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Retire To India

Retire To India
An immigrant's thoughts on money, retirement and achieving financial independence.

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Articles

Book Review: Retire Early? Make the Smart Choices
2007-07-02 01:00:00
I picked up a few books last week about early retirement and retiring abroad. In the next few weeks I will be posting a summary of each, with my notes on things I learned.The first book is Retire Early? Make the SMART Choices by Steven Silbiger. The first thing to note about this book is that "retiring early" here means electing to take social security benefits at 62 instead of waiting for full retirement benefits at the normal retirement age of 67 or later. I am always amused to see that retiring at 62 is considered "early" in most developed countries. (For comparison, retirement age in China is 50 for most women and 60 for most men. In India, 60 is the mandatory retirement age for most jobs; many state employees have to retire at 55 or 58.)As it turns out, more than half of this book is devoted to answering a single question: Is it better to opt for "early" social security benefits at 62, or to wait till the full retirement age of 67 (for those born after 1960)? The answer to thi...
More About: Books , Social Security , Book Review , Review , Smart

Carnival of personal finance #106
2007-06-26 04:51:00
My article on living on interest payments in retirement is featured in the Carnival of Persona l Finance #106, now up at Digerati Life, which by the way is an excellent blog about finance and technology run by an immigrant engineer based in Silicon valley.Here are some other articles from the carnival that interested me:KMC from Advanced Personal Finance writes about Inflation - Who Wins, Who LosesLazy Man and Money writes about retirement calculatorsHealthcare economist writes about the Ultimate Buy and Hold strategy using index fundsMatt from The Boulevard to Retirement writes about 6 Myths: Investing for Retirement.Originally posted at Retire To India.

Carnival of personal finance #106
2007-06-26 04:51:00
My article on living on interest payments in retirement is featured in the Carnival of Personal Finance #106, now up at Digerati Life, which by the way is an excellent blog about finance and technology run by an immigrant engineer based in Silicon valley.Here are some other articles from the carnival that interested me:KMC from Advanced Personal Finance writes about Inflation - Who Wins, Who LosesLazy Man and Money writes about retirement calculatorsHealthcare economist writes about the Ultimate Buy and Hold strategy using index fundsMatt from The Boulevard to Retirement writes about 6 Myths: Investing for Retirement.Originally posted at Retire To India.
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Early retirement planning: case study
2007-06-23 14:56:00
Found this excellent thread at misc.invest.financial-plan about a 40-year old couple planning "semi-retirement" in 5-7 years and "full retirement" in 12 years. Their assets (net worth of about $1.5 M) and income ($240K-$260K) are well beyond ours, but I still found it very interesting.Some notes:They contribute an astounding 50% of their gross income to retirement and college saving accounts.Their current asset allocation is 70% US equities, 15% International, 10% Bonds, 5% Cash. The suggestion from the group is to increase bond holdings gradually, leading to a 60/40 split of stocks/bonds at final retirement.They use FIRECalc to do Monte Carlo simulations on their retirement withdrawals, I tool that I too have played with a bit.For the semi-retirement period, they plan to allocate $10K/year for health insurance premiums. The response from the group is that this is on the low side. Related links: Early retirement planning with FIRECalc Originally posted at Retire To India.
More About: Retirement , Study , Planning , Case

Early retirement planning: case study
2007-06-23 14:56:00
Found this excellent thread at misc.invest.financial-plan about a 40-year old couple planning "semi-retirement" in 5-7 years and "full retirement" in 12 years. Their assets (net worth of about $1.5 M) and income ($240K-$260K) are well beyond ours, but I still found it very interesting.Some notes:Their current asset allocation is 70% US equities, 15% International, 10% Bonds, 5% Cash. The suggestion from the group is to increase bond holdings gradually, leading to a 60/40 split of stocks/bonds at final retirement.For the semi-retirement period, they plan to allocate $10K/year for health insurance premiums. The response from the group is that this is on the low side.Originally posted at Retire To India.
More About: Retirement , Study , Planning , Case , Early

Roth IRA conversion during early retirement
2007-06-20 05:11:00
Many people convert their Traditional IRAs to Roth IRAs due to the favorable tax treatment given to Roth IRAs. Under current law, money held in a Roth IRA is completely free from all future federal and state taxes. This is especially attractive if you believe that you will be in a high tax bracket during retirement, or if you expect the tax rates to go up in the future. You pay tax during the conversion process, in effect trading current tax payments for a reduction in future tax liability.There is one group of people for whom Roth conversions are especially attractive -- early retirees who are living off the savings in their taxable accounts. This is especially true if you plan to retire abroad. Since your income is likely to be lower during early retirement years, it would be an ideal time to covert your Traditional IRAs to Roth IRAs. If planned properly, this can save a considerable amount in overall taxes. What if your retirement savings are not in an IRA, but in another type of...
More About: Retirement , Early , Early retirement , Conversion , Retire

Roth IRA conversion during early retirement
2007-06-20 05:11:00
Many people convert their Traditional IRAs to Roth IRAs due to the favorable tax treatment given to Roth IRAs. Under current law, money held in a Roth IRA is completely free from all future federal and state taxes. This is especially attractive if you believe that you will be in a high tax bracket during retirement, or if you expect the tax rates to go up in the future. You pay tax during the conversion process, in effect trading current tax payments for a reduction in future tax liability.There is one group of people for whom Roth conversions are especially attractive -- early retirees who are living off the savings in their taxable accounts. This is especially true if you plan to retire abroad. Since your income is likely to be lower during early retirement years, it would be an ideal time to convert your Traditional IRAs to Roth IRAs. If planned properly, this can save a considerable amount in overall taxes. What if your retirement savings are not in an IRA, but in another type o...
More About: Retirement , Early , Early retirement , Conversion

Living on interest payments in retirement?
2007-06-14 04:51:00
A common misconception regarding retirement planning is that once you have enough savings, your interest income should cover your living expenses in retirement.For example, see the following comment by Ron Pearson, a financial planner who practices in Virginia Beach, Va., as quoted in Financial Planning magazine:My biggest challenge is to help my clients understand the total return concept and how best to take an inflation-adjusted income stream. Many of them are still in the "spend interest, don't touch principal" mindset.This thinking shows that many people are not aware of the real impact of inflation over many years. I will use a simple example to illustrate this. Consider the case of someone planning an "early retirement" to a low-cost country, and planning to live on $1000 a month on savings of $300,000 (which just happens to be my goal, as explained in an earlier post).For simplicity, assume that the savings are invested to give 5% investment return (close to the recent yiel...
More About: Living , Retirement , Cost of living , Interest , Retire

Living on interest payments in retirement?
2007-06-14 04:51:00
A common misconception about retirement planning is that once you have enough savings, you can "live on the interest payments" in retirement, without dipping into the principal.For example, see the following comment by Ron Pearson, a financial planner who practices in Virginia Beach, Va., as quoted in Financial Planning magazine:My biggest challenge is to help my clients understand the total return concept and how best to take an inflation-adjusted income stream. Many of them are still in the "spend interest, don't touch principal" mindset.This shows that many people are not aware of the real impact of inflation over many years. I will use a simple example to illustrate this. Consider the case of someone with a $300,000 nest egg, who needs a $1000 monthly income to supplement income from other sources like pension or social security. (By the way, this also happens to be my income goal for "early retirement" as explained in an earlier post).Let us assume that the savings are investe...
More About: Living , Retirement , Interest , Retirement planning , Eres

Book Review: In Spite of the Gods: The Strange Rise of Modern India
2007-06-11 06:00:00
I just finished reading this book, published earlier this year, about contemporary India . It is written by Edward Luce, a British journalist who spent much time in India and appears to have a keen insight into the problems and potential of India. I found it to be a fascinating read. I was amazed by the breadth and depth of the topics covered in the book. While it is a very readable introduction to the politics, culture and economy of modern India, it does not dumb down the subject for western readers as books of this sort sometimes do. It also gives a more realistic view of things compared to the portrayal in the Indian media where it is hard to tell the truth apart from the hype.The book argues persuasively that a "triangular dance" between the United States, China and India will shape the twenty-first century economy. It is also blunt about the many serious obstacles that remain before India can be a true economic power. I recommend it for anyone interested in the current state o...
More About: Books , Book Review , Review , Book

Book Review: In Spite of the Gods: The Strange Rise of Modern India
2007-06-11 06:00:00
I just finished reading this book, published earlier this year, about contemporary India . It is written by Edward Luce, a British journalist who spent much time in India and appears to have a keen insight into the problems and potential of India. I found it to be a fascinating read. I was amazed by the breadth and depth of the topics covered in the book. While it is a very readable introduction to the politics, culture and economy of modern India, it does not dumb down the subject for western readers as books of this sort sometimes do. It also gives a more realistic view of things compared to the portrayal in the Indian media where it is hard to tell the truth apart from the hype.The book argues persuasively that a "triangular dance" between the United States, China and India will shape the twenty-first century economy. It is also blunt about the many serious obstacles that remain before India can be a true economic power. I highly recommend it for anyone interested in the current ...
More About: Books , Book Review , Review , Book

Where did all the money go?
2007-06-05 06:00:00
I posted our Net Worth chart for the last 10 years earlier.When I generated this information from Quicken, I also ran a report on our income and expenses for the 10 years from 1997 to 2006. The results were quite interesting (at least for me), so I thought I will post that here as well.This also explains the categories that I use in Quicken to itemize expenses. I never liked the default categories that came with Quicken, so I customized it till I had about a dozen categories that I really wanted to keep track of. Here they are, along with the percentage of our income over the last 10 years that went into each category:Payroll taxes [24%]: Federal, state, Social security, MedicareHousing [17%]: Rent, Mortgage, Property taxes, Homeowner insurance, Home improvement expenses (but not routine maintenance)Merchandise [7%]: This includes all kind of "things" we buy. I used to track this in separate subcategories like books, clothes, electronics, furniture etc., but now I realize that every...
More About: Money

Where did all the money go?
2007-06-05 06:00:00
I posted our Net Worth chart for the last 10 years earlier.When I generated this information from Quicken, I also ran a report on our income and expenses for the 10 years from 1997 to 2006. The results were quite interesting (at least for me), so I thought I will post that here as well.This also explains the categories that I use in Quicken to itemize expenses. I never liked the default categories that came with Quicken, so I customized it till I had about a dozen categories that I really wanted to keep track of. Here they are, along with the percentage of our income over the last 10 years that went into each category:Payroll taxes [25%]: Federal, state, Social security, MedicareHousing [17%]: Rent, Mortgage, Property taxes, Homeowner insurance, Home improvement expenses (but not routine maintenance)Merchandise [7%]: This includes all kind of "things" we buy. I used to track this in separate subcategories like books, clothes, electronics, furniture etc., but now I realize that every...
More About: Money , Where

Switched to custom domain
2007-06-02 06:00:00
I switched the blog to a custom domain today. It is still hosted at Blogger, but no longer uses the blogspot address. The new URL is http://www.retire2india.comAny old links and bookmarks will continue to work, since Blogger forwards them to the new domain. I have to experiment a bit more to make sure that everything works right.
More About: Domain , Switched , Custom , Witch

Switched to custom domain
2007-06-02 06:00:00
I switched the blog to a custom domain today. It is still hosted at Blogger, but no longer uses the blogspot address. The new URL is http://www.retire2india.comAny old links and bookmarks will continue to work, since Blogger forwards them to the new domain. I have to experiment a bit more to make sure that everything works right.Originally posted at Retire To India.
More About: Domain , Switched , Custom , Witch

IRAs for non-citizens
2007-05-31 05:55:00
I received an email from a reader about my earlier post about withdrawals from 401(k) accounts for non-citizens. I mentioned there that if a non-citizen leaves America, he/she should be able to roll over his/her 401(k) balance to an IRA. It turns out that things may be more complicated than that.This is what I found out about IRAs for non-citizens at leading IRA providers. Since I am a customer of both Vanguard and Fidelity, I just sent emails to their customer service. For others, I have summarized what I found at their websites.VanguardFrom Vanguard's email response: Only foreign investors who have permanent residence in the United States and are not considered a nonresident alien (NRA) are able to invest in Vanguard funds.Now, I opened an IRA with Vanguard back when I was a non-resident alien, so this response puzzled me. I checked their electronic application form, and sure enough, it allows "U.S. citizens, Resident aliens, and Nonresident aliens" to apply. I think their custom...
More About: Taxes , Citizen

Our Net Worth over the years
2007-05-29 01:26:00
I was inspired by a fascinating post by S.B. at Retire At 45, where he charts his net worth over the last ten years.For the record, here is how our net worth has changed over the last 10 years. Like S.B., I have been using Quicken for more than 10 years now, so it was easy to generate this chart.Some clarifications regarding this chart:The net worth figure does not include cars or any other physical assets except our house.For the house, I have used the value of the house as assessed by our city. In fact, the sudden jumps in our net worth in 2001 and 2005 are partly due to increases in the assessed value of our house.As you can see, we started seriously paying attention to saving and investing only in 2001. I found the following quote from the post by S.B. very inspiring: Once the net worth begins to increase significantly, there is a tremendous temptation to alter the original plan and spend a lot of what has been accumulated. This is what all the advertisements and salespeople in ...
More About: Net worth , Worth , Years , Year , Ears

Our Net Worth over the years
2007-05-29 01:26:00
I was inspired by a fascinating post by S.B. at RetireAt45, where he charts his net worth over the last ten years.For the record, here is how our net worth has changed over the last 10 years. Like S.B., I have been using Quicken for more than 10 years now, so it was easy to generate this chart. Some clarifications regarding this chart:The net worth figure does not include cars or any other physical assets except our house.For the house, I have used the value of the house as assessed by our city. In fact, the sudden jumps in our net worth in 2001 and 2005 are partly due to increases in the assessed value of our house.As you can see, we started seriously paying attention to saving and investing only in 2001. I found the following quote from the post by S.B. very inspiring: Once the net worth begins to increase significantly, there is a tremendous temptation to alter the original plan and spend a lot of what has been accumulated. This is what all the advertisements and salespeople in l...
More About: Net worth , Worth , Years , Year , Ears

Social security: Retirement benefits 101
2007-05-24 06:44:00
While everyone has heard that Social security benefits are subject to change in the coming years, it is important to know how the current plan works.There are 4 components to social security benefits: retirement benefits for workers, retirement benefits for spouses, disability benefits, and survivor benefits. This post deals only with retirement benefits for workers.Here are the basics of Social security retirement benefits under the current law:You must have worked a minimum of 10 years to earn any retirement benefits.The benefits are based on the average of the highest 35 years of your earnings, where the earnings in a year cannot exceed the "Social Security Wage Base" limit for each year ($97,500 for 2007).If you worked for less than 35 years, the earnings for each year that you did not work will be counted as zero when calculating the average. (Note: this will have a serious impact for "early" retirees.)To account for inflation, earnings of more than 2 years before the calculati...
More About: Retirement , Social Security , Benefits

Immigrants and Home buying
2007-05-23 05:06:00
The real-estate boom in America in the last decade has been attributed to several factors: low interest rates, easy availability of credit, growth of the economy, and so on. What's not often mentioned is the role that immigrants play in this. Foreign-born populations have been rising in recent decades, as seen from the following charts.Immigrant s now account for nearly one-third of the nation's total population growth.According to this article from MSN money, a lot of first-time home buyers during the boom were "immigrants who arrived in the 1990s" and "a lot of the children from the earlier waves of immigration". This is certainly true in my experience. Immigrants typically take 10 to 15 years after their arrival to buy their first homes in the United States. It can take that long to build up their incomes, assets, and familiarity with the U.S. home-buying system.The article states that young immigrants are much more likely to be homeowners than their native-born peers. One rea...
More About: Buying , Home , Grant

Immigrants and Home buying
2007-05-23 05:06:00
The real-estate boom in America in the last decade has been attributed to several factors: low interest rates, easy availability of credit, growth of the economy, and so on. What's not often mentioned is the role that immigrants play in this. Foreign-born populations have been rising in recent decades, as seen from the following charts. Immigrant s now account for nearly one-third of the nation's total population growth.According to this article from MSN money, a lot of first-time home buyers during the boom were "immigrants who arrived in the 1990s" and "a lot of the children from the earlier waves of immigration". This is certainly true in my experience. Immigrants typically take 10 to 15 years after their arrival to buy their first homes in the United States. It can take that long to build up their incomes, assets, and familiarity with the U.S. home-buying system.The article states that young immigrants are much more likely to be homeowners than their native-born peers. One rea...
More About: Buying , Home

Carnival of Personal Finance #101
2007-05-22 03:01:00
My article on Immigrants and Personal Finance is featured in the Carnival of Personal Finance #101, now up at FIRE Finance.Here are some other articles from the carnival that interested me:Grad Money Matters writes about Culture Specific Oddities in Money MattersMy Weath Builder asks "Is Anything Really NEW In Personal Finance?"Clever Dude tells a personal story in Dealing with Trust, In-Laws and MoneyOriginally posted at Retire To India.
More About: Sona

Early 401(k) withdrawals for non-citizens
2007-05-21 04:53:00
JLP over at AllFinancialMatters has a post where he addresses a question about early withdrawals from a 401(k) plan. The person who asked the question is planning to return to India in a few years, and wonders whether it is worth contributing to his 401(k) plan at work. He stands to gain from the tax-deduction, tax-deferred growth and employer match, but may be subject to taxes and a 10% penalty for early withdrawal.Concerns of this sort prevent many expatriates and immigrants from taking advantage of the best avenues available for investing for their future. Consider the complexities involved in this situation:If the person is a permanent resident (green card holder) when he leaves America, it is easy to address the question of Federal taxes. One can use a phased withdrawal approach to minimize taxes. The idea is to withdraw only enough money each year to reduce the impact of taxes upon withdrawal. It is also possible to reduce the 10% penalty for early withdrawal by rolling over t...
More About: Taxes , Early , Withdrawal , Earl , Citizen

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