I am returning to India after a 13 yr stint in the US and i can't be more excited.
I am planning to invest most of my savings in Mutual Funds in India.
While i would like to keep a small portion of my savings in US for future educational needs of my 2 children. I would like to invest 100K in Vanguard within the next month. Being a newbie, I could use some advice. This investment will be in a taxable account aimed at savings growth and not retirement, for which my husband and I both have 401(k)s and IRAs. I am 34, married, with two children (5 & 2). We may be withdrawing some money in this account many years down the road, but prior to retirement. Since we're saving separately for retirement and savings growth, I plan on including stocks and bonds in my taxable account, even if it's not the most tax efficient. (Perhaps not a wise assumption.)
Based on what I have learned from this forum, if I don't want to slice and dice, I am thinking of the following allocation:
18% VTIAX Vanguard Total International Stock Index Admiral Shares
42% VTSAX Vanguard Total Stock Market Index Admiral Shares
40% VBTLX Vanguard Total Bond Market Index Admiral Shares
Anyhelp from Desi or others on this forum on specific Vanguard Fund pick for a 100K investment is utmost appreciated.
Thanks in advance.
Invest 100K$ in Vanguard Funds After r2i
Invest 100K$ in Vanguard Funds After r2i
anithac;388494I am returning to India after a 13 yr stint in the US and i can't be more excited.
I am planning to invest most of my savings in Mutual Funds in India.
While i would like to keep a small portion of my savings in US for future educational needs of my 2 children. I would like to invest 100K in Vanguard within the next month. Being a newbie, I could use some advice. This investment will be in a taxable account aimed at savings growth and not retirement, for which my husband and I both have 401(k)s and IRAs. I am 34, married, with two children (5 & 2). We may be withdrawing some money in this account many years down the road, but prior to retirement. Since we're saving separately for retirement and savings growth, I plan on including stocks and bonds in my taxable account, even if it's not the most tax efficient. (Perhaps not a wise assumption.)
Based on what I have learned from this forum, if I don't want to slice and dice, I am thinking of the following allocation:
18% VTIAX Vanguard Total International Stock Index Admiral Shares
42% VTSAX Vanguard Total Stock Market Index Admiral Shares
40% VBTLX Vanguard Total Bond Market Index Admiral Shares
Anyhelp from Desi or others on this forum on specific Vanguard Fund pick for a 100K investment is utmost appreciated.
Thanks in advance.
This is wrong approach.
I would suggest do DCA
Googel (in this forum) RRK fund choice/Vinod Basic financial documents.
Invest 100K$ in Vanguard Funds After r2i
anithac;388494I am returning to India after a 13 yr stint in the US and i can't be more excited.
I am planning to invest most of my savings in Mutual Funds in India.
While i would like to keep a small portion of my savings in US for future educational needs of my 2 children. I would like to invest 100K in Vanguard within the next month. Being a newbie, I could use some advice. This investment will be in a taxable account aimed at savings growth and not retirement, for which my husband and I both have 401(k)s and IRAs. I am 34, married, with two children (5 & 2). We may be withdrawing some money in this account many years down the road, but prior to retirement. Since we're saving separately for retirement and savings growth, I plan on including stocks and bonds in my taxable account, even if it's not the most tax efficient. (Perhaps not a wise assumption.)
Based on what I have learned from this forum, if I don't want to slice and dice, I am thinking of the following allocation:
18% VTIAX Vanguard Total International Stock Index Admiral Shares
42% VTSAX Vanguard Total Stock Market Index Admiral Shares
40% VBTLX Vanguard Total Bond Market Index Admiral Shares
Anyhelp from Desi or others on this forum on specific Vanguard Fund pick for a 100K investment is utmost appreciated.
Thanks in advance.
The bond fund is going to generate dividends and at only 3% rate and India is going to tax you on it. While in India you can generate 9% easily. Of course such high interest rate comes with high inflation and erosion of purchasing power which will reflect in exchange rate and if you really need all that money in dollars many years later, the net difference may not be much.
You see, the key issue is taxation. Are you holding GC? US Citizenship? Is your return permanent? You mention 401K and IRA holdings and apparently want to retain them? What benefit do you get from that when India is going to tax any accruals within them? Hence the plan needs to accomodate all accounts and not just one account in my view.
Invest 100K$ in Vanguard Funds After r2i
Desi,
Myself, spouse and Children are USC. I am hoping my R2I is permanent at this point.
I recently quit my job and have about 40K in my 401K, which i was hoping to roll over to an IRA @ vanguard. I already have another IRA a/c with T.Rowe Price (30K) which has my previous employment's 401K rolled over into it.
Can you pl. help me with a Plan. Am i better off investing this 100K as well in India as opposed to Vanguard investments.
I understand the gains from MF investments in India are not taxable unlike US. Is that right ? In that case am i not better of investing this 100K in India ?
I had planned to invest my savings of about 400K in MF,CD's and Insurance cover in India. I thought it was a good idea to make some investments in dollars in the US, which is why i picked Vanguard funds.
FYI since i had already made some RE and gold investments in the past and am vested very well, i am not looking to include them in my portfolio at this point.
Pl. Help with your advice.
Myself, spouse and Children are USC. I am hoping my R2I is permanent at this point.
I recently quit my job and have about 40K in my 401K, which i was hoping to roll over to an IRA @ vanguard. I already have another IRA a/c with T.Rowe Price (30K) which has my previous employment's 401K rolled over into it.
Can you pl. help me with a Plan. Am i better off investing this 100K as well in India as opposed to Vanguard investments.
I understand the gains from MF investments in India are not taxable unlike US. Is that right ? In that case am i not better of investing this 100K in India ?
I had planned to invest my savings of about 400K in MF,CD's and Insurance cover in India. I thought it was a good idea to make some investments in dollars in the US, which is why i picked Vanguard funds.
FYI since i had already made some RE and gold investments in the past and am vested very well, i am not looking to include them in my portfolio at this point.
Pl. Help with your advice.
Invest 100K$ in Vanguard Funds After r2i
Desi
I missed to mention few points.
I do not need this money immediately as we are going to be employed in India with a monthly income. Also i don't necessarily have to keep funds in my IRA, if it's not a good idea.
Would i be better off taking money out of my 401K or IRA a/c and investing them in India as well.
I missed to mention few points.
I do not need this money immediately as we are going to be employed in India with a monthly income. Also i don't necessarily have to keep funds in my IRA, if it's not a good idea.
Would i be better off taking money out of my 401K or IRA a/c and investing them in India as well.
Invest 100K$ in Vanguard Funds After r2i
As USC, USA will subject you to taxes on global income. It does not matter that you live in India.
As a resident of India since you are R2Iing, India will tax you on global income once RNOR period is over.
Of course, Foreign earned income exlcusion and some tax credits will be available, but let us examine 401Ks and IRAs.
401Ks. I recommend that all 401ks be rolled over to Vanguard Rollover IRA and combined into one account. This means T Rowe Price IRA be moved to Vanguard Rollover IRA and also rollover the 401K into it.
IRAs: Once you withdraw money from IRA, USA will tax you on it. If you withdraw before age 59.5 years, there will also be penalty on it. So, US taxes cannot be escaped unless you manage withdrawals at a very slow rate.
GOI does not recognize foreign tax deferred vehicles. For them IRA is your assets. Any interest accruals, dividend accruals will be taxed by GOI in the year accrued and since at that point there are no USA taxes on it (USA taxes only on actual withdrawals), no tax credit is available. Further if you sell some fund in IRA to buy another, that is a capital gains taxation event for GOI and hence cap gains tax.
The above is a very undesirable double taxation on IRA.
Only reason IRA makes sense is because of tax deferral. But once you move to India, there is no tax deferral as India views those as your current assets and taxes any income from them. With no tax credit, you become subject to double taxation.
This means, it is best to have a plan to close the IRA over a period of 2, 3, 4 years. Some might do periodic conversions to ROTH and then after five years withdraw. This minimizes penalty, but it all depends on the amount of money in the IRA, years of RNOR available etc.
The above explains to you about IRA. Now let us examine cash assets.
Let us say you have half a million to invest. From an investment perspective, one should invest this in many different asset classes, which means US stocks, foreign stocks etc. But one can get these stocks even in Indian market albeit, limited selection and somewhat higher expenses.
Let us examine these from tax perspectives first:
Let us say that you invest some money in USA. GOI will tax any interest, dividends and capital gains on that money. To the extent that USA has also taxed you, on these gains, GOI will provide tax credits. So far, good - this is fine. USA will have no issues on your USA investment either.
The issue of course is why invest in USA? The answer is to get to those investments that are not easily available in Indian markets and lower expenses. In such a case, I recommend only two types of such investments. One is investments in US equity markets such as Total US Stock Market (VTSMX or VTI) and TOTAL International market (VFWIX or corresponding ETF). I do not recommend any fixed income investment in USA
Now let us examine investment in India. From GOI perspective, this is not an issue at all. However since as USC, you will be subject to taxes on global income, your Indian investments will be considered as taxable investments by US. If you invest in mutual funds in India, they are considered as PFIC investments. These are ABSOLUTELY not advised. This makes life complicated for you. This means that you invest in fixed deposits and not bond funds and in individual stocks and not equity funds.
Indian mutual fund investments can be down under two options that they provide. These options are called "growth" option and "dividend" option. If one invests in Indian MF and chooses "growth" option, there would be no taxation event till sale. And if sale of such is not accomplished till after one relinquishes USC, then one can potentially escape PFIC taxation.
Considering above, my recommendation is that no fixed income investments in USA and tread carefully with investments in India keeping PFIC considerations in mind.
Hope the above helps.
As a resident of India since you are R2Iing, India will tax you on global income once RNOR period is over.
Of course, Foreign earned income exlcusion and some tax credits will be available, but let us examine 401Ks and IRAs.
401Ks. I recommend that all 401ks be rolled over to Vanguard Rollover IRA and combined into one account. This means T Rowe Price IRA be moved to Vanguard Rollover IRA and also rollover the 401K into it.
IRAs: Once you withdraw money from IRA, USA will tax you on it. If you withdraw before age 59.5 years, there will also be penalty on it. So, US taxes cannot be escaped unless you manage withdrawals at a very slow rate.
GOI does not recognize foreign tax deferred vehicles. For them IRA is your assets. Any interest accruals, dividend accruals will be taxed by GOI in the year accrued and since at that point there are no USA taxes on it (USA taxes only on actual withdrawals), no tax credit is available. Further if you sell some fund in IRA to buy another, that is a capital gains taxation event for GOI and hence cap gains tax.
The above is a very undesirable double taxation on IRA.
Only reason IRA makes sense is because of tax deferral. But once you move to India, there is no tax deferral as India views those as your current assets and taxes any income from them. With no tax credit, you become subject to double taxation.
This means, it is best to have a plan to close the IRA over a period of 2, 3, 4 years. Some might do periodic conversions to ROTH and then after five years withdraw. This minimizes penalty, but it all depends on the amount of money in the IRA, years of RNOR available etc.
The above explains to you about IRA. Now let us examine cash assets.
Let us say you have half a million to invest. From an investment perspective, one should invest this in many different asset classes, which means US stocks, foreign stocks etc. But one can get these stocks even in Indian market albeit, limited selection and somewhat higher expenses.
Let us examine these from tax perspectives first:
Let us say that you invest some money in USA. GOI will tax any interest, dividends and capital gains on that money. To the extent that USA has also taxed you, on these gains, GOI will provide tax credits. So far, good - this is fine. USA will have no issues on your USA investment either.
The issue of course is why invest in USA? The answer is to get to those investments that are not easily available in Indian markets and lower expenses. In such a case, I recommend only two types of such investments. One is investments in US equity markets such as Total US Stock Market (VTSMX or VTI) and TOTAL International market (VFWIX or corresponding ETF). I do not recommend any fixed income investment in USA
Now let us examine investment in India. From GOI perspective, this is not an issue at all. However since as USC, you will be subject to taxes on global income, your Indian investments will be considered as taxable investments by US. If you invest in mutual funds in India, they are considered as PFIC investments. These are ABSOLUTELY not advised. This makes life complicated for you. This means that you invest in fixed deposits and not bond funds and in individual stocks and not equity funds.
Indian mutual fund investments can be down under two options that they provide. These options are called "growth" option and "dividend" option. If one invests in Indian MF and chooses "growth" option, there would be no taxation event till sale. And if sale of such is not accomplished till after one relinquishes USC, then one can potentially escape PFIC taxation.
Considering above, my recommendation is that no fixed income investments in USA and tread carefully with investments in India keeping PFIC considerations in mind.
Hope the above helps.
Invest 100K$ in Vanguard Funds After r2i
Desi, I just had a couple of more follow up questions, if you have time for it.
1. It was my understanding that the gains from MF investments in India are not taxable if the funds invested are in Equities. Is this true only for Indians and not USC even if you have a OCI ?
2. Can you shed some light on investing in Growth Mutual funds in India:- If i invested in them, does it mean that i don't have to pay US taxes on their yearly gains until their Sale.
What about paying Indian taxes on their yearly gains, me being a USC ?
3. You have recommended investments in FD's as opposed to bonds - Aren't capital gains from FD's taxable in India as well as in the US ? How different is it from the gains derived from Bonds ?
1. It was my understanding that the gains from MF investments in India are not taxable if the funds invested are in Equities. Is this true only for Indians and not USC even if you have a OCI ?
2. Can you shed some light on investing in Growth Mutual funds in India:- If i invested in them, does it mean that i don't have to pay US taxes on their yearly gains until their Sale.
What about paying Indian taxes on their yearly gains, me being a USC ?
3. You have recommended investments in FD's as opposed to bonds - Aren't capital gains from FD's taxable in India as well as in the US ? How different is it from the gains derived from Bonds ?
Invest 100K$ in Vanguard Funds After r2i
> One is investments in US equity markets such as Total US Stock Market (VTSMX or VTI) and TOTAL International market (VFWIX or corresponding ETF). I do not recommend any fixed income investment in USA.
I am not sure on taxes, if you are investing in above investments -
1) try investing 10k per month for a span of 10months
2) be prepared for wild swings -28% to + 14% (don't ask me how i got this figures)
If this 100k is for the purpose of your kids education, why not 529 plans like state of Ohio? where you have all vanguard funds. And, no taxes in any country.
Other alternatives i can think for 100% principal protection -
1) 5 year CD at the rate of 2.8%; pay taxes on interest.
2) I Bonds ...yearly 20k for a period of 5 years; no taxes until you redeem.
I am not sure on taxes, if you are investing in above investments -
1) try investing 10k per month for a span of 10months
2) be prepared for wild swings -28% to + 14% (don't ask me how i got this figures)
If this 100k is for the purpose of your kids education, why not 529 plans like state of Ohio? where you have all vanguard funds. And, no taxes in any country.
Other alternatives i can think for 100% principal protection -
1) 5 year CD at the rate of 2.8%; pay taxes on interest.
2) I Bonds ...yearly 20k for a period of 5 years; no taxes until you redeem.
Invest 100K$ in Vanguard Funds After r2i
venkat786;388715If this 100k is for the purpose of your kids education, why not 529 plans like state of Ohio? where you have all vanguard funds. And, no taxes in any country.Where do you get this from? What makes you think that India will not tax any interest, dividend, capital gain received in your 529 plan investment in USA? Any particular Indian Income Tax section exempts this taxation?
Invest 100K$ in Vanguard Funds After r2i
venkat786;388715Other alternatives i can think for 100% principal protection -Why do you think India will not tax these?
1) 5 year CD at the rate of 2.8%; pay taxes on interest.
2) I Bonds ...yearly 20k for a period of 5 years; no taxes until you redeem.