Ep 48: Making Money Moves ~ Keep It In the U.S. Or Move It Overseas? The Million $ Question!
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Things are bad in the U.S., should I move my money overseas?
We explore this question that has come up a couple of times, due to the economic uncertainty.
We include tariffs, market volatility, practicalities of funds transfer, and financial goals as items to take into consideration.
Key Takeaways
Moving money overseas can be complicated and requires an understanding of regulations.
Exchange rates and compliance requirements are critical factors to consider.
Assess the underlying reasons for wanting to move money.
Financial planning should align with personal goals and timelines, maintain open communication with your financial advisor.
Investing in diversified portfolios can mitigate risks.
Episode Links & Resources
Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.
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Understanding the Question: Should I Move My Money Overseas?
Intro
Jane Mepham, CFP®
We are back with another episode of the International Money Cafe Podcast. Over the last couple weeks and months and days, we've been getting a lot of questions from prospects and clients. And I've also seen this question come up a lot in advisor communities. The question is, Should I move my money overseas? And so, in today's episode, we're going to sort of unpack that. What does that mean? Can you, do it? Should you even do it? And hopefully by the end of today's conversation, you have some clarity and really be able to answer the question, should I move my money overseas?
Manasa Nadig, EA
Yeah, it's a genuine question. And those who are asking this are definitely very concerned. And, you know, this is not something that's age specific. It's pretty much across the board. And as we are recording today, it's early May and tariffs continue to wreak havoc in the market.
There is talk of a possible recession or people are also saying that we might already be in a recession. And all of the markets, the companies, the traders, the businesspeople, they don't like how the tariffs are affecting all of the stock market prices. And also, just the fact that. There's so much uncertainty right now in the business community in general. And that definitely has a trickle effect on how markets behave. And because that's where a lot of people's money is. So, the long-term goal, so to speak, is
know, manufacturing companies over the many past years have had to outsource work to other countries, right? And this has meant that the American companies or the manufactured goods have relied on raw material parts and what have you that have come into the country from other places. Now, there is a good argument that
Yes, manufacturing has left the US and that's what this administration wants is to bring it back.
Manasa Nadig, EA
In the short term, the tariff and all of these other policies are definitely going to impact how much this will cost and whether this will have what the desired effect is supposed to be at the end. We don't know that yet. So that is the uncertainty that we're looking at. And yeah.
Anxiety With The Stock Market
Jane Mepham, CFP®
Right. And I think you've kind of really done a good job explaining it. That's what the tariffs are supposed to do. That's what it's all about. What I'm finding interesting, and you and I have had conversations on this, most people...
probably don't really care about the specific details. Who's being tariffed, who's not being tariffed, who's doing what with all these tariffs. But we are concerned. The reason being, as the markets continue to go down, I think we can all identify with that sinking feeling in the pit of the stomach, which is...Part fear, one part dread, really anxiety as we see the value of our accounts go down.
We actually just talked about it before hitting record that every time we look at our accounts, we're just seeing a lot of red. So I get it. You and I get it. There's a lot of anxiety. And I think a big part of this anxiety, again, it's not because it's the tariffs or what's going on. I think it's really what this money represents. So if I'm counting on the 100k in my account to be there Let's say next year for a family project and I see it going down I log in and I just see lots of red I'm going to be concerned and genuinely so as you pointed out for most people the concern is what this money Represents the dreams that are held in this money. Does this mean I'm going to retire later? Or I won’t be able to pay for the kids' college. And I think a big part of it is the element of feeling like you have no control over what's happening. And as human beings, we feel like we want to do something, anything, maybe move our money overseas.
Scary Market Headlines
Manasa Nadig, EA
Yeah. And of course, you know, media doesn't help or you don't know which part of the media to trust. You know, is they sensationalizing the issue or is this the truth? And having that ticker run at the bottom of your computer screen like you and I was talking about earlier, that doesn't help either.
We see all of these headlines that are downright scary. The CNN headline on April 4th said the Dow plunges 2200 points as tariff tumult rocks markets. MarketWatch said US stocks saw the biggest two day wipeout in history. And you know, when you are looking at that, on the one hand, you know you're not alone.
Jane Mepham, CFP®
Mm-hmm.
Manasa Nadig, EA
Facing all of those problems. There are millions of people in there with you. But at the same time, it's kind of hard to remember that, you know, the volatility is all part of time and money goes up, down. mean, markets go up and down, I'm sorry. And the thing though is that there was this almost kind of a feeling that you took for granted because the U.S. market had outperformed other economies and they had done it consistently over a period. Therefore, people didn't really, coming back to our original question, they didn't have to look outside because the U.S. market was one of the best. And now, after all this news that is coming out, people are beginning to look at what other possibilities are out there.
And then they see, oh, wait a minute, as we were crashing, the stock indexes in Germany and Poland and Spain, or maybe Brazil and other countries were going up. And comparatively, they were up 25 % where we were getting wiped out. And so...When you are making that kind of apples-to-apples comparison, maybe that question isn't so far-fetched, right?
Can I Cash Out Of the US Market And Take That Money Out?
Jane Mepham, CFP®
True and it's I think with those kind of numbers like I think you said 25 percent here today right and the uncertainty of the current situation and the political situation and the immigration situation we don't need to see all that and the way the dollar has behaved in the last one month as we're recording this so we're talking let's say April to May really going down again other currencies I can completely understand why people are asking about moving their money overseas. And by the way, I think the way the question has been coming through, it's not so much invest overseas. People are talking about cold hard cash.
Can I take this from my U.S. account? Can I cash out of the U.S. stock market and just take that money, pack it in some offshore bank? So, we definitely want to acknowledge the dilemma, and I feel terrible. We talked a lot about this. You and I have also invested money in the market. And we can see what's happening. So, I completely sympathize entirely with the sentiment and understand that sometimes having another choice can be tricky. So, for those of us born in other countries where we still maintain those ties, know, probably because we still have family, we visit them, chances are we still have bank accounts in our home countries, and we do actually use those accounts to send money home for various reasons.
So, it's not a stretch to consider the question. Absolutely. For those without the foreign connection. So I'm thinking now, let's say a US citizen born in the US, if you're considering this option,
Practicalities Of Moving Money Overseas And Reporting Requirements (FBAR & FATCA)
Jane Mepham, CFP®
And you're asking if you should move your money overseas, it probably means you're scared, and we totally understand in sympathy. So, let's take a quick break. And then when we come back, maybe Manasa, we can jump into what does this mean? What are the practicalities of actually moving money overseas?
Manasa Nadig, EA
Hey, welcome back listeners. We were just talking about all of the ramifications around the questions that we've been getting about trying to move money overseas and the fears and the uncertainties that may have prompted that question. So, let's consider the practicalities of what it is. Let's say you can move money overseas because you're concerned about what's going on, the economic environment, the stock market, et cetera, et. And how easy or difficult is it for you to be able to actually move the money overseas?
So like Jane was saying before the break, if you already have an account overseas because you have family overseas and you're helping them out for whatever reason. So, you have a relationship in that country in some kind of a visa or what have you. You have opened a bank account. It's pretty straightforward. You can move the money there and maybe depending on the country that it is in, you have certain ways of investing it, maybe, or just park it in a CD and it may do well.
And this would definitely be those people who are either green card holders or here on non-immigrant work visas or even naturalized citizens or foreign nationals who have a footprint in another country. So, to you, we would say, yes, this is a choice, you have this, maybe you can take it up, be mindful, the exchange rate is also fluctuating, and the dollar is getting weaker.
So, we don't know what will happen down the road if you want to bring this money back into the U.S. And that happens quite a lot. Those are conversations that Jane and I have constantly about factoring in the foreign exchange rate. So be mindful of that. And of course, please always remember, and you know this will always come from me, you have reporting requirements. You have an FBAR compliance requirement.
If you have more than $10,000 overseas and depending on your filing status, you may have a FATCA filing requirement as well. So, remember that. Don't forget that part of it. Now, if you do not have any kind of foreign connection at all, but you're looking at this as a possibility, this is going to be quite a difficult task. And I could say that this is going to be an uphill battle.
Foreign Banks Reluctant To Open Bank Accounts For U.S. Citizens
Other countries have what is called KYC, which is “know your customer” requirement. And they may or may not be willing to open bank accounts for you. And especially for those who have a U.S. footprint because of other things that we have talked about in other episodes, there's a FATCA requirement that means that those foreign banks must report your information back to the U.S.
That could lead to a reluctancy to work with you, to open bank accounts for you. Or maybe it could be mitigated if you're bringing a lot of money, like millions of dollars and you have private banking and things like that, but we won't go into that. But viable countries are far and few. That's one thing. And then even if you could and you were able to open bank accounts, if this was a choice available to you, then definitely there's a lot of documentation involved, like I said, maybe with the KYC requirements. And that is something that you will have to look at. And like we were saying earlier, the FATCA stands for the Foreign Account Tax Compliance Act. And what this has meant is foreign banks have to report all your information back to the U.S. and back to the IRS. And for those banks that are not equipped to handle this, they might definitely not want to work with you in terms of opening a bank account and going through all of those things might even be a big drain on their compliance department. So, these are all of the factors that I think should get you start thinking about the practicalities of doing this.
What Problem Are You Solving By Sending Your Money Overseas?
Jane Mepham, CFP®
And actually, to your point, it's not only U.S. citizens here. We've also had a lot of reports about U.S. citizens living overseas being unable to open a bank account. Like there are really few bank accounts that are willing to open accounts for U.S. citizens. So, as you pointed out, for somebody who's here without those overseas connections, it really is going to be an uphill battle. I guess we go back to the original question. I am concerned about what's happening. Should I move my money overseas? And I think the way we would turn this back to you is yes, we understand, but we need to try and figure out what problem we are trying to solve.
Is it because again, you're concerned about the market? Is it because you're going to visit next year and you want to have some cash, that kind of thing? So, if you don't really plan on moving the money, I think you should go ahead and do it. But if you're doing it because you're concerned about the market and what's happening here, we're all in the same boat. You absolutely must consider the hassle of what it would take. It's as Manasa has explained, it's not easy unless you have millions and millions of dollars. And so, we don't want to leave you without a plan. We're going to suggest a couple of things that you can do to mitigate that or answer that question.
If you're thinking about moving your money overseas because the market is tanking, here's a couple of things you can think about or consider one, look at your financial plan and ensure your goals remain unchanged.
What To Do With The Money Instead
Jane Mepham, CFP®
If they have, if your goals have changed, it's time to have another conversation with your advisor to remap things as we're thinking about it. It's also okay to call them and chat about your anxiety. It's a valid question. It's something I've said to my clients, feel free to call me anytime you have anxiety about what's happening in the market. If it's money you need in the next three years or so, that money should not be in the market. And I have a blog post that we're going to link to where we talk about short-term money and some places to keep it.
You can park this short-term money, in high-yield online savings accounts, maybe T-bills, maybe CDs and that type of thing and really how to think about it, be systematic about it. And then continue building your emergency fund. Manasa and I talk a lot about 12 months plus the cost of return, tickets home for the whole family in case something, you know, things go south, at least you're not stuck.
If you're a business owner, and I'm sure Manasa will tell you this, you probably want to go higher. There are other things you may want to consider. For example, if you're a single income household, you're on a work visa, you have your kids here and your family, you may consider going even higher, maybe up to 15 months. Hold off on major purchases like a house, especially if this will impact your reserves. Consider short-term market options instead.
We actually talked about where we still see a lot of people, especially on work visas, wanting to buy a house as part of the American dream. And Manasa and I will be like, okay, if it doesn't impact your reserves, if you're able to hold on to that house for at least 10 years. And we don't always know that because we don't know what's going to happen with your work visa. So, that's something to keep in mind. Other things to consider.
- Improve your skill sets. Make yourself more marketable in case you get laid off, you're able to land somewhere.
- Let's see, invest in globally diversified portfolios to smooth out the ride. As it is, the U.S. is about 60 to maybe 65 % of the whole global market. And so if you invest in diversified portfolio, it really means you are investing in those markets outside. And so instead of packing your money in a bank overseas, you can actually be a participant in the market, right?
- And then, course, you know, keep investing through your 401Ks, your Roth account, if it makes sense for you, of course, invest in your IRA. Don't stop investing. Keep investing. Think of it as dollar cost averaging. So, when the market is up, you buy. When the market is down, you buy. And a couple of other things.
- Let's see, rebalance your portfolio. Do some tax loss harvesting.
Strategies For Managing Financial Anxiety (20:07)
Manasa Nadig, EA
Wait a minute, shouldn't it be when the market is up you sell and when the market is down you buy?
Jane Mepham, CFP®
That is true when you're doing the rebalancing, you're right. Yes, you're absolutely right. But the one I was thinking of is where like when you think of the 401k, you invest so much every month. So it doesn't matter, you know, what the market is like. But that's a good point about the whole rebalancing idea. So you're always let's say you're 70/30 portfolio, you're able to maintain that. Anything else you can think of, Manasa?
Manasa Nadig, EA
Yeah, I go back to when don't look at the portfolio every day, which I feel like I should have it tattooed on the back of my eyelids sometime. Because that's doing nothing. It's just going to make you even more anxious. So I think one should just go about, try to live your life.
Jane Mepham, CFP®
Okay. Yeah. Yeah.
Manasa Nadig, EA
Meet up with friends, have a good social life, or go for a run, go for a walk, and ignore people who are telling you, we made a ton on the market or whatever that they do. So if you're in for the long haul and you can hold on tight and talk to your financial planner, if you don't have one, find a good one who will listen and empathize with you and talk to you about this. Yeah, I think that's what I think we should do. But do you have anything else you want to add, Jane?
Jane Mepham, CFP®
So, I think in, before you do that, you do the official conclusion. But I think what we said is, so the question is, should I send my money overseas? And I think what we've sort of walked you through is. One, it's not as easy as just, we send your money overseas? There are hassles and it's really not easy to open bank accounts. So, keep that in mind, but keep going back to what's your concern?
Why do you want to do this? And based on that, you'll be able to come up with, I'm sure you'll be able to walk through this and come up with a good answer for your situation. And I think that's it. I you can do the official conclusion as we call it.
Manasa Nadig, EA
Yeah, yeah. And definitely thank you so much for listening. if you like this episode and you want to listen to our other episodes, we are streaming on most major podcast platforms or go to our website, theimcafe.com
and you can find all our episodes there and you can download our free guide about foreign assets as well. So, thanks for listening and we'll be back with more.
Jane Mepham, CFP®
Bye.
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The speakers' views and opinions discussed in this episode should not be considered financial, tax, or legal advice. Consult your advisor for any legal, cross-border tax, and financial advice.