Investing in U.S. (as U.S. citizen) while earning EUR in France

[leferowe]

Hi -- I'm a U.S. citizen living in France and earning in EUR. I have the following investment account types in the U.S. (under my parents U.S. address)

• Traditional and Roth IRAs -- Vanguard
• Brokerage account -- Betterment
• 401(k) -- Guideline

I am hoping to continue investing in these accounts; however, I'm trying to understand the best way to do so.

The approach I'm thinking of is to:

1. Each month convert EUR monthly savings to USD on Revolut
2. Send converted USD from Revolut to my U.S. bank account
3. Invest amount into my brokerage account into an index fund

There are a few things I'd like to understand:

• Is this a reasonable approach or is there a better approach I should be taking?
• Are there any tax implications of this approach?
• I will soon be receiving RSUs from my company and wondering if I should be regularly liquidating those (in this approach)?
• Is there a way for me to continue to invest in my Traditional IRA? When I file taxes in the U.S., I am reporting my income earned in France.

I've noticed several posts in regards to expat investing and I'm trying to put the pieces together. Thank you all in advance!

 

[andrewfenestra]

@leferowe Although I don’t have the answer, I am in the same situation and am thankful to OP for asking this question. Am in the same boat.

 

[resjudicata]

@leferowe I’d recommend you read Millionaire Expat. Helpful advice for this exact scenario. Note that you cannot invest in a US 401k, Roth or Traditional IRA if you’re now getting paid in France.

 

[stephendisraeli]

@resjudicata

Note that you cannot invest in a US 401k, Roth or Traditional IRA if you’re now getting paid in France.

Income that was taxed by the US can be used to make contributions to these plans. So as long as the FEIE is not used or the income exceeds the FEIE, contributions are possible, as the US taxes the worldwide income of their citizens regardless of where they live.

Whether contributing to such plans is economically sensible is another matter. It depends on the contents of the applicable tax treaty and whether the country of residence respects the tax advantaged status of these accounts.

 

[teofan]

@stephendisraeli In practice, you will not find a US broker willing to let a nonresident make IRA/Roth contributions.

 

[lilania]

@teofan The common strategy I see is that OP should maintain a US address for their existing accounts (such as a family member’s, etc). This should allow them to continue making contributions from their US bank account as normal (assuming these are allowed, for example by taking the foreign tax credit). However, I only recently moved abroad and so would appreciate hearing if anyone has been closed out following such an approach.

 

[teofan]

@lilania That would work but could lead to issues down the road. I’ve heard of brokers closing accounts if they figure out what you’re doing.

Also, I think capital gains and dividends would be reported to the state where you claim to live. That could open an interesting can of worms if they ask why you didn’t file a state return. Plus the IRS might see that and ask if you really live outside the US.

 

[standardissue]

@teofan I let my ROTH/previous 401k provider (Fidelity) know I live in France and there was no issue. But now I am a bit worried… how else are we to save for retirement while living abroad?

 

[carpediem78]

@standardissue Taxable brokerage account or a low cost index funds in a variable annuity wrapper.

 

[0604606x]

@teofan What about a self employed expat starting a SEP-IRA? Same rules??

 

[teofan]

@0604606x I’m not specifically aware of any that will. Interactive Brokers is your best bet among the big ones.

 

[resjudicata]

@stephendisraeli Ah yes great point! Forgot about that.

 

[stephendisraeli]

@resjudicata Though, as someone else already mentioned, finding a financial instution that will let you start a new IRA or contribute to an existing one while not being a resident of the US might be difficult to impossible.

US citizens not living in the US are in a rough spot when it comes to investing.

 

[cb4yah]

@leferowe I think your initial approach (points 1, 2, 3) is probably the best way. Just don't let the broker of your index fund in the US know you're living in Europe, or they might freeze your account. Use an address of a family member in the US if possible.

It is a violation of EU law for brokers to allow EU residents to invest in US-domiciled ETFs, as the US ETFs lack what is called a key investor information document (KIID), which is an EU requirement for consumer protection under UCITS IV.

Edit: It might be worth doing more research into the best ways to transfer the money and convert currencies, as this can sometimes be a bit expensive. ALWAYS check the exchange rates against the market rates. Wise (formerly Transferwise) has always been rather transparent and reasonably cheap, but I haven't checked the competition in years. Another idea would be to buy Nano (a cryptocurrency) on a reputable exchange in Europe, transfer it to a wallet, then deposit in a reputable American exchange and withdraw the funds there. The fees from the exchanges might make this unattractive though, and you will need accounts at both exchanges.

 

[leferowe]

@cb4yah Thank you -- very helpful! On the currency exchange I've explored 3 options that seem to be good:

• Revolut Premium subscription which would allow unlimited currency exchanges without a fee at the market rate (same rate as Wise). The premium subscription is 8 euros per month, so very much depends on whether you're transferring more than 1,500 euros per month
• Transferwise which has a fee of approximately 5 euros for every 1000 euros transferred
• Having friends and family help with the exchange -- I think there's a limit here as anything over $15,000 annually may be considered for taxation (gifts)

 

[finnallen101]

@leferowe

Also check Interactive Brokers. I am in Mexico but it is about 2-3 USD per conversion and they use the interbank rate. No wire fees because they are set up to receive free local transfers and free ACH in the US. Seems too good to be true but it has been working for me for a year. Only 1 free deposit and 1 free withdrawal per month; there are 1-10 USD fees for additional deposits/withdrawals.

 

[whitesunshinee]

@leferowe In terms of the approach with US expats, from what I have read there are platforms out there that will accept US expats and they are tax compliant and may be able to also help with the FX side of things if Revolut charge a little bit for it (i assume depends on what account you have)

There is some good info on Investments For Expats website on platforms for US expats I saw the other week which might streamline the process if that helps?

 

[heavenboundgurl]

@leferowe Why convert to USD instead of investing in European funds?