Home › Forums › Financial Markets/Economics › Moving money to another country for better interest rates
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CA renter.
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February 20, 2014 at 11:47 AM #20973February 20, 2014 at 11:59 AM #771108
UCGal
ParticipantThere are significant new reporting requirements for having bank accounts overseas. I frequent a few expat forums and the reporting requirements are challenging.
The FBAR form seems to be the one that draws the most ire based on what I read.
From what I read on one forum – it’s almost impossible for a US citizen to open a swiss bank account – even if they are legal residents and live in Switzerland… because of this new reporting.
You’ll have to decide if the extra interest is worth the extra paperwork.
February 20, 2014 at 12:36 PM #771110SD Transplant
ParticipantKev374, I think you are oversimplifying the risk. I woudl not have the courage to deposit it any private bank there,and I deal with global banks on a daily basis(Indian banks as well)…cash under the mattress may be better suited vs. a deposit with I-C-I-C-I.
My 2 cents
[quote=kev374]Planning to move out about $160,000 over to India where the interest rates are 9.5% annually. The Rupee has seen some volatility lately but I feel that it has hit a high of 62 to a dollar and the downside risk is small. Even if it goes to 70 to a dollar then it’s about a years worth of interest anyway.
I also know I have to fully disclose foreign interest earnings and pay tax on it. I figure I will pay 28% Federal tax (as that is my marginal rate) and currently 9.3% CA tax as well, so total of 37.3% of my interest will vanish in taxes but I pay the same taxes on my current pathetic interest income of 0.8% anyway. No way to avoid that!!!
I figure if I move to Texas next year then I will avoid the 9.3% state tax on my interest and my money could compound quite well.
My questions are – what are some of the downsides of transferring large amounts of money out of the United States to chase better interest rates elsewhere?
Another point to note, I am originally of Indian origin but i’m a US Citizen…however I have special OCI status in India (Overseas Citizen of India) which gives me parity with Indian citizens for banking, residence and employment purposes.[/quote]
February 20, 2014 at 12:48 PM #771111spdrun
ParticipantConsidering that exchange rates can easily vary by up to 20% per annum, you run a risk of losing your interest to rate changes, especially with tapering coming.
February 20, 2014 at 1:13 PM #771112livinincali
Participant[quote=kev374]Planning to move out about $160,000 over to India where the interest rates are 9.5% annually. The Rupee has seen some volatility lately but I feel that it has hit a high of 62 to a dollar and the downside risk is small. Even if it goes to 70 to a dollar then it’s about a years worth of interest anyway.
[/quote]Indian saving accounts are insured up to 100,000 Rupees but in US dollars that’s only $1,600. If you pick the wrong Indian bank and it becomes insolvent you could lose 99% of your money.
February 20, 2014 at 1:19 PM #771113scaredyclassic
ParticipantIf you get married and have a bunch of kids you won’t have to worry as much about stuff like extra money.
February 20, 2014 at 2:12 PM #771116kev374
ParticipantI plan to deposit only in State Bank of India which is a nationalized bank. I understand that it is not insured but if SBI goes under then India itself can be considered insolvent. The SBI has the full backing of the Indian govt. If SBI goes under there will be chaos.
The alternative is to keep the money here as it continues to lose value due to inflation. I personally believe the CPI is a joke, I believe the inflation figures reported by shadowstats.com (around 6-7%) is more accurate. So each year i’m losing 6% of my savings. I can’t invest in the stock market because I think it has become nothing but a ridiculous casino.
As far as I am concerned what the US government is doing is nothing short of theft. Theft of money through inflation of people who have saved to finance their own agendas.
About the taper, I just don’t think a taper has any long term viability. I firmly believe that our economy is being held up solely by the governments stimulus. The moment they taper we enter into another recession and it could be a pretty bad recession.
I am of the belief that there are fundamental systemic problems in the US economy that the government has only addressed so far by flinging ridiculous amounts of money into the mix to temporary alleviate problems.
I seriously fail to see how higher interest rates are even possible IF with zero interest rates our economy is still under life support.
So, the moment the taper causes things to go south Yellen may start easing again, the dollar may come under pressure.
As for the claim that the economy is improving, it is nothing but utter rubbish. The whole thing is nothing more than smoke and mirrors.
February 20, 2014 at 3:39 PM #771119Jazzman
ParticipantThe only risk is exchange rates. If the bank will allow multiple currency accounts, you can switch back quickly if needs be. The problems I’ve run into is some foreign banks don’t allow US residents to open an account. As far are declaring interest, if the bank doesn’t provide US tax-filing docs, you can, in theory, use any exchange rate when converting back to USDs.
February 20, 2014 at 5:29 PM #771124Participanthttp://Www.everbank.com had accounts where u could hold in foreign currency. I still have Ann act there. Yup. Just checked. They’ll hold your rupees do all the work…
February 20, 2014 at 5:35 PM #771125ParticipantWhy not buy a foreclosure (maybe outside of CA) with the money, rent it out for 8% on the dollar and take some nice tax deductions as well?
February 20, 2014 at 6:15 PM #771126Participant[quote=scaredyclassic]Www.everbank.com had accounts where u could hold in foreign currency. I still have Ann act there. Yup. Just checked. They’ll hold your rupees do all the work…[/quote]
Good one. I did notice this though: Note: the rupee is a non-deliverable currency, which means we’re unable to deliver the currency to you because of foreign government regulation.
February 20, 2014 at 6:20 PM #771127Participant[quote=UCGal]There are significant new reporting requirements for having bank accounts overseas. I frequent a few expat forums and the reporting requirements are challenging.
The FBAR form seems to be the one that draws the most ire based on what I read.
From what I read on one forum – it’s almost impossible for a US citizen to open a swiss bank account – even if they are legal residents and live in Switzerland… because of this new reporting.
You’ll have to decide if the extra interest is worth the extra paperwork.[/quote]
UBS has a US office in Zurich, and a big US presence, but you are right there is friction between the US and Switzerland at the moment. Their oldest bank closed due to pressure and fines. Offshore banks are usually more amenable.February 21, 2014 at 6:59 AM #771137Participant[quote=Jazzman]The only risk is exchange rates. If the bank will allow multiple currency accounts, you can switch back quickly if needs be. The problems I’ve run into is some foreign banks don’t allow US residents to open an account. As far are declaring interest, if the bank doesn’t provide US tax-filing docs, you can, in theory, use any exchange rate when converting back to USDs.[/quote]
The exchange rate can get you. For example in 2010 it was $1 = 45.74 rupees. Now it’s 62.07 rupees. So if you invested $100K in 2010 and got 9.5% per year you would have 6,575,861 rupees but converting that back to dollars now would be $105,942. So you got 9.5% interest per year but your net interest gain was a little over 1% per year because of the exchange rate change. Now obviously it could work in your favor rather than against you, but it’s impossible to know ahead of time.
The other potential problem is capitol controls. So you can get your money stuck over there. For example they just recently passed this capitol control.
[quote]
The limit on personal remittances has been cut to $75,000 per year, from $200,000 per year.
[/quote]That would mean even if you saw things changing where it was a bad investment to be in India it would take you 3 years to get your money back out. A lot can happen in 3 years.
February 21, 2014 at 7:26 AM #771140
CoronitaParticipant[quote=spdrun]Why not buy a foreclosure (maybe outside of CA) with the money, rent it out for 8% on the dollar and take some nice tax deductions as well?[/quote]
Lol.. easier said than done for a lot of people.
And besides….
The OP I believe still rents. I think he would be better served buying his own home and living in it and building equity before tackling the problem of being a landlord.
(assuming he is living/working where he would settle down).
Just curious, besides the condo you picked up here in SD, did you pick up anything else recently?
February 21, 2014 at 8:20 AM #771144(former)FormerSanDiegan
Participant[quote=kev374] The alternative is to keep the money here as it continues to lose value due to inflation. I personally believe the CPI is a joke, I believe the inflation figures reported by shadowstats.com (around 6-7%) is more accurate. So each year i’m losing 6% of my savings. I can’t invest in the stock market because I think it has become nothing but a ridiculous casino.
[/quote]If the purpose of your investment is to avoid losing purchasing power due to inflation, then buy something that inflates.
Or, said another way, if you are worried about devaluation of US currency relative to something tangible, buy that something tangible.
Moving to another currency presumes that that currency won’t suffer the same problem. In today’s global economy, it is unlikely that the US could see significant inflation independent of the rest of the world.
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