US & India saving approach

[julienmarin]

Hi All,

I would like to get input from others who maybe in similar situation as me. I'm currently in US and dont know if I will settle here or come back to India . Hence, I'm splitting saving between US & India.

I have a home loan for an apartment in India which I'm paying with every lumpsum I get.

I'm contributing 2.5% to 401K here & my employer matches it (they will match upto 4 %).

I have some MF investment going thru SIP (about 30k) under mother's name in India. I plan to do another MF in US (Vanguard Admiral is what I have in mind for low expense reasons).

Does this plan good ? What are the factors I need to be aware of. Would be great to get feedback.

** Update ::: **

Thanks to all feedback. This is where I stand.

Increased 401K (traditional) to 4% (max employer will match). Changed the default investment Target XXXX to US LRG CAP EQ for expense ratio (.4 Vs .03). Down the lane; I may switch to Target.

Opened an Roth IRA (for better liquidity as I can withdraw after 5yr) with Fidelity (same provider as 401k).

My India investment is pretty straightforward 1 x LRG CAP (Mirae Asset India Equity) 1 x Mid Cap (Mirae Asset Emerging Bluechip) 1 x Small Cap (L&T Emerging Business) in the ratio of 75:12.5:12.5 L:M:S.

 

[furiouscat4323]

@julienmarin My approach is to pay off all my loans in India and put savings in S&P500 and Indian FD.

As other poster had already added, maximize 401K. Also look at Robo advisors like betterment and wealth front.

Tax and compliance are the biggest pains for me. I am doing everything to avoid paying taxes in at least one country, in this case, India.

 

[julienmarin]

@furiouscat4323 i have a question with regards to the S&P 500 investment. I assume you are using Vanguard or something similar. From my reading; you are considered Resident Alien for tax purpose and you can open the account. What happens if you leave US? Are you allowed to hold the units without adding more or Do you need to sell off everything?

I tried to open Vanguard account and it asks me to mail the information i.e. I can't complete online. Is this expected?

 

[scottysam]

@julienmarin Hi, i am in the same boat.

These are my suggestions.

Put in 4% into your 401k, to get complete match. That is free money you are giving up.

Regarding the MF, look into getting a ROTH IRA, based on your income, only if you can leave the money there for 5 years, then you can withdraw tax free.

Hit me up for any specific questiona you might have.

 

[the_morning_star]

@scottysam

Regarding the MF, look into getting a ROTH IRA, based on your income, only if you can leave the money there for 5 years, then you can withdraw tax free.

You have to wait until 59.5 to withdraw everything tax free. Before that its 10% penalty. The contributions are however, tax free

 

[familybooster]

@the_morning_star /@scottysam & /@the_morning_star said it right.
That is what I suggest too, but in the following order :
4% 401k match > repay off loan > max Roth > MF or ETF (India/US)
Your aim should be to get the max out of the tax-advantaged accounts before going for after-tax investment. No matter where you retire, you should be able to maintain a bank account in the US and keep the monies invested in the US markets till then.

 

[the_morning_star]

@familybooster I would recommend add this to the list - Max Spousal Roth (spouse need not be working for this)

 

[benjaminpatterson]

@the_morning_star actually i dont think spouse needs to be working for this. You should just earn more than 11k 5500 each annually in order to contribute on behalf of your spouse.

 

[hd3484]

@julienmarin You need to take a step back and figure out what your priorities/long term goal are.

US is a good option short term wise when it comes to making money IF you are saving properly(at least 40% of total income) and living semi frugally.

US is a horrible option long term wise in every which way.

I been in the US for 25 years on and off. My aunts/uncles came here in the 60's-70's.

 

[julienmarin]

@hd3484 Thanks for your valuable input sir.

 

[elifrye]

@julienmarin Like most; Max 401k (18.5) + IRA (5.5) + HSA (6.8)
Throw rest in VTSAX
India - Just do UTI Nifty 50 + FD
You will be all set either way India / US.

 

[julienmarin]

@elifrye I'm using FSTVX which is Fidelity version of VTSAX as they allow free trading of Fidelity shares.

 

[elifrye]

@julienmarin cool; either way will work optimal

 

[jesusandliberty]

@julienmarin

I'm using FSTVX which is Fidelity version of VTSAX as they allow free trading of Fidelity shares.

/@julienmarin: note that Fidelity (and maybe others, I know only about Fidelity) apparently allows only residents to invest in mutual funds. As long as you are a resident alien, you can invest in them, but once you are a non-resident, you will not be able to purchase more units, though you can retain/sell what you have bought.

There is no such problem with stocks and ETFs though. So if you want to consider ETFs instead of mutual funds, IIRC, the nearest ETF equivalent to FSTVX is Blackrock's ITOT, which is commission-free on Fidelity and has very low expenses. You might want to check it out. You could also consider IXUS, which is for non-US global.

There is a list of ETFs that are commission-free on Fidelity here: https://www.fidelity.com/etfs/ishares

 

[julienmarin]

@jesusandliberty Thank you, I think its across all . I wouldn't be investing if I'm leaving. Its just matter of how long to hold . My Roth IRA, Can I switch to ETF from FSTVX anytime ? Any catches like not switch within X numbers of days from purchase? Can I switch even after moving to India?

 

[meme2206]

@julienmarin What are your plans with the 401k? What's your plan when you decide to go back? Just pay the fine and take your money out?

Also the investments do you plan on keeping them and operating them from India one you leave?

 

[furiouscat4323]

@meme2206

What are your plans with the 401k? What's your plan when you decide to go back? Just pay the fine and take your money out?

I am planning to do that. Even if I pay 10% fine, I should still come out ahead with 50% employer contribution, right?

Or keep the money as it is and use it for children's eduction or my own retirement as I don't think I will need it soon.

 

[meme2206]

@furiouscat4323 So here is my doubt
I leave the US and after a while this would mean we close our bank accounts here because unless you have recurring deposits we might have to pay a maintenance fee right?
So at the time of withdrawal if I don't have a US bank account to transfer to, can I directly send it to my Indian Bank?

 

[julienmarin]

@meme2206 Not necessarily. There are online-only banks which allow free checking account.

 

[meme2206]

@julienmarin It will be nice to hear from people who do this. Because sometimes your account gets locked and they need 2FA. I tried this with an account I had. It was nightmare just opening it and trying to do a transfer. At every step it thought I was doing some fraud.