Advice for an American with Japanese Family

[cooper]

Hi Everyone,

I have a few questions.

Background: I have an American passport (the IRS is cruel) and currently plow all my savings into my US robo-advisor (IRA & taxible acounts). My wife and I plan to try to retire early.

1. I'm considering rolling my wife's (neglected) NISA account and allocating the maximum to it while reducing my contributions to my US taxable account. Is this a reasonable strategy?

2. I assume this is an automatic yes, but should I also have my wife open an iDeCo account? (I worry that additional tax breaks will lead to paying Uncle Sam because last year I had to pay the IRS.)

Thanks for the help,

Cooper

[RetireJapan]

Fortunately I am not very clear on US regulations, but does your wife have a green card/file taxes with the IRS, or do you file jointly with her as your spouse?

If not, then NISA (and possibly iDeCo) would be easy ways to invest here. iDeCo is more beneficial the higher your marginal income tax rate, so works better for people in higher tax brackets.

[cooper]

My wife doesn't have an SSN/green card, but she is on my tax return as an NRA (non-resident alien). She should be able to invest in a NISA account, and the only potential obligation would be to report it on an FBAR. (My children's SSNs are why I'm hesitant to establish youth NISA accounts for my children.)

I suppose if she can invest in Vanguard ETFs through a Rakuten NISA account, any discrepancies in fees compared to the US will come out in what I pay in transfer fees currently.

[Tony]

1. I'm considering rolling my wife's (neglected) NISA account and allocating the maximum to it while reducing my contributions to my US taxable account. Is this a reasonable strategy?

I am not a tax accountant, but as long as you don't go over the yearly gift tax exemption limit, it shouldn't be a problem.

[cooper]

Hi Tony,

Interesting point about the gifting limit. I'll need to figure that out if that's applicable.

Thanks,

Cooper

[RetireJapan]

I'll need to figure that out if that's applicable.

It probably is. Spouses can give each other money for household expenses, but if you give your spouse money for investing it counts as a gift, and a person can only receive up to 1.1m yen a year in gifts before having to pay tax (on anything over that).

[cooper]

Thanks for that information. I spoke with a financial planner who confirmed the same.