Tax free, deferred, or taxable accounts for 30 yr old retirement.

This doesn't answer your question, but a lot of people working overseas in Asia find out some interesting things, such as: 1) they often pay a year end bonus often equal to at least two months salary and sometimes almost all your salary; 2) people open off-shore, secret (and illlegal) local currency accounts to stash away such bonuses; 3) up to $80k or so of salary is tax-except by the US, if the US expat works at least 11 months out of 12 outside the USA.

RL

I think it would depend on a couple of things. Does he plan on being in a higher or lower tax bracket at retirement? Does he expect an inheritance that may provide large unearned incomes later in life? Does he expect a large bonus or income increase that could phase out his "Rothability"? Can he predict or dictate how US tax policy will change in the next 50 years (I'm guessing No)?

We diviersify investments on a sector risk/return level, maybe he should also diversify his tax risk and invest in multiple vehicles.

No brainer. His U.S. Tax bracket is 0% right now. That means his retirement tax bracket is guaranteed to match or be higher than his current bracket. Roth IRA is the best option for this scenario (higher taxes in retirement than now).

Ch> Scenario: 30 year old will be working overseas (China). Annual

Thanks but there is no chance that this person would do anything illegal. I don't know about the bonus issue. Hopefully this will happen to him.

Thanks. I'll advise him to max out his Roth IRA first, then anything left over would go to his regular investment account.

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I don't deal much with overseas income, so I ask this question. If he shows no US income, how can he contribute to any US retirement account? IRA contribs are limited to the current maximum + any applicable catch-up amounts OR 100% of your reported compensation, whichever is less. His US income is 0.00, he shouldn't be able to contribute at all, right?

Just curious.

Oops, forgot all about that.

An > I don't deal much with overseas income, so I ask this question. If he

I have not thought of that. The company he works for is a US company with multi national offices. So I am not sure whether his income is considered US income. He is a citizen filing US income tax. Does that not make him eligible for an IRA?

Where would I look for answers?

That was my problem when I worked overseas. No US earned income, just interest income. Couldn't invest in a Roth IRA so I used tax-managed funds instead.

I believe that it does not matter if the company is US based or not. It depends on the residency status of the income earner. If the US citizen passes the bona fide residency test or the physical presence test then a certain amount of their income is excludable from US taxation under the Foreign earned income exclusion. If he can exclude all of his income (I think the limit is around $82,400) then he would show no US income and could not contribute to a qualified US retirement plan.

I would look up "foreign earned income exclusion" on the IRS website. Once you know what his US taxable income will be, you will know what he can contribute to an IRA or Roth. He still needs to answer the questions from my earlier post before he knows which is best, but I'm betting on the Roth being numero uno.