DINKs moving from US to CH - introduction and looking for advice

Share your story
1

New Mustachian here! Already big fan of the forum and digging through a lot of the material.

I’m posting here to introduce myself and to seek advice from the Swiss experts.

Background

We are a married couple, M33 & F34, I’m a Swiss citizen, who has never really lived in Switzerland and my wife is a US citizen. We are now moving to Zurich, and we are looking at how to set us up for FIRE in Switzerland.

First, the crispy detailed numbers:

Our current net worth is $850k distributed across 401k’s and our brokerage (IBKR). Most is tied up in VT and Vanguard target date funds. We keep our short-term cash needs in SGOV (0-3 months US treasure bonds).

We will be high earners in Zurich with a combined yearly income of around $850k.

Advise needed on financial plan

I’m looking for some feedback on our current plan for our finances.

Looking through the forum, this is what I gather would be best for our situation. We would like to keep it simple:

  • Maintain IBKR as our primary broker
  • Open bank accounts with UBS
  • Equity allocation: VT and use DA-1 form to reclaim dividend tax withholding
  • Long-term bond allocation: VAGX
  • Short-term cash needs: Hoping UBS has something to offer here.
  • Fully fund Pillar 3a
  • Still undecided on pillar 2a funding
  • Don’t touch our 401k’s until we reach RE

Here are the outstanding questions we have:

  • It seem to matter where the VT ETF is domiciled. Which would be the best option when residing in Switzerland?
  • Is VAGX the best option for long-term bond allocation? We would like this to be CHF hedged.
  • Any advice on where to park short-term cash needs? Should also be CHF hedged.
  • Any other advice for someone new to the financial landscape in CH?

Thank you in advance. If anyone regular meets up in Zurich to discuss finances, I’d love to be part of the community once we move there!

EDIT: Lot’s of good replies already! To clarify, my wife will be taxed as a US citizen, but I’m not a US citizen and won’t have to file anything in the US. We have checked this with our tax and immigration lawyers.

2

As your wife is a US citizen, make sure that there are no US tax issues (keyword PFIC) before investing in pillar 3a and/or non-US ETFs. I’m not familiar with the details but this could be a big risk. (And also check the inverse, Swiss tax treatment of 401k).

1 Like
3

I assume both of you will stay US people for tax purposes. That will severely limit your options for investing.

For instance forget about any non US investment vehicle (so probably no CHF hedged bond in your portfolio). (No pillar3 etc)

Also many banks might make it harder for you to bank with them (but UBS will definitely be ok). Consider keeping some US based banking and brokerage.

Also note that tax wise, for many people in your situation optimizing the swiss tax is not worth it (because US would tax the rest). But you might be at a level if income high enough that ZH taxes would start being higher than US federal tax (so some amount of optimization might start to make sense)

1 Like
4

Global equity ETF -: VT is still the best option for Swiss residents in terms of Taxation. However you should inform yourself about US estate tax jurisdiction on US domiciled ETFs. Switzerland has a good treaty with US but still some paperwork needs to be done by benefactors to be on right side of law.

1E plans -: Since you are high earners, you might be offered 1E pension plans by your employer. If that’s the case, then you can also enjoy tax sheltered equity exposure.

Tax deductible contributions to pension fund -: In addition , you would be allowed to make additional Voluntary contributions to your pensions and that is tax deductible. Limit might wary as per employer and fund conditions. You should make yourself aware of these provisions

1 Like
5

Many of those don’t really make sense for US people and will be a pain to deal with in case of mistakes.

(Eg pension contribution will only reduce swiss tax, not US so might not be very beneficial, plus likely can’t use vested benefits accounts with equity if you ever want to cash out due to PFIC rules, so you’d be stuck with large pot of money earning little interest)

1 Like
6

As far as I can read only one is US citizen. Other person is Swiss

7

My wife will stay a US citizen. I won’t have any tax obligations in the US. Since my income is around $600k of the total HHI, it will make sense for me to tax optimize as much as possible.

8

I learnt a new acronym today DINK.
I am not aware of any meet-ups but would be interested if there is any.

All the best for your move back to your homeland :slight_smile:

3 Likes
9

Thank you! Very excited.

I’ll arrange a meet-up once we move there and have settled in :slight_smile:

1 Like
10

Doesn’t have to be a US citizen to be a US person. This is a key point with respect to finances, to clarify soonish.

2 Likes
11

Short guide to CHF fixed income options should have all the pointers (incl. to more detailed articles for the various options).

FWIW you probably won’t get anything interesting from UBS, it’s going to be expensive and fairly low returns.

VT is US, probably best for you (esp. since you likely don’t even care about US estate anyway given your wife is a US citizen, and might be above the 60k threshold if you also have RSUs from a US company).

Note: this is super long duration, lots of interest rate risk make sure that’s what you want.

Got it, I wonder how it works in practice. Since you’ll be filing jointly for swiss taxes, I guess there’s some kind of complicated process to figure out which part of the joint swiss taxes can be claimed as credit to your spouse non-joint US taxes? (given it’s IRS I assume those stuff are non trivial and you have someone taking care of it for you).

1 Like
12

Right. I did talk to my advisors about this and to my understanding she will file married but separate in the US, I won’t file anything in the US and we’ll file jointly in Switzerland. I will clarify however and make sure I full understanding of this. Thanks for the heads-up!

1 Like
13

Thanks. I’ll take a deeper look at this!

Right. I’m just looking to replicate the standard Three-fund portfolio in Switzerland, i.e. looking for a CH hedged alternative to BND.

Good question. We do have advisors handling this for us. After the tax year, I’ll let you know how it went :wink:

Thanks for your help.

14

Also, whether IRS considers you to be a US person (for US taxes) and Swiss banks consider you a US person enough to NOT give access to financial services, are two independent inquiries.

Also note that Postfinance, as a de facto state bank at the federal level, is required to open bank accounts, at least basic ones, to any resident of Switzerland. Might be a better option than UBS, I suggest to also check it.

15

Thanks! Our corporate-sponsored relocator advised UBS as previous clients had success with US/CH couples banking there, so that’s why we are going with this option.

16

That’s great, yet I’d recommend to challenge or double-check anything they say. Eventually, it’s your responsibility, no theirs. I had tax advisors from a big, reputable firm when working abroad and their advice in some cases was just wrong. :roll_eyes: Luckily not in the US, I understand the IRS can be quite influental.

You should at least give some hint on the industry or level so we can put it into perspective :wink:

1 Like
17

Yes! I’ve done this the other way (from Europe to US) and these big companies make tons of mistakes that I’ve had to correct. I’m definitely checking up on their work!

:smile: Specialized manager at one of the US tech companies.

2 Likes
18

How would we have ever guessed? :roll_eyes:

I am afraid a significant part of your future colleagues is already here.

5 Likes