Taxation and Representation, Take 3

Bureau of Economics

Saving money is hard for lots of people.  It certainly is something that nowhere near enough Americans devote time or money to.  In other societies, saving is done mostly by the government or through fixed pensions.  In the case of Switzerland there is a three legged approach, where you, the government, and your employer all contribute to retirement.

In America, we have 401k plans, IRAs of various sorts, educational savings accounts, medical savings accounts, social security, and then private saving.  Many of the *SAs and things like 529 plans require speculation, and indicate a government that is hell bent on taking your money should you NOT get sick, or should you need less education than you planned.  Social security is a very small suppliment as compared to actual costs of living, and health care remains problematic.

If you’re like most people, you probably have a little money in mutual funds.  At some point, if you have children, you might even open for them a custodial account.  As it turns out, neither of these options are available to expatriates due to the way they are regulated.  That is- they are regulated by the states and if you don’t live in one, many brokerages will not know what regulatory framework to apply (and thus protect themselves with).  While this sounds like a negative situation, it can have some advantages: there exist professional fund managers whose primary purpose is to maintain a balanced portfolio for individuals, given a set of goals.  Mutual funds charge money.  These guys charge money.  So long as they know what they’re doing, you’re getting about the same service, only your portfolio is kept balanced and the stocks are at least somewhat vetted, which is something many people neglect over time.  And you don’t need to be an expatriate to take advantage of the service.  You just need to have some funds.

Most Americans place their primary savings into their houses.  This is advantagious from a tax perspective.  If you live outside the country, doing so (a) may not offer you those same advantages and (b) may tie you to a locale in which you do not wish to live (either the current international location or some place in America).  This in turn can keep people from setting down roots in a community, which itself is probably bad.

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