Retirement savings

Who says you are not entitled to a state pension? Are you an EU citizen?

HungaryDragon wrote:

Who says you are not entitled to a state pension? Are you an EU citizen?

No, I am not.

serg117 wrote:

I would very much appreciate any input/shared experience. I am sure I am not the only one here who is dealing with all of this.

I cannot answer your questions directly but I can talk about it general.  Governments everywhere will screw you over your social security contributions (i.e. by changing the rules to suit themselves). Contrary to popular belief, in most countries, there's no social security investment fund, but merely a redistribution from from taxes collected.  So, whatever you do, your cash is going to be attacked one way or another based upon the whims of politicians and their incompetent spending.

So, assuming no payments into a social security fund, you will need a considerable amount of income generated just maintain a reasonable lifestyle.  Assuming an 8% return (that's a good rate), you'd need perhaps $1M in income generating assets to get just $80K a year on which you have to pay taxes.  So the questions is really about how much you need to have to be safer in older age rather than the mechanism by which you generate it.

Of course, none of this matters a damn if you don't have sufficiently good health. Anyone over age of 55 will be visiting the public or private health systems a lot more than someone who is 35.

Interest rates are terrible, so anything that offers a better return than interest at the bank has to be worthwhile. Land is always a good investment long term since they won't be making any more of it and it has always appreciated in value, even here in HU.  On the other hand, diversity is a good idea to protect your investments.  Shares long term are a reasonable deal if you have conservative tastes but brokerage fees will eat away a bit at that. If you pick your international markets, then you can diversify your risks much more than simply cash at the bank.

As far as I know any tax regime will mean withholding taxes at source in whatever the jurisdiction the shares are traded in.  If you want your tax back, you'd have to ask for it by dealing with the tax authorities. That said, most shares (at least in the US) that increase/decrease are capital gains oriented and are not meant to generate income, so you could just let the taxes ride.  In other jurisdictions (e.g. UK), income from shares is more important.

I am not aware there is anything to stop you from having an online brokerage account in any EU country or in the USA so long as you pass the AML (Anti-Money Laundering) tests.  You still have to fil in the appropriate tax forms to ensure your status as a non-resident is recorded, i.e. for USA, it's form W8BEN.

The rule of thumb I remember was is 1/3 cash, 1/3 government bonds, 1/3 shares  or similarly 1/4 cash, 1/4 government bonds, 1/4 shares, 1/4 property.   This is a diverse portfolio that gives you access to ready cash, provides secure guaranteed returns (bonds), the excitment or plod of speculating (shares) and the stability of some long term increases in wealth with income generation (property).

I'm no expert, but thought it might be worth sharing.

fluffy2560 wrote:

The rule of thumb I remember was is 1/3 cash, 1/3 government bonds, 1/3 shares  or similarly 1/4 cash, 1/4 government bonds, 1/4 shares, 1/4 property.   This is a diverse portfolio that gives you access to ready cash, provides secure guaranteed returns (bonds), the excitment or plod of speculating (shares) and the stability of some long term increases in wealth with income generation (property).

I'm no expert, but thought it might be worth sharing.

Thanks a lot! So in this hypothetical scenario, if I invest in a non-Hungarian (say, EU- or US-based) mutual fund that uses the 1/3-1/3-1/3 portfolio you mention, what would I owe to the Hungarian tax office as a tax resident? Would this depend on how much this portfolio earns in dividends, interest, sales of equity?
Would I be able to avoid HU taxes on the part of my income (dividends and interest, I guess?) that was subject to the withholding tax abroad? Would this require jumping through too many bureaucratic hoops?

serg117 wrote:

.... you mention, what would I owe to the Hungarian tax office as a tax resident? Would this depend on how much this portfolio earns in dividends, interest, sales of equity?
Would I be able to avoid HU taxes on the part of my income (dividends and interest, I guess?) that was subject to the withholding tax abroad? Would this require jumping through too many bureaucratic hoops?

I'm no expert but generally if you live here, you are taxed on your world wide income howsoever received. The source of the income and the rate applied would be covered in the tax treaty between wherever and HU.  You'd have to look that up as all the treaties have different rates.  It's not too difficult to deal with but if you don't speak the language, don't have time and have limited knowledge, best to use a proper tax advisor.  With a mutual fund, unless it's traded like shares, your income would be nibbled away in fees (they can effectively nullify your gains).

It's really worthwhile doing it yourself and can be quite interesting.  I track mine in Excel but the paperwork at year end I leave to professionals who know the rules properly.

Thanks! Since you seem familiar with the US procedures, let me ask you this. Suppose I file W8BEN, which according to the US-Hungary agreement reduces the US withholding tax to 15%. This is what I lose on the US side. Would I still have to pay any taxes in Hungary (on interest, dividends, health tax, etc.)?

serg117 wrote:

Thanks! Since you seem familiar with the US procedures, let me ask you this. Suppose I file W8BEN, which according to the US-Hungary agreement reduces the US withholding tax to 15%. This is what I lose on the US side. Would I still have to pay any taxes in Hungary (on interest, dividends, health tax, etc.)?

As I said, I'm no expert.   

The question of tax residency is complicated and every treaty is different and there's no size fits all.  Non-resident tax I think is indeed 15% (I think) on withholding but this is on income, not unrealised capital gain which is another ball game.  W8BEN is a 3 year certification that the applicant is resident in another treaty country - it's self certified.  You use the yearly tax certificate from say, the broker, in your tax returns wherever you are actually resident.   

If you are a US citizen you're subject to a lot of hassles, including being taxed worldwide on your income regardless of where you actually live.  Then there's the really nasty FACTA (look it up).  I believe the US and Philippines are the only countries to tax their nationals regardless of where they actually live. 

Whatever you do, once the authorities have you in their system, it's very hard to get away from them and their BS.  The only way is to go to another country which is easier on the pocket but it'll end up costing something. I have a colleague who was born in the USA to naturalised US citizens who were dual nationals of a European country, lived there until he was about 3, then left and has lived in Europe and Asia ever since and never ever worked or been primarily resident in the USA. He still gets hassled by the US government, 60+ years later.  The only thing he can do to get "the man" off his back is to revoke his US citizenship and use his other citizenship primarily.  A lot of US extremely wealthy citizens do that to get way from the spawn of the devil (aka, the IRS) and take up citizenship of say, The Bahamas or Singapore which aren't as fussy and like rich people.  I believe you can revoke the US citizenship and claim it back later but you'd need to check that out for sure. Not to be taken lightly and one would need to be worth millions, if not billions to make that work. 

I can only suggest you consult an advisor.  Or read the IRS info (good luck with that!).

Serg, if you are US citizen you will have very difficult time opening bank or brokerage account in EU. They simply don't want Americans as clients. US based online broker would be my choice due to lower capital gain taxes in US. In most cases you will not be charged double tax due to international agrements against that. Alternatively you could look into opening small business or investing in property.

MOHCTEP wrote:

Serg, if you are US citizen

His flag path and bio says he comes from Russia.

MOHCTEP wrote:

very difficult time opening bank ... in EU

Difficulty or ease can vary between countries and banks. Had no problem starting accounts in Hungary, nor in maintain them, so far.

fluffy2560 wrote:

the really nasty FACTA

That law is about identity theft and credit card reports. Did you mean FBAR?

fluffy2560 wrote:

revoke his US citizenship and use his other citizenship primarily

According to the Reed Amendment, if the IRS determines you revoked your citizenship to avoid taxes you can be forever barred entry into the US. And the IRS can (and will) charge 30% capital gains tax on any US investments you may still have. So only an "option" for those that wish to cut all ties to the US.

fluffy2560 wrote:

I believe you can revoke the US citizenship and claim it back later

If a US Citizen voluntarily, without coercion or extenuating circumstances, gives up citizenship, it is usually a one way ticket. Returns are not allowed in most circumstances.

klsallee wrote:

His flag path and bio says he comes from Russia.

Flags at the bottom show via the USA. 

If a Russian citizen, then the tax rate is (I think) quite low so probably not worth spending huge amounts of time and effort avoiding.

fluffy2560 wrote:

klsallee wrote:

His flag path and bio says he comes from Russia.

Flags at the bottom show via the USA.

And my flag path shows via Switzerland. I am not a Swiss citizen. I was just an expat in Switzerland for many years before coming to Hungary.  But my flag path starts in the US. Since that is my country of origin,

klsallee wrote:

And my flag path shows via Switzerland. I am not a Swiss citizen. I was just an expat in Switzerland for many years before coming to Hungary.  But my flag path starts in the US. Since that is my country of origin,

Fair enough.

I guess someone could have picked up US citizenship on the way here.  My path shows UK to Hungary but I've lived in a multitude of other countries than I've shown. So I stuck to the most important countries in the world 

Probably upshot is that it's not a reliable indicator!

It is quite the same to IRS whether you are US citizen or Green Card holder. As long as you have been freedumbed by Amurika you owe it for the rest of your life (taxes that is).

klsallee wrote:

fluffy2560 wrote:

the really nasty FACTA

That law is about identity theft and credit card reports. Did you mean FBAR?

FBAR is just asking to be called FUBAR. Not that FACTA of 2003, I really did mean FACTA (Foreign Account Tax Compliance Act) of 2010.  That's asking to be called something less than polite with a U replacing the first A at least.

klsallee wrote:

According to the Reed Amendment, if the IRS determines you revoked your citizenship to avoid taxes you can be forever barred entry into the US. And the IRS can (and will) charge 30% capital gains tax on any US investments you may still have. So only an "option" for those that wish to cut all ties to the US...... If a US Citizen voluntarily, without coercion or extenuating circumstances, gives up citizenship, it is usually a one way ticket. Returns are not allowed in most circumstances.

Yes, I'd forgotten about that Amendment.  I think for High Net Worth Individuals, it's no problem to take out their Montenegrian or Bahamas citizenship or whatever and lose the US citizenship and afford the best lawyers to get it back if so required.

MOHCTEP wrote:

It is quite the same to IRS whether you are US citizen or Green Card holder.

True enough, indeed.

fluffy2560 wrote:

I really did mean FACTA (Foreign Account Tax Compliance Act) of 2010.

Then you meant FATCA not FACTA.  Easy typo to make.

And for US expats the FATCA kicks in only for those filing singly with $200,000 in financial assets at the end of the year ($300,000 any time of the year) or double those numbers if filing jointly with a spouse. More US expats fall below that threshold than don't, I suspect, and need not file form 8938. And most expats that need to file form 8938 have an accountant or tax attorney to take care of such things (but if they don't, they should have one).

FATCA kicks in for anyone having over 10,000USD at any time during the year.
http://www.irs.gov/Businesses/Compariso … quirementshttp://www.irs.gov/Individuals/Internat … rm-to-Filehttp://www.irs.gov/Businesses/Corporati … -Act-FATCA

MOHCTEP wrote:

FATCA kicks in for anyone having over 10,000USD at any time during the year.
http://www.irs.gov/Businesses/Compariso … quirementshttp://www.irs.gov/Individuals/Internat … rm-to-Filehttp://www.irs.gov/Businesses/Corporati … -Act-FATCA

Not quite correct. FATCA is a new law that adds, as your first link even clearly states, a "new Form 8938 filing requirement".... which.... "does not replace or otherwise affect a taxpayer’s obligation to file FinCEN". The FinCEN filing is still at the $10,000 threshold, but that is a different law from FATCA, and a different form. FATCA added new requirements on foreign financial assets, and a new form 8938 to include with your 1040. The two laws seem similar, but they are different laws and different requirements.

FATCA is about taxing you. FinCEN is about tracking financial crimes. Which is why you do not even send the FBAR to the IRS, and you attach no form to your 1040 for FinCEN reporting. That goes straight to the Financial Crimes Enforcement Network (you can see from that name where FinCEN comes from) and which you must now file and submit online.

klsallee wrote:

..... The FinCEN filing is still at the $10,000 threshold, ....FATCA is about taxing you. FinCEN is about tracking financial crimes. Which is why you do not even send the FBAR to the IRS, and you attach no form to your 1040 for FinCEN reporting. That goes straight to the Financial Crimes Enforcement Network (you can see from that name where FinCEN comes from) and which you must now file and submit online.

FATCA! Oy vey, I read what I wanted to read.  One for the eye/brain/finger coordination fail collection. I am still thinking FUBAR for FBAR.

BTW, I believe any banking transaction over USD 10,000 is reported to the US Treasury, regardless of where it occured. Makes sense therefore to use cash everywhere or get used to base 9999.

fluffy2560 wrote:

or get used to base 9999.

Do that and risk getting all the cash in your bank account being seized by the IRS:

Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required

klsallee wrote:

fluffy2560 wrote:

or get used to base 9999.

Do that and risk getting all the cash in your bank account being seized by the IRS:

Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required

Yes exactly, please do not try it more than once. I have had problems with TD Ameritrade , they've stopped transferring my funds from my brokerage account to my foreign bank under very flimsy pretence. I thought US gov. wants people to spread USD around the world to make it easier for fed to print more...
BTW, if you have second citizenship and open accounts abroad as non-US national you are in violation again and watchful American Eagle will bite you in the ass.
My wife got so tired of all this BS she gave up her citizenship this year. She was lucky enough to file before September and before they increased the fee from $470 to $2500.

klsallee wrote:

fluffy2560 wrote:

or get used to base 9999.

Do that and risk getting all the cash in your bank account being seized by the IRS:

Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required

It's the same elsewhere too. Seize first, ask questions later.  If anything has the power to cause revolution, it's taxes.  But anyway, USA is particularly known for its distortions and unfathomable tax code . 

Bit like DNA, everyone adds but no-one takes away.  They all end up as very messy and is not "designed". The "best" one I've seen was Kosovo when under UN protection - whole thing was 1 page of A4 in very readable type!   

The main point was that USD transactions are reported back to the US Treasury.  Other transactions (in EUR etc) are not supposed to be reported BUT watch out for SWIFT, Visa and Mastercard based transactions which are officially spied on by the NSA. Fallout from Snowden.

http://www.theregister.co.uk/2013/09/18/nsa_banking_cybersnooping/

MOHCTEP wrote:

BTW, if you have second citizenship and open accounts abroad as non-US national you are in violation again and watchful American Eagle will bite you in the ass..

How would they know if you are a dual national?  How does anyone really know anyway unless you declare it or are naturalised?

I know for my kids, my nationality (British) is recorded on their Hungarian birth certificates. It's not recorded on UK birth certificates and of course, nationality is complex issue.

MOHCTEP wrote:

My wife got so tired of all this BS she gave up her citizenship this year. She was lucky enough to file before September and before they increased the fee from $470 to $2500.

That's a lot of money and clearly aimed at being a disincentive. 

What actually happens if one simply ignores the IRS and do nothing at all? 

i'm thinking of my colleague who gets hassled.  He says mainly it's at immigration when he attempts to enter the USA on his British passport (which records his birthplace as Boston) although how they know it's not the British Boston, I've no idea (UK passports record town/city of birth, but not country).   They try and direct him to the US persons queue, regardless of the passport he's carrying.  I've no idea if he files his US IRS paperwork.

You wrote yourself watch out for SWIFT. That is how they might know that you are using EU credit card from the bank they have no record of. Since banks supposed to report you to the US treasury or IRS they could put two and two together and deduce that you are US national using some Visa in EU that they have no record of.  I am working in EU on my second passport and opened bank account the same way.
If individual has no financial or family ties to US then potentially one can just tell them to f. off. Of course forget about traveling back to us you will be most likely arrested.
My friend who lives in NY got pulled over last month for speeding and discovered that he has a warrant for his arrest for unpaid parking ticket from 1990s in another state. Parking fine was $25 with fees and penalties it is probably a few hundred USD, but no that is not all you have to go to court, so that judge can lecture you and make you look like a fool. The process in US courts is streamlined; you ignore fine, court sends notice to appear to the old address, you never appear obviously, the judge rules "Contempt of court" and issues automatic arrest warrant. Bam, you just have been freedumb-ed.

MOHCTEP wrote:

You wrote yourself watch out for SWIFT. That is how they might know that you are using EU credit card from the bank they have no record of. Since banks supposed to report you to the US treasury or IRS they could put two and two together and deduce that you are US national using some Visa in EU that they have no record of.  I am working in EU on my second passport and opened bank account the same way.
If individual has no financial or family ties to US then potentially one can just tell them to f. off. Of course forget about traveling back to us you will be most likely arrested.

There's no personal information like date of birth in a SWIFT transaction, just simply the routing information, account numbers, amounts, currency, destination name etc.  They would have to know from the bank or card issuer records, not a transaction.  Two people called Joe (or Jo) Smith could only be distinguished by things like (as in Hungary), date of birth, mother's name, gender etc. Even then, it's not foolproof. I remember hearing that Laszlo Szabo must be the most common name here. Might 10s of them in each town. Some of them related, others not.

One way around the tracking might be to get paid by receiving a pre-paid Visa or Mastercard bought by the payer.  You'd only need the PIN in most cases to carry out most basic transactions.  Then they'd never know (in theory).  Reminds me of the TV show "Person of Interest". Look away from the surveillance cameras.

And then there's Bitcoin too....hmmmm!

MOHCTEP wrote:

Serg, if you are US citizen you will have very difficult time opening bank or brokerage account in EU. They simply don't want Americans as clients. US based online broker would be my choice due to lower capital gain taxes in US. In most cases you will not be charged double tax due to international agrements against that. Alternatively you could look into opening small business or investing in property.

I am a Russian citizen, all of the above FATCA-related complications do not affect me (keeping my fingers crossed - there are proposals to implement something similar in Russia).

How do these policies create problems for retired older HU people?

Example 66+ years old.  Who are or planning to contact and activate a US Social Security Administration monthly benefit Direct Deposit to a
foreign bank account payments.

US-SSA Direct Deposit bank account is seperated by laws from other saving,  credit, bank accounts. So SSA benefit Direct Deposits must
be periodically withdrawn and then re-deposited to other credit or saving, etc. accounts in person  .

SSA payments, limited monthly may be a 2600 USD. It can quickly
compound inside a foreign bank account. Also assuming other USD deposits from pre-retirement savings earned as personal after tax earnings.

There is no clear information available to RETIRED 66+ people, as to the compliance of chasing USD US Government FATCA FBAR and other related forms mentioned here under Retirement Savings...

Can a retired member who is receiving USA S.S.A. payments offer
advise on simple grand father zero paper work solutions?.

USA 2010 legistlation is now fully enforced 2014 including retirement 
Banking Access, FATCA, FBAR and the US PATRIOT Act

The enactment of FATCA legislation in 2010 and the increased enforcement of FBAR reporting in the past few years have resulted in problems of financial access for overseas Americans. Because of this legislation, some foreign banks have refused to do business with Americans.
 
Same Country Exception would exclude reporting of accounts owned by Americans abroad where the account is with a Foreign Financial Institution in the same country where the individual is a resident. This would alleviate the filing burden for FATCA on Americans as well as the identification and disclosure of these accounts by the Foreign Financial Institution.

ACA  advocates easing Patriot Act guidance to facilitate state-side banking access for Americans overseas. ACA continues to dialogue with Congress, the Treasury and the IRS for these positions and others in order to insure banking access for Americans overseas.

Executive summary:

The FATCA legislation, passed in 2010 and being implemented from 2014 on, was designed to identify the foreign bank accounts of Americans who were not reporting income from these accounts to the IRS. The legislation requires banks worldwide to report the accounts of American clients to the IRS, or pay hefty 30% penalties on all US dollar transactions.

Americans with foreign bank accounts have two additional tax filing requirements, IRS Form 8938 (instituted by the FATCA legislation) and Treasury Department Form FINCen-114, the Foreign Bank Account Report, commonly called the FBAR.

All these reporting requirements, and the threat of penalties if the reporting is not complete and accurate, are causing some foreign banks and other financial institutions to cut off access by Americans overseas to foreign financial tools, such as mortgages, bank accounts, insurance policies, and pension funds, all of which are essential financial tools for survival overseas.

At the same time, Patriot Act legislation currently contains know-your-client guidance that is leading US banks to close domestic US accounts held by Americans who no longer can provide a mailing address in the United States.

FATCA FBAR movie on UTUBE

youtube.com/watch?feature=player_embedded&v=Vnw0i2ilds0

 

Interesting topic.
I enjoyed reading the answers you received from other posters.
I am sorry I know nothing at all about banking or retirement funds.
Just to make you feel a bit better though, my older sister worked full time in the UK for over 10 years, is age 67 now and does not collect a penny from any UK SS.
My husband worked between his schooling and actually work years in Hungary for 9 plus years, not enough to collect a penny in HU now that he is of retirement age.
He collects from the US only.
He went into the SS office in Hungary and last visit they told him one needs 15 years to collect the min. in HU. The min. is so low that it isn't even worth it, something close to $200. a month.
You can pay into the system by why would anyone pay off the extra years to collect such a low amount, over time you would be lucky to just break even, if one should life that long that is.
My wild guess is to do something that involves either the UK or the US. If you have plans to live in HU forever then that might be the only way to seriously think about HU investments. By the time one exchanges forints into dollars you will just lose too much over all.
Good luck, interesting read.

Marilyn Tassy wrote:

Just to make you feel a bit better though, my older sister worked full time in the UK for over 10 years, is age 67 now and does not collect a penny from any UK SS....

If she was an employee there and paid tax and National Insurance there, then she should be able to get something out of the UK government, even if it's a reduced rate.  Personally if they owed me $1 a month, I'd want it back.  It's her right to any money in the system so she should take it.  If she lives outside the 

As to the other points, yes, pay in for years, then get ripped off.   That's government (everywhere) for you!

Thanks, I have been telling my sis to look into collecting from the UK. Can't hurt to see if she has enough credits or not.
Like I said here in HU, my husband went into the SS office in Budapest but was told one needs at least 15 years to collect. He only put in 9 years. Too bad they were some of the best years of his life, age 14 to 23.

Marilyn Tassy wrote:

Thanks, I have been telling my sis to look into collecting from the UK. Can't hurt to see if she has enough credits or not.
Like I said here in HU, my husband went into the SS office in Budapest but was told one needs at least 15 years to collect. He only put in 9 years. Too bad they were some of the best years of his life, age 14 to 23.

I didn't finish the posting properly.  Regarding the UK pension contributions, If she lives outside the EU, then, if she gets anything, she won't be entitled to inflation increases. Apart from that, why not try?!  Her entitlement!

I looked at the online calculator and she'd probably get about $200 to $300 a month.  It's worth having!

UK State Pension Calculator (Female)

Hi, I'm new to Expatblog,
While the topic at this forum is FBAR and other investment/retirement savings issues, if any of you want to know about a serious, now in the courts legal action against FATCA and one country's IGA, take a look at the #2 posting over in the Brazil Forum called FATCA & FBAR; who'd running the show here anyway? 

Happy New Year
LLGM

LLGM wrote:

.... over in the Brazil Forum called FATCA & FBAR; who'd running the show here anyway?

Thanks for posting this.  US of A has a habit of passing extraterritorial acts.

Wow, guess I am really"out of it".
Don't know a thing about banking and actually moved to Hungary to escape reality.
Guess if I actually had any funds to speak of I would care more.
All I know is the dollar is strong at the moment, what goes up will come down however.
Good thing, for now we can buy more wine for our $.
Bad thing, can't sell out right now, would lose over 30% of our investment.

LLGM wrote:

in the courts legal action against FATCA

Even if the Canadian courts rule against FATCA this will not affect expat or "accidental" American's legal US responsibility to the IRS. So might be a rather a hollow victory.

And given that the Republicans now control both houses of Congress, and with the RNC on record to seek the repeal of FATCA, if one is interested in the repeal of FATCA your money might be better spend in lobbying rather than paying lawyers for a legal challenge which could take years.