How to become FIRE as an International Medical Graduate?

[rrc]

Hi,

I am new to the blog and haven’t seen much regarding international medical graduates (IMG) that end up staying in the US for work and how to go about reaching financial independence, and was wondering if anyone here is in a similar situation.

By way of introduction, I’m a 34 year-old IMG (no student debt) with training in pathology and about to finish my last fellowship in June 2018. I got a job lined up to start in August 2018 in California (I’m well aware of the taxation/cost-of-living downsides, but because of my current visa (J1) I don’t have many options). When I first started as a PGY-1, I was able to save ~30% of my income for the first 2 years. I knew that there were better things to do with the money than having it sit around in my savings account but unfortunately, I didn’t have much knowledge about investing. I opened a taxable account in Schwab and invested a few thousand dollars on some random stocks (not the best idea). Then I met my wife to be and not only did my savings rate dropped dramatically but also my savings. I spent most of the money travelling, on the wedding, honey moon, opening a company in my home country (provides some passive income now, not much), moving for fellowship and buying a house in Texas, and we’ve recently been blessed with a baby girl. Unfortunately, I was also one more of the victims of whole life insurance through the NWM commission salesman that I met via my wife. I’ve now cancelled both mine and my wife’s policies and took the hit after 2 and 4 years of putting money, respectively. Currently, we have ~$10k in credit card debt that we’ll hopefully pay once my wife goes back to work from maternity leave and we owe my parents ~$30k for the down payment of the house. There is no deadline to pay them and it does not accrue any interest. I recently finished the WCI book and I’m caught up with the podcast. Both are great. Stumbling on this blog has been an eye-opening experience. I am in the process of putting together my IPS and my portfolio so that my first attending paycheck gets distributed to the appropriate accounts, but I still have many questions that I would really appreciate if people took some time to answer or point me in the right direction.

Questions:

I tried opening a Roth account in Vanguard but couldn’t because of my visa status. My wife is a US citizen, though. Should I open a Roth account in Vanguard for her and one for me elsewhere like Fidelity? In addition to the Schwab account I also have Wealthfront and Betterment accounts where I could open a Roth. Would you recommend against opening a Roth with any of them? I guess the MOST important question I have right now is when should I open the account(s), before the year ends or early next year before becoming an attending? Is there a minimum that you recommend to open a Roth account? I don’t think I can fund the maximum amount now.

I would also appreciate any suggestions regarding the house we bought, should we sell or rent? Does anyone know how to find a good property manager? Since my wife’s family and my family have some properties abroad, does anyone know if opening some sort of Trust or corporation that manages all the properties including the house in Texas is a good/feasible idea?

Does anyone know the implications of having tax-deferred/tax-exempt/taxable accounts as a foreigner, if I don’t become a US citizen and plan to retire in my home-country?

Thanks and happy Holidays!

[lost]

1) If Vanguard is not opening a Roth for your due to visa status, would others do?

2) Max out Roth after paying CC debt. You know this if you read the book.

3) You are not a foreigner as far as IRS is concerned, you are expected to pay taxes as you have US source of income.

4) Since you have a US source of income & stay in US most time of the year, any income received from non US sources is also taxable in the US (you can apply for foreign tax credit for any taxes paid in the foreign country)

5) Your future plans do not make any difference to paying current taxes. If you do not become a citizen, Medicare/Social security taxes you pay will not be useful to you.

6) If you have foreign bank account(s) or renal income, check with your advisor whether you need to file FBAR. This disclosure of foreign bank account is separate from filing taxes.

7) If your parents are making frequent visits/staying for long periods of time in US with you, their income is also subject to US tax. There is a formula you need to follow. Most get away with it but something to keep in mind.

8) Check with your home country, whether there are any restrictions on type of bank account you can hold etc. once you are considered non resident (simply because you're spending most time of the year elsewhere).

[PhysicianOnFIRE]

I think @lost did a good job of addressing the specifics.

I'll take a bigger picture approach. It seems that your finances took a rather dramatic change when you met your wife. Be sure you are both on the same page with the FIRE plan and goals for saving versus spending going forward.

Defining how much you need to FIRE is important. If you plan to move back to your home country, depending on where that is, cost of living may be dramatically lower. $1 Million US might be more than enough to live really well there.

I'm not a huge fan of roboadvisors, but you could do much worse. I feel similarly about target date funds, but at least with the robo, you can get some TLH in a taxable account without paying any attention to it.

Regarding the house in TX, you're probably better off selling it unless you think you would buy it today for the sole purpose of renting (in a hypothetical scenario in which you don't already own it). Both WCI and I have been accidental landlords. It's not a lot of fun and probably not a great investment if the place wasn't purchased with the investment in mind.

Cheers! And welcome to the forum.

-PoF

[Raj]

Hi rrc,

What visa are you on? Do you pass the "substantial presence test"? I put "resident alien" for citizenship status while on H1b as a resident and had no issues opening roth IRA for myself and my wife.

As mentioned above, read about FATCA and FBAR regulations for taxation on foreign money and assets while you file for taxes in US. My understanding is, any amount >10k$ needs to be reported in your taxes and >100k$ will be taxed.

 

[G]

Perhaps I missed what your nationality is, but I see little downside to becoming a US citizen once you qualify.  It would actually make a very interesting discussion from a financial perspective.

[lost]

Raj wrote:

Hi rrc,

What visa are you on? Do you pass the “substantial presence test”? I put “resident alien” for citizenship status while on H1b as a resident and had no issues opening roth IRA for myself and my wife.

As mentioned above, read about FATCA and FBAR regulations for taxation on foreign money and assets while you file for taxes in US. My understanding is, any amount >10k$ needs to be reported in your taxes and >100k$ will be taxed.

 

Click to expand...

Every penny earned into a foreign source/account will be taxed. But, under 10k (total of all foreign accounts) one does not have to file FBAR annually.

[jfoxcpacfp]

rrc wrote:

I guess the MOST important question I have right now is when should I open the account(s), before the year ends or early next year before becoming an attending? Is there a minimum that you recommend to open a Roth account? I don’t think I can fund the maximum amount now.

Click to expand...

You have until 4/17/18 to fund your Roth accounts for 2017. Do the best you can to fund as much of the $5,500 per person as possible. You could open each with $100 and set yourselves up for bank drafts. This is a golden time for you to be funding those accounts as you'll soon be an attending and you'll be focusing on tax reduction.

rrc wrote:

I would also appreciate any suggestions regarding the house we bought, should we sell or rent?

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Sell. You'll have enough other issues to concern yourself with than adding landlord to the list. As PoF mentioned, if you wouldn't buy this house as a rental property today, you don't need to keep it.

rrc wrote:

Does anyone know the implications of having tax-deferred/tax-exempt/taxable accounts as a foreigner, if I don’t become a US citizen and plan to retire in my home-country?

Click to expand...

Yes. You need to know and understand the tax treaties between your home country and the US. The answer is specific to your situation and you'll probably need advice as you go along.

A good fee-only financial advisor, when you can afford it, will serve as your advocate and also help you navigate some of the complexities of arriving in the US without a depth of knowledge of the system. An advisor will also help keep both spouses' goals in alignment and help you stay on track to reach them. Although...you could do a lot worse than following the advice on this website - welcome to the group!

[rrc]

Thanks for the quick responses and warm welcoming!

@lost – I agree that paying off CC debt is top on the list. I don’t think my parents come that frequently and they don’t stay for long periods of time, but I’ll look into it just to be safe.

Yes, @PhysicianOnFIRE, my life changed dramatically after meeting my wife, but for the good. We are in the process of moving forward being on the same page. I’m Mexican and the cost of living in Mexico can be quite low and quality of life surprisingly high (in some areas) compared to what I have experienced here in the US and other places. I agree that $1 million US can go a long way. Using some of the excel sheets on your blog (excellent resource btw!) I hope to reach that milestone in the next 10 to 12 years. I agree that selling the house will be the best way to go.

@Raj, I’m on a J-1 visa and will switch to O-1. I pass the substantial presence test. Did you open the accounts with Vanguard?

I don’t think I have to worry about FBAR/FATCA (<$10k) for this year but I’ll start reading about the regulations.

@G, I echo your comment about the discussion of becoming a US citizen. The way I see it is that if I become a citizen, Medicare/SS might be useful to me (as pointed out by @lost) at the expense of having to pay uncle Sam and deal with the IRS for the rest of my life. The fact that many Americans are renouncing citizenship makes me wonder if it's a good idea (https://www.bloomberg.com/news/articles/2017-11-01/americans-are-renouncing-citizenship-at-a-record-pace). I recently came across this website http://nomadcapitalist.com/, that seemed interesting, although probably a scam. I’ll be interested to hear comments from some of the most experienced people in this forum regarding some of the points that this guy makes.

@jfoxcpacfp Thanks Johanna for the information regarding the Roth accounts!

I’m pretty sure there is a tax treaty between Mexico and the US so that citizens of both countries don’t have to pay double taxation but I’m not sure how Mexico handles retirement money from foreign accounts. I’ll have to look into that.  I'd like to think that figuring out what to do with retirement accounts hovering the $1 million dollars will be a good problem to have once I get there.

Thanks again!

rrc

[WallStreetPhysician]

Welcome! I think many of your specific questions have been addressed by others. I'd point you to foreignbornmd.com, a blog written by an IMG.

-WSP

[PhysicianOnFIRE]

rrc wrote:

I’m Mexican and the cost of living in Mexico can be quite low and quality of life surprisingly high (in some areas) compared to what I have experienced here in the US and other places.

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Indeed. Did you happen to see that my family and I spent most of November in Guanajuato? Loved it!

$1 Million US would be $40,000 a year based on a 4% withdrawal rate. You could live quite well most places in Mexico on that princely sum. The average household income is about $8,000 a year, I believe.

[rrc]

Yes, I recently read it. I enjoyed it very much, I'm happy you and your family had a great time in Guanajuato (beautiful place). I would also recommend Puebla if you have a chance to visit.