What to do with $25k USD while studying abroad (Germany?)

[jamie777]

A little background on myself: 27M, US citizen, have worked in the US for 4 years since graduating with my masters degree. No debt. Current NW is ~$200k: ~$150k across 401k, ROTH, taxable brokerage, crypto, and ~$50k in cash (including $20k emergency fund).

I will be moving to Germany to start a PhD program (3-5 years) but will be retaining my permanent residence/address in the US. My PhD salary will cover all living expenses while I’m there and if I’m frugal enough, I could potentially save 200-300 Euros per month.

After moving expenses and getting settled in, I’ll have roughly $25k sitting in cash that isn’t part of my emergency fund.

Any advice on where to park the money while I’m in grad school? Rollover my 401k to a traditional IRA and contribute there? Invest it all in an index fund and call it a day? Leave it in cash just in case?

The only big short term expenses (less than 5 years away) I foresee are a wedding and potentially a used car when my partners car craps out.

I’d hate to see the cash sit there losing value over time due to inflation, but also I don’t want to be “overinvested” and have to sell investments to cover big expenses in the near future.

Appreciate the help!

 

[tessal]

@jamie777 Have you considered using some of this money to travel and experience Europe instead? You seem financially well-positioned and are going to be in a location which is a good jumping-off point for many destinations.

 

[jamie777]

@tessal Definitely. I’ve bought a few thousand euros to get started, so some of that will be used towards travel. I’m hoping I’ll have some room for fun money in the budget as well. Good call on you to remember to enjoy life as well

 

[tkm]

@jamie777 One note: (Roth) IRA accounts aren't really recognized by the german tax authority. You'll still have to list and potentially pay taxes on your dividends and gains.
Another note and certainly not financial advice, but something to consider if your move is not permanent: afaik German tax authorities don't get reporting from US accounts.

 

[whitesunshinee]

@jamie777 Could you not invest it in something offshore that you could get at easily? I'm not a US citizen but from what I read it can be tricky to have investments due to the taxes, but surely there must be something where you can park the cash and still have it relatively accessible for the wedding and car?

 

[jacob_]

@jamie777 Sounds like you are well set. You should check the US-German tax treaty. I assume that if you count as resident of the US over the whole time, you don't need to worry about German capital gains taxes, but it really depends on if you can prove that your Lebensmittelpunkt continues to the be in the US.

Apart from that: If you expect to need the money in five years, I wouldn't put it into stocks or only a part of it. However, 20k as emergency fund is already pretty solid, so it really depends on your preferences / risk profile. I personally would probably be fine with just having the emergency fund and the rest in stocks, i.e., low cost index funds (considering that you will also save more in the coming years, as you will likely get a better paying job after your PhD).

Maybe do an extrapolation. Say you expect to need 20k USD in five years and expect to save ca. 300 USD per month, that's 3600 USD per year, so in five years you should have another 18k USD, so you could invest most of your 30k USD over the next few months and then build new buffer with your savings. Or you first put 10-15k USD into stocks and see how much you can actually save and then decide if you want to put more in stocks or not.