal goes up as an NRA (all of it is taxable income with no deductions). Instead, I could have just saved in a taxable brokerage account and, if I had stayed in the US, made some larger contributions to a Roth 401(k) then.
The caveat is that my new home (Hong Kong) does not tax capital gains. Someone returning to Europe may find it easy to max out the available tax-advantaged savings methods, so the Roth IRA would have value. Even so, there's still the hassle of having a US account that you can't do anything with. You also have to make sure it won't become "inactive" because it is then liquidated, you are subject to a penalty tax & income taxes on the early distribution, and you have to fight with the state you lived in to get your money back. Technically, logging in once a year should be fine for it to remain active, but you don't have those access records to establish that you haven't abandoned the account, and you cannot make any trades that would give you some record.
Statistics: Posted by HKexpat — Mon Aug 05, 2024 3:17 am