How do you save/invest money

We have a couple of fixed rate offshore accounts that have the fab interest rate of 6.66 p.a. And yes, it's tax free until you take the money 'onshore'. I'd avoid Jersey, though, as growth there is really slowing down and a lot of the island offshore operations are being offloaded.

Tax free where? Maybe fromUK tax, but not US if it's held by a US citizen.

One thing I like about the UK is the number of high interest savings accounts, now that I've looked you can get a cash ISA paying 6% at many banks and even paying US tax on the gains it's not bad. It's not where I'd choose to invest long term money, but for saving for something like a car or flat down payment they look like a good bet. I'm really interested to see how people put money away in longer term investments like stocks, funds and bonds as it's a bit of a minefield for the small expat investor.

The 6%+ cash ISAs are very attractive considering an average return on fund investments are often 7-8%, I believe and that's before tax.  Granted, there is a US tax liability but no UK tax liability.

I think your US index fund option is a good idea.  It's a very passive investment, no need for managers to manage it really and the fees should be very low and could do this as an offshore investment.  Question is, where do you go to invest this?  Must be a million and one options.  I was looking on hsbc.co.uk and I think it said you can invest just a couple hundred pounds to start in a US offshore investment account, maybe not a bad option?

I think your US index fund option is a good idea.  It's a very passive investment, no need for managers to manage it really and the fees should be very low and could do this as an offshore investment.  Question is, where do you go to invest this?  Must be a million and one options.  I was looking on hsbc.co.uk and I think it said you can invest just a couple hundred pounds to start in a US offshore investment account, maybe not a bad option?

I use one of the big no-load firms in the States. I had an account with them before I came to the UK and I've just kept up my regular monthly investment schedule. Now that I've looked at the new HMRC rules for overseas investing by non-Doms they don't look too bad, particularly if you are an American and use to having your worldwide income taxed. The CGT exemption is pretty generous in the UK and it won't be very often that I realize such a gain in a tax year.

What's interesting me about this thread is how few ideas for expat investing there seem to be. Is it that people just don't save or invest or do they just put it in a bank savings account. With the decline of defined benefit pension schemes and the fact that expats probably move around more than most people I think it's important for us to have a good savings and investment plan. I have a UK pension plan and save each month to a ROTH and a US after tax index mutual fund. I'm now doing a cash ISA, to save for a flat down payment.

I think the cost of living in the UK means that many people don't have much leftover money to invest.

And to be perfectly frank, a lot of people on this forum seem to be in the income bracket that means they are lucky to have a savings account, let alone any investments.

And here was me thinking that everyone invests in gold but didn't want the tax man to read it here!

 

Vicky

And to be perfectly frank, a lot of people on this forum seem to be in the income bracket that means they are lucky to have a savings account, let alone any investments.

I'm certainly not wealthy. I have a university job and some web searching shows me I earn just a bit more than the average for my area. I'm single so I don't have many of the expenses associated with a family, but I do have a girlfriend.... . Still I don't think I'm too out of the ordinary. I put regular saving as a priority, particularly as an expat so you have a "rainy day" fund. I save 10% of my salary each month before anything else and I live of what's left.  Another thing I find useful is to limit the use of my credit card, that's probably the best saving strategy of all.

Good for you! I wish I could do that. But I can't. Way too much debt accrued both foolishly and necessarily. Thems the breaks. Now, with 2 kids, and an international move in the works, anything we would have saved is gone.

But that doesn't mean our long term security isn't a worry. Hence why I'm reading this thread at all!

I am very aware of savings.  I guess as I am not socking away tens of thousands each year, I just don't stress over having to pay taxes and figure it's part of life.  I am married to a UKC so the majority of savings are in his name alone, so only get taxed by the UK.  

We are also quite cylical in our savings.  Save a lot..buy a house....save some more...spend it on a wedding.  So far nothing except pensions have been very long term.  We have only just started focusing on long term savings and Cash ISAs and Savings accounts were the best we could come up with.  HSBC have their Regular Savers account, which is offering 10% interest at the moment.  I haven't worked out all the details, but certainly seems like a great idea - even if you have to pay 40% US tax, that is still a 6% return after tax.

As far as retirement goes, I have a pension with my company and a Roth IRA back in the US that I put a few hundred dollars in each year (christmas and birthday gifts).  Nothing majorly exciting.  

When we get to the next level of savings (i.e. £15,000+ a year) we will speak to a qualified tax/financial advisor regarding our best options for expat situations.

For those of you putting money in your Roth IRAs/IRAs: do you have US taxable income? I was under the impression that you could not contribute if you had no US taxable income? I only have interest income in the US, and it is under the taxable threshold.

Would love to know if I have misunderstood.

ooopps...Maybe not.  I just figured it was only about $200 a year max, that it wasn't an issue.  Learn something new everyday.  I'll have to check with the old accountant (aka dad).

For those of you putting money in your Roth IRAs/IRAs: do you have US taxable income? I was under the impression that you could not contribute if you had no US taxable income? I only have interest income in the US, and it is under the taxable threshold.

Would love to know if I have misunderstood.

You're right, you have to have US taxable income, that's why I don't take the foreign earned income exclusion. I put my UK income on my 1040 so I have US taxable income, but I claim credit for my UK taxes, and I fund my ROTH. I think this is ok, it seems to work, if I'm wrong let me know.

You're right, you have to have US taxable income, that's why I don't take the foreign earned income exclusion. I put my UK income on my 1040 so I have US taxable income, but I claim credit for my UK taxes, and I fund my ROTH. I think this is ok, it seems to work, if I'm wrong let me know.

I looked back at my return and I think that it might be possible for a lot of US expats to do a ROTH even if they use the FEIE as your ROTH contribution is calculated based on your Modified Adjusted Gross Income which is your Adjusted Gross Income (AGI) PLUS your FEIE and housing exclusions. The IRS taxes you on your AGI which might be quite small if you take the FEIE, but then you get to add that back on for purposes of calculation the amount you can put in a ROTH.

This seems a bit too good to be true, am I missing something? I'll post this on the tax forum too.

I'll be interested to see the reply. Hopefully one of the experts will know.