Me and my partner recently decided to find jobs and move to the US to be closer to his family (we met in grad school in Canada). We are planning to move to Japan in about 5 years. We are recent graduates, so investing is something we are just starting to learn about and reading about international tax treaties and the different retirement accounts has been quite overwhelming.
Me (Japanese national) has some cash in Japan that I inherited, but I cannot open an investment account since I do not currently reside in Japan. I would, however, love to invest this money and let it grow. I am currently looking for jobs to join my partner in the US.
My partner (US national) recently got a job in DC, he started investing in his 401k and IRA through his job.
I have been reading up on our options so that I can start investing as soon as I get a job as well. Maybe even move over my cash from Japan to the US to start investing. I have identified Schwab investment accounts to be quite friendly to expats. But frankly, none of the retirement options seem to be a wonderful idea when considering the taxes to be paid. And please correct me – I imagine that I probably understood things wrong since I am an investing newbie. This is the information I have gathered so far:
- Any retirement account from the US will be taxed in Japan when we start withdrawing money after retirement. Meaning if we have a Roth IRA, we get taxed twice. Once when we invest (US), and once when withdrawing (Japan).
- An option I thought of was getting a traditional IRA since it is pre-tax investment. So, when we withdraw money from our trad. IRA while residing in Japan, we should only get taxed in Japan…? (assuming double-taxation treaty applies, and you only get taxed in the country you reside)
- The other option is to withdraw all of our retirement accounts before moving to Japan in ~5 years. This means we have to pay penalties and taxes to the US. Plus it increases investment risk when investing in ETFs, since it is a relatively short period of time.
I understand that once we move to Japan, we can open a NISA and have some tax advantaged retirement investments. But what can we do in the meantime to help us save up for retirement? Should we just keep saving in a high yield savings account (~4.5% interest rate) to avoid penalties for early withdrawal? Right now option 2 seems to be the most viable to me or am I missing anything? I would love to hear from folks that went through a similar situation.
Any input is greatly appreciated!
by my-human-guardian