Serge

Financial Education for Serge Families

In 2020, we were introduced to Serge and began having one-on-one conversations with Serge families to help with making smart money decisions. While no two families are alike, several themes have emerged in these conversations. Here are some common financial challenges faced by Serge families:

Six Common Financial Challenges for Serge Families

1. Retirement Planning

You have access to a robust, low-cost retirement plan through Serge. However, there could be missed tax savings opportunities — especially when considering marginal tax brackets and ways to minimize taxes over your lifetime. Commonly, Serge families have a very low marginal tax rate, or may be paying no federal income tax at all. Deferring income tax on retirement funds may be resulting in paying more tax in retirement rather than less. It is important to understand and manage marginal tax rates for life.

2. Emergency Planning & Repatriation

Many in your field maintain low cash reserves. For American families who live overseas, we often say: "You're flying 600 mph at 50 feet off the ground." Having more cash is like having more altitude. If something goes wrong, you have options. It is worth considering building a larger emergency fund, and planning for a potentially costly return (repatriation) to the U.S.

3. College Planning

Your low income might open the door for need-based aid. With thoughtful planning, your FAFSA Expected Family Contribution (EFC) could be lower. However, holding too much cash may reduce aid eligibility. This creates a balancing act between college savings and emergency planning — particularly as kids approach their teenage years. We have found it helpful to get help with this subject. One option is www.kc360.co.

4. Tax Compliance / Tax Returns

This is a significant source of stress for some Serge families. Some of you navigate filing tax returns well with TurboTax or other common tax filing programs, while others encounter more complex questions around the Foreign Earned Income Exclusion (FEIE), reporting U.S.-based income, and state residency considerations. There’s no one-size-fits-all approach. Serge families often struggle with correctly filing tax returns.

5. Tax Planning (Now & Future)

Many Serge families might not be fully utilizing their current low tax brackets to potentially reduce future tax burdens in retirement or upon returning to the U.S. While income is low, it is possible to buy future taxes on sale, and push deductions into future years when taxes might be higher. This is a complex issue that requires thought.

6. Managing U.S.-Based Assets

Some families we’ve spoken with have investment accounts, real estate, potential future inheritances, and family wealth that may be impacted by the host country tax regime, have significant carrying costs or risk, may be creating future financial problems, and are disjointed. While some manage these assets effectively, others may benefit from revisiting their approach from a contextual viewpoint.

Let’s Connect

If any of these topics resonate with you — or if you have other financial questions — I’d love to connect.

Click this link to schedule an appointment.

Disclaimer: If you're not currently a client of our firm, it’s important to note that as a CFP® regulated by the Securities and Exchange Commission, I must avoid providing financial advice to non-clients. My conversations with Serge families should be considered financial education - guiding you to resources that will help you make informed decisions about your money.

Bryan Hancock, MBA, CFP®