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Author: jm41 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: overseas Date: 6/23/1998 4:42 AM
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Hello all,
I am new to investing (though I shouldn't be -- it's something I've found infinitely confusing and thus have avoided for too long). Have a couple of questions.

I'm a 31-year-old American living in England. I work full-time in England and am married to a British citizen. I contribute to my company's pension policy here, which will pay me an annuity when I retire that will be calculated from a fraction of my final salary multiplied by the number of years I have accumulated working for this company. First question: does it make sense to 'buy extra years' in this policy by paying more money into the pension scheme? The maximum number of years you are allowed is 40, which I am unlikely to reach unless I do pay extra money in. But the money I pay in will not be before tax (25% in this country, even for a low earner like me), and it will not be matched by my company. It seems that extra money could be invested better elsewhere, because then I will be able to take advantage of market growth. Any thoughts?

One idea I have had is to take advantage of the fact that I do occasionally do computer work for my father, who owns a small company in the States. I never ask him to pay me for this, and the company does not make enough that it can afford to. But I was wondering if it would make sense for me to contribute some money to his company so that it could pay me for this work and then I could put that into my IRA in the states (I have a small traditional one). Am I mad?

This leads me on to my third question. Can my husband (who, like I said, is a British citizen) have an IRA in the States if he gets paid money for work done in the States?

For the time being we are planning to remain in England, if that makes any difference.

Thank you!

FoolAbroad
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3952 of 76237
Subject: Re: overseas Date: 6/23/1998 1:25 PM
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Greetings, FoolAbroad, and welcome.

<<I'm a 31-year-old American living in England. I work full-time in England and am married to a British citizen. I contribute to my company's pension policy here, which will pay me an annuity when I retire that will be calculated from a fraction of my final salary multiplied by the number of years I have accumulated working for this company. First question: does it make sense to 'buy extra years' in this policy by paying more money into the pension scheme? The maximum number of years you are allowed is 40, which I am unlikely to reach unless I do pay extra money in. But the money I pay in will not be before tax (25% in this country, even for a low earner like me), and it will not be matched by my company. It seems that extra money could be invested better elsewhere, because then I will be able to take advantage of market growth. Any thoughts?>>

You don't say what buying these extra years will cost nor do you indicate by how much and for how long it will boost your eventual payout. Those are the key factors. Quite possibly the money you use to do this buy back can be invested at a rate of return that will ultimately pay you more of an incremental benefit than the retirement plan will. All you can do is make the comparison yourself as we don't have the numbers to do so.

<<One idea I have had is to take advantage of the fact that I do occasionally do computer work for my father, who owns a small company in the States. I never ask him to pay me for this, and the company does not make enough that it can afford to. But I was wondering if it would make sense for me to contribute some money to his company so that it could pay me for this work and then I could put that into my IRA in the states (I have a small traditional one). Am I mad? >>

Well, I can't speak to the state of your sanity ( <g> ), but I do question the wisdom of that approach. You will give your dad money that you have been taxed on at the rate of 25%. Your dad will then "pay" you with that money so you can pay income (maybe) and FICA (at the self-employed rate of 15.3%) taxes in the U.S. on that "income". Then you will take that money to invest in an IRA. If so, I hope that IRA earns a whopping rate of return so as to offset that second round of taxes. It might work, but regardless it will cost you money to do so.

<<This leads me on to my third question. Can my husband (who, like I said, is a British citizen) have an IRA in the States if he gets paid money for work done in the States? >>

If the money is earned and taxed here, I know of nor reason he can't have an IRA based on that income.

Regards…..Pixy


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