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 24, 2014 at 6:14 PM #771219March 3, 2014 at 1:05 AM #771411
CA renter
Participant[quote=kev374]You do get interest on Dollar accounts in India but it is very low… I think currently around 3% which does not make it worth the hassle.
As I said earlier given the virtually zero interest rate environment in the US, and the fact that I strongly believe that interest rates are going to stay very low for the foreseeable future.
By having a high interest bearing account overseas it’s a win-win whether there is deflation or inflation here in the US. If there is deflation the profits are even more amplified, if there is inflation then it’s a hedge against that preseving your capital.
There is no chance for higher interest rates in the US as I strongly believe that if interest rates rise the entire economy will fall apart. We will have a situation like Japan with super low interest rates for a very very long time, perhaps even a decade or more…Japan has had ultra low interest rates for 2 decades!!! There is no reason the same cannot repeat here.
I’ll say it again – the RISK of doing nothing when the government is seriously devaluing the currency can be catastrophic for your future!!! This is true especially if you are a saver like me who has no debt and has most of my savings liquid and not invested in the stock market.
Up until recently money printing and inflation was only a theory, but in the last couple of years I can very SERIOUSLY see huge effects in my day to day life… the cost of everything from my rent, to groceries to eating out at restaurants is seriously going up!! Nobody seems to give a crap but to me the trend is very concerning.[/quote]
Agree with everything you’ve said on this thread, Kev. There is a pool of people who’ve been paying a steep price for this so-called “recovery,” and it’s the savers and fixed-income folks who are on the losing side of this intervention. It totally sucks, but what can you do? Personally, I think the other posters’ suggestions regarding real estate are probably your best bet. Buy a condo that has approximately the same costs as your rental. Even if prices go down, you will hopefully be able to rent it out and cover most/all of your costs that way.
FWIW, I had a number of foreign currency accounts with Everbank. The “best” one was the Icelandic Krona which was paying about 11% interest when I first opened it (yay me!). In case you don’t remember what happened to the Krona…
http://en.wikipedia.org/wiki/2008%E2%80%9311_Icelandic_financial_crisis
Buy a condo or a house, instead. 😉
March 3, 2014 at 11:27 AM #771431earlyretirement
ParticipantYou got some good advice on this thread. Do NOT underestimate the risk of currency spreads. % ROI is all relative when you have currency spread risks. Case in point, a few years ago my friend was raving about how she was going to get a guaranteed 20%+ annual rate in Argentina and I highly advised against it. 20% a year is moot if the currency devaluates at a faster rate (which it has done).
I’m not saying that will be the case with you but just keep in mind those risks. Anytime something is paying out that kind of yield, there will be risks.
Another risk which I didn’t see mentioned (although someone did mention the FBAR reporting) is that your odds of getting audited by the IRS drastically go up once you fill out a FBAR. (Take it from me as someone that has gotten audited 3 times in 5 years).
As well, I have many clients and friends that all have gotten audited and the one thing we have in common is we’ve all filled out FBAR’s. So by basic deduction I assume your odds of getting audited are drastically higher once you fill one of these out.
An audit in and of itself is not necessarily a problem but it’s a big hassle! And I think once you get audited your chances are higher in subsequent years that you will continue getting audited. (Again, not scientific but just based on what I’ve seen with many friends and clients and myself).
I still fill out a FBAR each year as I still have accounts in several foreign countries but I’d say keep in mind the main risk which is currency spreads/devaluation and also the hassles with potential audits by the IRS.
I’m certainly not saying you shouldn’t do it. I know people that have been very happy and seemingly making solid returns (so they tell me) in Uruguay and Paraguay. Just go in with your eyes open with the various risks.
Good luck.
March 3, 2014 at 7:03 PM #771456joec
ParticipantThese are all good points. Another reason to diversify and not again, put all your eggs in one basket such as having no debt, all cash, etc etc etc…
If inflation hits and all you had was cash assets, you could be out 20% a year…
Better to have just a mix of stuff to sleep better at night and “tap” assets which aren’t down when various things happen in the world. Sorta like have both a Roth and a regular IRA, if taxes are bad, tap the roth, etc…
This is the same argument against having 100% bonds, CDs, stocks, housing, you name it…
I never understood why people would do that to themselves. It doesn’t help your returns or savings or safety.
Since you choose what assets to manage/sell, you can always control your tax rate.
Thanks for the points on the FBAR.
March 4, 2014 at 10:40 AM #771518Hatfield
ParticipantI think you can accomplish a lot of what you’re looking for with an Everbank foreign currency CD. They are a US-based bank that offers CDs that are indexed in single foreign currencies, and also “baskets” of currencies.
For example, their Indian Rupee CD is paying 6.5%
The deposits themselves are FDIC insured, but not against currency fluctuations. But this seems better than actually sending your money abroad, you’ll get proper income reporting, you can get your money back in a hurry if you need to, and so on.
I don’t currently hold any of these CDs but did quite well on the Euro CD during the big dollar slide about 10 years ago.
March 6, 2014 at 1:39 PM #771610kev374
Participantwhat are the risks of using Everbank besides currency fluctuations? Are the fluctuations strictly on exchange rate or are there any other risks? For instance… are they invested in any fixed income instruments in India that can go bust?
March 6, 2014 at 7:40 PM #771621Jazzman
ParticipantCurrency risk is one the biggest investment risks you can take IMO. Since you have close ties to India, you can probably monitor those risks more carefully, and if you plan on spending time in India, it is then your main currency, so doesn’t matter. Everbank are pretty good at answering questions, and will call you back the next day. You are right about interest rates, and it is the bain of my life. I really wish there were alternatives, but apart from carefully researched real estate and waiting, I don’t see much else. You could probably earn more by switching to a cheaper auto insurer or shopping at Costco than investing. Spend less and save more to counter the effects and finger the central banks. I’ve had several foreign banks accounts over the last ten years and never been audited (touch wood).
March 6, 2014 at 8:20 PM #771623scaredyclassic
ParticipantIf you quantify the amount you’d save by being cheap and spending little as investment returns the return would be astronomical.
March 6, 2014 at 8:39 PM #771627Participant[quote=scaredyclassic]If you quantify the amount you’d save by being cheap and spending little as investment returns the return would be astronomical.[/quote]
Yes, and let’s not forget that savings are like tax-free income! 🙂
March 8, 2014 at 10:41 AM #771698ParticipantI know this isn’t applicable to the OP as you aren’t an ex-pat but I thought this would still be interesting to post.
March 9, 2014 at 6:24 PM #771710Participant[quote=earlyretirement]I know this isn’t applicable to the OP as you aren’t an ex-pat but I thought this would still be interesting to post.
Thanks for the article…Good and more power to those people.
…yes, I don’t like where US laws and “politics” are and going…
March 9, 2014 at 10:05 PM #771713Participant[quote=earlyretirement]I know this isn’t applicable to the OP as you aren’t an ex-pat but I thought this would still be interesting to post.
IRS filing for US expats is antiquated, which is why so many Americans living abroad don’t bother with it. I’m sure the IRS would agree and welcome changes to the requirement. The allowance before you owe Uncle Sam tax is reasonably generous, and there is probably no requirement from your foreign employer abroad to provide the IRS with data, so you might be able to get away with filing your own returns. If leaving the US for good, watch out for the exit tax.
March 10, 2014 at 1:50 PM #771721Participant[quote=Jazzman][quote=earlyretirement]I know this isn’t applicable to the OP as you aren’t an ex-pat but I thought this would still be interesting to post.
IRS filing for US expats is antiquated, which is why so many Americans living abroad don’t bother with it. I’m sure the IRS would agree and welcome changes to the requirement. The allowance before you owe Uncle Sam tax is reasonably generous, and there is probably no requirement from your foreign employer abroad to provide the IRS with data, so you might be able to get away with filing your own returns. If leaving the US for good, watch out for the exit tax.[/quote]
I agree it’s antiquated. I guess you could complain but who would listen? Yes, the allowance as you mention (foreign earned income tax exclusion) is quite good. $97,600 for a single person or you can legally structure it if you are married and own your own business to double that to $195,200 if you get 2 salaries for you and your spouse.
I lived abroad for many years but I’d never leave the USA for good…. we have it too good here compared to other countries.
March 10, 2014 at 3:25 PM #771723spdrun
ParticipantDefine “good” — if you’re making the salary of an average middle-class American family in a country where per capita income is 1/3 that of the US, you can live like a king.
March 10, 2014 at 10:17 PM #771734Participant[quote=spdrun]Define “good” — if you’re making the salary of an average middle-class American family in a country where per capita income is 1/3 that of the US, you can live like a king.[/quote]
Well, I lived abroad for 9 years and yes in some respects you can live like a king but the grass isn’t always greener on the other side. Depending on where you go but I can tell you there is a LOT of corruption, inefficiency, and red tape in many other countries.
I still own properties in 4 different countries and always will and will definitely continue to visit but long-term living, I’d NEVER give up my US passport. I do plan to live a few months out of the year once I fully retire abroad but no way I’d give up my passport.
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