Settling back into the hazy, lazy days of winter, it’s been three weeks since Diane and I returned from our Australian trip that featured our first-ever work exchange stint and some sightseeing in Melbourne and Tasmania. As Chinese New Year “officially” comes to an end tomorrow after the 15th day, things are finally beginning to return to normal. Unfortunately, statistics show February is the hottest month of the year with the most hours of sunshine and least amount of rain. While we expected that, we didn’t expect the odd phenomenon of a strong El Niño combined with Global Warming to make it even hotter than normal.
According to an article in The Washington Post making headlines, scientists using NOAA (The National Oceanic and Atmospheric Administration) data seem alarmed at the average temperatures in the Arctic during what’s supposed to be the coldest deep freeze of the year. Normally, those living in Malaysia would shrug and say “Yeah, so what?”. But looking carefully at the images depicting the level of abnormalities, I noticed that Peninsular Malaysia, Sarawak province and a small piece of Vietnam are the only places in all of Southeast Asia in dark red, designating temperatures from 2 to 4 degrees Celsius above seasonal norms. With daily temperatures hovering at 34 to 35 (94 to 96 Fahrenheit) and humidity that’s been hovering i the 70 to 85% range all day, it’s been hot. And uncomfortable.
Normally, Westerners (myself included) love and worship the sun which makes the winter months an ideal time to visit Penang but when the sun gets too hot for sunbathing and walking means sweating profusely even in the shade, it’s time to start hoping for rain. Like ski resorts desperately waiting for a snowstorm in dry winters, local Penangites are talking about how hot it’s been. Combined with GST, a weak currency and the slowdown in China, most Uber drivers agree it’s been the quietest Chinese New Year they’ve ever seen. Based on the one night of festivities we saw for Hokkien New Year, this is actually fine by me but you’ll have to excuse us during these next few weeks if our posts make its seem like expat life in Penang is quite uneventful and boring.
Without vehicles, Diane and I usually supplement our shopping trips on the bus and Uber with excursions to local museums and other sites of interest, a day trip to The UNESCO area of Georgetown and hikes on the Batu Ferrenghi Aqueduct Trail that’s beautifully shaded, full of friendly monkeys and usually isolated. Taking advantage of a partly cloudy day last week, we hit the trail and reached the spot where the dusky leaf monkeys hang out. Normally very shy and timed, maybe the heat affected their mood as a large group of juveniles actually jumped down to the trees so close to us it almost seemed like they wanted to jump on us. Unlike the more personable macaques, dusky leafs are vegetarian and usually don’t approach humans. Adorably cute, they stayed around for about 45 minutes until the sun started to rise higher and the family leaders decided it was time to hit the other side of the path that’s more shaded and further into the jungle. Never tiring of monkey watching, I consider outings like this one of the best ways to see monkeys in their natural environment having fun.
Lately, however, I’ve been hitting the condo’s gym just before sunrise to avoid severe dehydration, writing a post and hitting the pool for the most of the day. Immersed in a period before traveling again, we’re also trying to save money after spending a bit more than planned in Australia (OK, way too much actually). With Myanmar next on the list, we’re expecting to spend a lot less but I’m still watching the finances carefully. On that note, let’s talk taxes !! As I’ve alluded to in my recent post, living below your means and sacrificing current cash for tax purposes can pay off handsomely and for the last time in the foreseeable future Diane and I get a five digit gift from the Federal government. Ironically, moving to another country after having worked a partial year in the USA usually yields large refunds, especially if you contribute as much as possible to a tax sheltered retirement plan while still working.
Having worked for us three times, it’s not a great mystery. Payroll taxes are withheld by your employer at a rate that assumes they pay your full salary over the course of the entire calendar year. Even if you don’t cut your taxable income, you’d probably still get a refund due to over-payment of tax due. Of course, retiring means you’d have no other income for the year except for capital gains, bank interest (ha) and fixed deposit interest. Taking a sizable capital loss once in your life can’t hurt either since you’re allowed to carry over $3,000 every year forever until it’s all used up which reduces taxable income. Purely by luck, we took almost all our investment funds out of the market in 2008 to raise capital for a large down payment on our highly overpriced suburban Bay Area house. Getting most our cash into a mortgage, we missed most of the 45% drop that battered most portfolios and we started investing again in 2009 at the start of a new bull market.
The biggest misnomer that people don’t know is the ridiculous rule about taxation for American citizens. Only the dirt poor nation of Eritrea and the USA taxes its citizens on worldwide income. Simply put, this means American citizens earning anything higher than the standard deduction amounts must file tax returns FOREVER no matter what country on earth they live in. Working expats get an exemption for about $90,000 USD but professionals often earn much more than that and it’s all subject to taxes. We’re also lucky enough to file something called a FBAR. Tracking every penny we own, Americans need to report ALL their overseas assets including bank accounts, trusts, overseas retirement accounts, real estate holdings, foreign brokerage shares and just about anything else that’s considered a tangible asset. Even if you’re lucky enough to earn too little income to file a tax return (often the case for middle class retirees), you still need to file this form.
And if you’re lucky enough to be wealthier than us in retirement, there’s a new form for complying with the evil FATCA legislation that Obama squeezed past everyone after years of delays during the Bush years that monitors high net worth people like a cat watches over a mouse. Usually too complicated to file yourself, most American expats use a cross-border tax firm that specializes in knowing all the gobbledygook and we’re no exception. Changing tax firms now that we’ve moved overseas, I promised my new tax guy a shameless plug. Probably one of the better firms around the world for filing US expat taxes, Greenback Tax Services deserves a first class endorsement. Having just contacted them in late December, they assign new clients a professional tax specialist who sends you an appropriate questionnaire and really gets to know you through email correspondence.
Explaining our past situation took a few emails and some clarifications about why we’d be expecting a large tax refund given our modest means and status as early retirees earning no income. After explaining a lot of the concepts I’ve shared on this blog, our professional tax specialist understood and asked all the right questions before all of our 2015 tax records were available. Allowing for a simple and quick e-filing as soon as our last required 2015 tax form was available, his advance prep work helped make the process painless and simple. Uploading all your records on a secure server, it’s all very easy and priced according to what returns you need to file with no hidden fees of any kind. Our assigned specialist is Nicholas Roscher. Hailing from New York City and an expat himself residing in Spain, he sports a highly impressive profile on LinkedIn and answered all our questions in a very timely manner. Give him a shout if you find yourself needing an expat tax specialist.
Finally, on the political front, I always shy away from that topic when it comes to the blog. Making a rare exception, I will say that the world’s fascination with Donald Trump’s dangerous quest to become America’s new president followed us everywhere we went in Australia. Uttering more than two words to almost anybody from waiters to tour guides with my obvious American accent almost instantly morphed into a conversation about ” So explain America’s fascination with Trump”. Unwilling to lower myself to the level that’s become the 2016 Presidential Campaign, I won’t even dignify the topic with an answer. Rather, I’ll briefly explain my very non-partisan view on American politics.
Neither favoring Republicans or Democrats, I’m in favor a complete and total overhaul to the fundamentals of what’s called “American democracy”. Completely broken, the political system in America started deteriorating in 1980 with Ronald Reagan’s election. Beginning with an overhaul of the old “progressive tax system” that favors the élite, Wall Street, large corporations, and a handful of industries like big pharma, food and oil, the wealth disparity in the USA is on par with third world African nations and dictatorships. Once a proud nation with a manufacturing based economy, the US economy runs only on over-consumption, consumer spending and a system that keeps 80% of a financially ignorant electorate sacked in debt, working until they die and unable to achieve what they once called “The American Dream“. This is not my opinion; it’s a statistical fact. Simply put, Americans never take responsibility for anything because finding a scapegoat is easier and Trump’s appeal takes full advantage of this by spewing off racist crap and blaming everyone and not addressing real solutions.
Several solutions exist like establishing a practical third-party that can win an election without the billions of dollars donated by lobbyists and special interests. Another possibility is ditching the obsolete “electoral college”. Written for a 19th century nation of mostly rural uneducated farmers and created with the belief that citizens weren’t sophisticated enough to allow a popular vote as the last word, California’s vote hasn’t counted in decades despite its large number of electoral votes. Already decided by a few “swing states” where the candidates waste all their time coveting, West Coast voters needn’t bother voting because CNN already calls the election six hours before the polls close. But those two ideas will likely not be seen in my lifetime. Or will they?
To answer all the Australians that I offered no comments for and for the benefit of anyone who’s curious but unfamiliar with what’s really wrong with America, I came across an article the other day that addresses the fundamental problems I’ve mentioned but explains them a lot better than me. Bernie Sanders is a small potatoes senator that’s never had any other income other than his political salary. Advocating himself a “socialist” candidate even though most Americans have no clue how real socialist policies might affect their lives (sans expats that have lived overseas), he’s actually beginning to attract a large enough movement of the same frustrated voters smart enough to recognize Trump for what he really is (A Fascist with no political cause), I’ve been given a glimmer of hope that maybe, just maybe, there might be some real alternatives to The Power Elite currently ruling the world. I highly urge every single reader to check it out.
Please click this link to read the article. And that’s all I’ll ever say about American politics because this is an expat blog about our experimental foray into early retirement overseas and not a place for Trump bashing (although it’s highly appreciated).
So for now we’re of to the pool.
Cheers from Penang and good luck to America’s citizens.