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Investment Planning for Immigrants

Investment Planning for Immigrants

My friends often talk about their investment strategies. They have 401(k) and Roth IRAs, health savings accounts, brokerage accounts, and investment properties. I live in a very nice area, and my friends are well-educated business leaders who had successful parents who taught them well. They are wealthy people. Their parents often encouraged them to set up their investment accounts in their twenties, and they benefited from compounding growth over decades. Many have education savings and investment accounts to pay for their children’s education. Some have just one child. Yet, they often seem incredibly stressed about finances, investing, and retirement. They often tell me I am lucky not to have kids because it’s too expensive and tiring.

As an immigrant, my financial obligations are far larger than that of my friends. And I do not have support. I have to do my investing and retirement planning to ensure I can support myself and my extended family. I am not just planning for my retirement. I am planning everyone’s lives and their retirements as well. I am the backstop. Yet, I do not have anyone to bail me out if I even need support.

What makes it hard is the limited influence one has on their extended family. If I had kids, I could guide them and help them avoid expensive problems in life. I would have visual oversight of them with daily contact. For my extended family, while I financially support them, I do not have as much influence over their decisions. How do you influence the decisions of a parent or sibling? They are adults, and they think they know best.

For example, my father recently sold my childhood home to pay down debt because of a bad business investment. My parents had to go live in their village home, which is called a dacha. Then my sister asked my parents to sell their investment 1-room apartment, which they had bought with money left from the sale of my childhood apartment after the debt was paid. This apartment was meant to give them some monthly rental income for their retirement.

During the war in Ukraine, I had to get my sister, nephew, and half Ukrainian brother-in-law, with Ukrainian last name, out to Mexico on very short notice. Moving them cost me $35,000. That is a significant amount. This is not counting my lost income and lost health due to the tremendous effort, prolonged stress, and weeks of working around the clock. We barely got them to leave the country. I had to buy multiple airplane tickets because they were not allowed to have a layover in some countries without visas, and visas were not possible to obtain. The plan was to bring my parents and brothers next, but after all the work was done to set up my sister’s and her family’s lives in Mexico and sort out their documentation, they suddenly decided to go back.

When it’s your immediate family, you would usually plan such a large expenditure and defer things until they were manageable and more cost effective. As an immigrant like myself with an extended family, I am financially obligated over actions and needs I often cannot control. So, while I plan for my family, my planning often changes if they make financially poor investment choices, or something happens out of their control. I have found that careful planning is less important than keeping a large savings buffer. Strategic and operational flexibility is more important than a plan.

Investing has always been difficult. I have lived in multiple countries. In each country, I would set up a retirement account to benefit from tax-free or tax-deferred benefits and make my contributions. Yet, I never had the opportunity to see the benefits of compounding interest and re-invested dividends. Interest needs time to have an impact. A very long time.

Each time I moved, I had to decide if I should keep the account or cash it out. Rolling it over to my new account in my new country was not even possible. Keeping the account open has many other problems. I have a bank account with money in it, but I cannot move the money. That bank authenticates the login with an SMS but will only recognize a phone number with that country’s area code. I have long since given up that number. The bank will allow me to change my mobile number, but first, I would need to log in and be authenticated with the number I no longer have. The support desk is of little help. They take months to respond.

In another case, I want to pay the taxes owed. It’s not much, but if I owe it, I want to pay it. I have no means of contacting the revenue service in that country. The phones are never answered, and my emails get a response after three to four months. The two checks I FedEx’d were returned since they could not locate my tax account and were unwilling to follow up to authenticate my ID. They basically wanted me to stop bothering them.

In another example, I decided to keep my retirement account in Canada. Yet, I found out the Canadian Revenue Agency would impose a 1% per month penalty on any deposits made while I was not physically present in the country. This is why I have to close accounts as I move.

Americans spend their entire lives trying to understand one set of tax codes and investment options. As an immigrant, I had to spend just a few years mastering each country’s tax code and investing options. And then I had to leave and start over.

To pay for my MBA, I had to sell my house. Yet, that was not the only reason. I was very worried about having so much of my wealth tied up in a foreign country. Many things could go wrong, including the illegal seizure of my property. So, I had to sell and give up the asset appreciation. And pay the full taxes, and get permission from the revenue agency to transfer the money. And pay the transfer fees to the bank and revenue agency. In all the situations above, I did not want to give up my investments. Yet, I had to do so, and often, at a time that was not beneficial for me.

Many of my friends have seen incredible compounding gains from holding 401(k), and Roth IRA accounts since their twenties. Now in their sixties or seventies, they have benefited from almost fifty years of gains. The same applies to their homes. They have greatly appreciated in value. Most bought amazing homes when they were in their thirties and will sell those often fully paid-off homes, downsize to a smaller home, and live off the profits.

Many will not have to downsize. The fifty years of returns from their 401K and Roth IRA accounts will be sufficient. As immigrants, we almost never have the time to fully benefit from the two sources of the greatest wealth creation (time-based home and equity appreciation), as much as people born in the USA. This is something that investment advice does not take into account when advising immigrants. This is why I had to study investing for myself and make my own decisions.

Yet, as an immigrant, each time I move and give up what I have built, I am making a bet on myself. It is an investment I can fully control. It is the only investment I can fully control. That is the path I have taken. My American friends and neighbors slowly built their wealth because they had the power of time on their side to let their assets appreciate. I could not do that. By the time I need my 401(k) and Roth IRA, those investments will not have as much time to grow and compound as my American friends.

I set up my 401(k) last year at the age of 41, only after I was sure I would not move again. I was tired of having to close accounts and lose money. The compounded gains will not be as significant over twenty or even thirty years when compared to my friends. That is a hard barrier I cannot change. Most people try to overcome this hard barrier by making risky investments to earn higher returns to make up for the shorter investing time period. I am not going to do that. I worked too hard to build what I have, and I cannot afford to lose it.

So, what could I do? How would I overcome this barrier? I had to invest in myself to rapidly create wealth and, thereafter, invest it in property and equity. My solution has been to earn more. Then I invest it modestly. Most people focus less on earning more, and pursue aggressive, another word for risky, investments. I would rather invest a hypothetical $1,000,000 and earn 3% after inflation and taxes than invest a smaller $100,000 and aim for 10% after inflation and taxes. The bigger the principal investment, which I get from investing in myself to increase my earnings, the less I need to chase returns. And given the hard barrier of too little time, those returns will not compound as fast anyway. The stock market works over long stretches of time.

I know the salaries of consulting equity partners, investment bankers, and the like. I mentor many of them as my clients. When I looked at the obligations I had for my family, it scared me. When I did the math, I realized that, even as a senior banker or consulting partner, I would need to stay in an apartment, or a very basic house, for probably most of my life, work in a job I did not like, and just barely earn enough to take care of everyone.

If I achieved all of this, I would not be having a great life. I would just get by. This is me working as a corporate finance banker when I did not at all like being a corporate finance banker. And I was good at my job, getting promoted in 6 months to director. I did not just want to get by financially in a career I did not like. I wanted a full life. That is why I built an authority-based business. The goal was to bet on me and build a business around my name that could never be taken from me. Earn more. Invest wisely without chasing risky returns. Help more people. And live a happy life while caring for the people I love.

An authority-based business is not for people who want to get rich overnight. It is betting on yourself and building a business for the long-term. If you are inclined to build your own business the way I built mine, potentially initially on the side while working full time, and want Michael and me to coach and guide you through the process, you are welcome to learn about The Authority-Based Business coaching program and apply to enroll. Levels of effort and installment options are available.

Here are the details:

https://www.firmsconsulting.com/authority-based-business-program/

Take care,

Kris Safarova

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