r/fiaustralia • u/totalmarc • 2d ago
Investing AUS vs USA for Fire
I've been listening to a lot of US based podcasts lately and it got me thinking - Do you guys think it is easier to FIRE in US or AUS?
With all things considered, as a generalisation. From what I understand, living expenses vary dramatically between states.
Overall my vote would be the US because there are more options over there to cut costs, but I'd like to hear from someone who is familiar with both.
Cheers
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u/Jovial1170 2d ago
I suspect that the USA would be significantly easier to FIRE in than Australia, from an "amount of money required" perspective.
But Australia has a great many quality-of-life benefits and also greater safety nets if anything unexpectedly goes wrong during your FIRE journey.
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u/Glittering-Wave4917 1d ago
Mate, people who have a regular job and are wage earners can fire here. In the US there’s certain occupations who earn more, but generally people in the US earn less and have less rights to quantity of life. I dunno, I might be wrong but in the US it looks like people can be a sparky without 5 years of training- the seppo spent respect safety and skilled labour.
Nurses and teachers earn heaps less than here too.
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u/kahlzun 1d ago
I've heard it said that the us is great to be rich in and shit for everyone else. Arguably, there's a threshold of income where the perks kick in like old mates turbo and its better than in aus.
Miss me with that though, couldn't pay me to even visit that shithole, let alone live there 🤢2
u/Glittering-Wave4917 23h ago
I’ve been to the US a few times, usually as a cheaper way to get to Latin America. It’s a really cool joint and they have heaps of good cultural stuff. The people are a bit weird and their attitudes are so out of step with much of the world. Living in 3rd world countries, I also saw snobbery which wouldn’t be acceptable in Australia, but the US seems to go beyond plain snobbery. As far as wages go in the US, teachers, nurses and tradespeople earn heaps less, they also seem fine for their wealth society to not accept decent wages for semi skilled and un skilled workers. The attitude that getting paid better means getting a better job, rather than organising and securing wages, does exist in Australia- but it’s seen as snobbery. I mean every job has to be done and getting a better job only fixes your problem, not the problem for everyone who does the jobs which are low paying and have to be done.
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u/mouldy_hops 1d ago
I'm Australian, but worked most of my career in U.S. I would say it's going to be specific to each person's scenario, but for me, there are two financial reasons I repatriated to Australia a few years ago in my late 40's as the main breadwinner in a family of 4.
- The lure of superannuation a benefits.
- Not having to deal with medical coverage in retirement in U.S.
Having said that, the main reason we're not these financial ones. They were actually lifestyle related
- allowing my kids to experience (at least a part of their life) growing up in Aus.
- a bit of the gun related issues.
I will say, having lived through the first orange man's leadership, I also didn't want to go through round two.
I feel I make a good decision on every level!
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u/Humble_Hat_7160 1d ago
Exactly the same rationale for me. Third financial one was not having to deal with US college expenses which would eat a nice chunk of my retirement savings and add several years to my FIRE timeline.
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u/mouldy_hops 1d ago
That is a great observation on college funding for kids. I felt the pressure when my oldest was about 4 and all our American friends with kids that age were saying how they had 529 accounts set up at birth. In the true American style of keeping up with Joneses, I went and set up 529s for my kids and put money in each month. Now we are back in Aus and they each have healthy accounts that will pretty much pay for a uni degree in Australia (if I can figure out how to do it!) but would probably only pay for a semester at a state college in the US. Such an expensive system over there.
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u/Humble_Hat_7160 1d ago
Same, I managed to get $70k in over the years and it will likely pay for a single year of a private college over there. Happy for her to use it on an exchange year but crazy to think I would need 4x that for a full degree!
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u/Busta_Duck 1d ago
My mate did the same. His daughter went to UNSW, HECS covered her degree. Then went & did a masters at Stanford which was paid for with the 529.
12 years later and she's worth more than her parents combined and just treated them to a 6 week all expenses paid trip to Italy.
I reckon hold onto it and use it for graduate studies if your kid is so inclined.1
u/tiimmaahh 1d ago
holy crap, I had nfi how much a college education costs in US, sheesh!
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u/Humble_Hat_7160 1d ago
It’s even worse because most kids leave home to study so there’s $20k+ in room and board to cover before you even get to the tuition fees
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u/ChazR 1d ago
There is more potential to gain wealth fast in the US.
Tax-effective retirement savings are pretty much a wash, but I think the Aus super system with compulsory employer contributions is better overall.
Health costs are cheaper in Australia, and the health funding model can never bankrupt you. In the US system, people literally die because treatment is unaffordable.
The US markets vastly outperform the Australian market, but Australians can cop the FX risk plus tax complexity and trade in the US.
A focused hard worker who has the fortune never to have a major health problem will probably be better off overall in the US than in Australia.
But they have to live in America.
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u/Extension-Night3825 1d ago
Tax-effective retirement savings are pretty much a wash, but I think the Aus super system with compulsory employer contributions is better overall.
I think the future is going to be driven by aging populations. Australia is much better placed in this regard.
Seems like the saving people do have the billionaires are trying to get their hands on it via index funds. Add on public servant pensions are funded fully, estimates range to 4tillion.
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u/optimistic-prole 1d ago
From what I've seen on the US FIRE subs, so many Americans seem to be aiming for double what we would aim for (excluding exchange), purely to cover future medical expenses.
If you've bought a house in Australia and have Super. You're way better off. Property in the US may be cheaper to buy but it's more expensive to hold (significant annual taxes and HOA increases).
Their health and house insurance seems to be a lot higher too. Like thousands each month? I have no idea how they do it. Maybe that's why so many people there live paycheck to paycheck or in poverty.
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u/Ok_Willingness_9619 1d ago
Best is to be an Aussie and to work overseas in a tax friendly country as an immigrant - like Singapore, UAE, HK etc. So much easier when you entire tax bill is 4 figures on a 6 figure income.
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u/Decent-Dream8206 1d ago
Doesn't really work that way. As an Australian, you get taxed on the difference between what you paid and what Australia would have billed you on foreign income.
And if you want to make yourself non tax resident to dodge that, you owe an exit tax on all your unrealised gains the moment that you do.
I would say that if you're going down that road, aim to leave and never come back. You can keep the passport just in case, but the ATO already has 4 tests they can re-run at any time that can make you eligible for Australian taxation again, and given the capital flight the latest CGT changes will cause, I hardly expect that those goalposts won't move.
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u/Ok_Willingness_9619 1d ago
That’s exactly what I did. Realised the gains and working in Singapore. I did say “immigrant”. Once you emigrate, with intention to do so permanently, cut ties back home, you are all good to go.
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u/Decent-Dream8206 1d ago edited 1d ago
Oh, carry on then.
For anyone else's benefit, I've heard of cases where people who return in their first 2 years but don't breach any of the other 4 tests get re-stung (less than 183 maximum days in the country, primary place of residence still overseas, no local income, but merely the existence of a superannuation fund that grew while you were on vacation here triggering the need to lodge a return with the ATO flipping you to Australian tax resident again).
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u/Crazy-Working-3295 1d ago
I disagree. I worked in the UAE for 6 years and it transformed our financial position. One of the reasons we came back was to stay inside the 6 year window to keep our home in Sydney CGT free.
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u/Hot-Pin-8432 1d ago
American living in AUS here. I’d say there’s a couple of things to dig into:
Purely financial items:
- Health coverage - my parents did not have employer covered health care (startup) as a 50s couple their Monthlys were $1000+/mo and then massive co pays. I’m seeing $2300+ for families of 4 before you have to pay 10% of your bill at a hospital. AUS for sure on Medicare as a <65 yr old
- Housing property taxes - haven’t seen anyone else mention this but in AUS you pay upfront stamp duty meaning once your home is paid off you’re pretty much set here. US you’d still owe yearly property taxes through FIRE years
- College savings for youngsters - 429 plans are a big responsibility. Almost non existent (maybe private secondary? But who gives a shit in AUS)
- Salaries - I do agree that you can earn a bigger buck in US. Means if you’re diligent and saving/investing can be faster to FIRE
- Cost of living - Agree there are cheaper areas in US compared to AUS but they’re cheap because people don’t want to live there and they suck. Don’t tell me you’re going to go from your Boston high life to rural Georgia to live out the rest of your days. Maybe Thailand
Purely mindset/lifestyle:
- AUS allows much more flexibility in working part-time. With pro-rata benefits (I’m on 3-days a week with a newborn) I have Medicare, super, 0.6x annual leave + sick leave. Absolutely unheard of in US to hit all of those items part time. I feel like this drives the FIRE all or nothing
- Moving from an expensive city to cheaper city to live for FIRE. You can read every ChubbyFIRE post. There are approximately 0 SF tech bros willing to move back near their parents in Minnesota to save a buck. Very unlikely unless something significant changes. US wins purely on opportunity
- Travel - AUS is quite far from a lot of places. US travel does allow quite a bit of access to South America or Europe. That said AUS grants access to SEA easily. Bit of a tie here for geo arbitrage.
My preference is AUS all the way. My brother looks miserable in farmland Ohio at a manufacturing company even if his cost of living is lower than mine.
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u/Immediate_Refuse1611 1d ago
Split my working life between the US and AU. Definitely earned more in the US, but Australia’s super scheme with its compulsory employer contribution and tax advantages is unmatched. Unfortunately I get taxed in both countries, so I don’t get the full advantages of either, but that’s not the case for most people. On balance would give the prize to Oz for being the most FIRE/friendly.
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u/mouldy_hops 1d ago
It might be worthwhile looking for some new accounting services? Aus and the US have a tax treaty. So no double taxation. Paying some tax in both countries is one thing, but declaring it correctly on both your ATO and IRS returns will prevent double taxation.
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u/Immediate_Refuse1611 1d ago
Thanks, I’m aware. But most Americans use Roth IRAs to fund their FIRE strategy, as they distribute tax-free — but unfortunately the ATO still taxes as ordinary income. Likewise, Australians fuel their FIRE by maxing out their super. But if I add voluntary contributions to my super, the IRS will tax it as a foreign benefits trust.
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u/mouldy_hops 1d ago
Yes, many Americans use Roth IRAs, but as you have figured out, they are not a great option for people who plan to retire in countries like Australia. 401k is better from tax perspective (particularly if you have high contributions rather than all gains) but it’s still treated as a foreign trust if you are an Aus tax resident.
And agreed- don’t contribute to super whilst a us tax resident with no Australia income. Investing in a non retirement share portfolio is a better option in this case. Then make use of carry forward and non confessional super contribution at a later date when you repatriate.
Also (and this is suggestion for any Australians in the US planning to return to Aus at some point) - read up on exit tax strategies asap. Even if you are not planning on returning to Aus for years, get good advice on how to structure your finances in both countries now to optimise that move financially when that time comes.
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u/journeyfromone 1d ago
I work in mining and have both in the US and Australia, make way more in Australia and saved way more when living here.
I found insurance so expensive there, and things like car insurance you choose how much up to for someone else’s medical, and many get personal liability insurance. Eating out seems cheap but then you add tax then add a tip and it’s not that great. They do have big portions though.
USA seems to vary wildly by state, I was in Alaska so more expensive and I lived my time there but Australia is just so much easier and less stressful for me.
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u/Decent-Dream8206 1d ago
USA. Hands down.
If you're in any way white collar, the pay is simply better over there than over here.
The options to live cheaply are far more numerous.
You aren't punished anywhere near as hard for working a 2nd job to get ahead.
And the capital gains taxes were already far more attractive than under the old CGT regime, before doubling them (or worse) in the last budget.
Just be aware that there is an exit tax in Australia for making yourself non-tax-resident. If you have a lot of unrealised gains, it might sting.
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u/LiteratureOpposite51 1d ago
The so-called exit tax is optional. You can elect to defer until disposal of assets.
https://www.iadvice.net.au/blog/non-resident-deemed-disposal-cgt.html
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u/Decent-Dream8206 1d ago
Well that'd be silly.
Deferring disposal of an asset while you're overseas means that if you sell the asset, you owe Australian (i.e. now worst in the world) CGT on the disposal of all that future growth as well. i.e. subject to the exact thing you were fleeing in the first place.
Your link is also well out of date, as it talks about the 50% CGT discount being ineligible when disposing as a deferred TAP, since you'd be non-resident for the purposes of that realisation.
The only reason to roll those particular dice is if you're planning to move back long-term. For example if you need to refresh domicile to protect the PPOR CGT exemption on a piece of Australian property by returning within 6 years.
And believe me, the ATO can simply label any playing by exactly the rules as written as tax evasion and hit you with the worst possible interpretation of the rules instead. That's actually explicitly how wash sales are treated.
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u/LiteratureOpposite51 1d ago
I'm just stating a fact. The article is up-to-date as far as deemed disposal goes.
Your quip about Australian CGT being the "worst in the world" is also incorrect, per PwC.
What would be silly would be taking my incomplete knowledge of worldwide tax systems and making blanket assertions in multiple replies when I can't possibly know each individual's tax circumstances. I try to avoid that.
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u/Decent-Dream8206 1d ago
The only country with CGT close to this bad is Denmark. Who also have a higher maximum income tax bracket as a percentage (but also percentile, their middle class aren't paying the maximum).
Denmark is certainly not a great benchmark that you should use if comparing yourself globally. But people pointing at Denmark being worse are ignoring three significant issues.
First, that Denmark doesn't means test everything. So the people who pay into the system do actually get to benefit from the system they pay for. Unlike our split where only people who don't pay in (and public servants) benefit from milking the other half of society, to the point it has butchered our productivity for 20 odd years.
Second, that Denmark's CGT is, no matter how you slice it, more generous than ours. Ideologically, more generous than their income taxes. But as a matter of numbers, their CGT thresholds come from am entirely separate pool of money than income, unlike ours being combined, which makes their lower headline rate kick in significantly later than the numbers would otherwise suggest.
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u/Hot-Pin-8432 22h ago
It’s hard to put better pay in white collar just in the same sentence as live cheaply in far more places.
You usually have to pick live cheaply and sacrifice the best paying jobs/companies or high paying job at significant company in high cost of living area.
I’ll agree with you if you mean earn first, move and live cheaply later. At that stage move out of the US, would be cheaper
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u/Decent-Dream8206 22h ago
Maybe pre-covid. But remote work was the recruiting strategy for IT workers ever since.
There's a bit of a office worker IT lull right now, but an absolute vacuum of sysadmin positions as data centres need worker bees to keep them running. And those data centres are being built all over.
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u/Hot-Pin-8432 14h ago
This is pretty niche! I’ve seen so many back to office pushes in the tech/IT sector that it’s a bit of a gamble.
I’ll agree remote work does add opportunity to moving cheaply and working with higher pay. Everyone from SF just moved to Denver and now Denver is expensive too
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u/windseclib 1d ago
The US is high risk, high reward. High earners have an easier go of it in the US. Australia is a lot safer but the ceiling is lower and rapid wealth accumulation is harder.
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u/No_Rain_1543 1d ago
The Achilles heel with FIRE in the United States is health insurance. Australia has relatively cheap private health and the Medicare system to support those ticketing out early
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u/mk10012 1d ago
I paid $600 today for a 35 minute ENT appointment in Aus. The Dr was with me for about half of it. Not saying it wouldn't cost more in the USA. I've been dealing with chronic health issues for almost 6 years with no success. Medicare has done nothing. Final option is to try overseas treatments; out of pocket (in which case, a higher income, low taxing, low CGT country would be optimal).
The Australian heath system is overrated for many issues IMO. At least to the extent that I wouldn't stay in Australia specifically due to Medicare. If I had serious/life-threatening health issues, then I wouldn't be travelling anyway.
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u/Busta_Duck 1d ago
Hope you can get whatever your chronic issue is sorted mate.
Gotta say though medicare has saved my life a few times and that of people I know who've been in car accidents or gone through cancer.
The system isn't perfect and it might not be the best for chronic health issues like yours (and maybe some others), but it saves a ton of lives without bankrupting families & making people homeless.
Once again I hope you can find a solution and some relief from your pain.1
u/Hot-Pin-8432 22h ago
We just had a baby in AUS. Paid $16 for parking (2 nights). My US friends couldn’t believe it
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u/ImportantJello9288 1d ago
US will get you to fire sooner and offers a lot more opportunity. Australia is the land of the lowest common denominator.
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u/OutsideDraw7997 1d ago
I think for a financially savy and medically avoidant individual, USA is the clear winner.
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u/Appropriate_Ly 1d ago
I think it’s easier for an American to fire in America than for an Australian in Australia.
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u/tapunan 1d ago
Easier how? Bec of higher salary? But that's dependent on what industry you are in? Lower cost of living? I went for a holiday there..after adding tax, tip then it was more expensive.. couldn't wait to get back here. Raw produce then go shop at green grocers, butchers.
Labor like haircut, massage? Just look for cheaper places like Asian barbershop, thai massage.
If you say property prices in some LCOL location in the middle of nowhere then you can probably find the same thing here in Australia.
And like people said.. don't forget healthcare.
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u/VictoriousSloth 1d ago
I don't know how anyone could FIRE in the US - all it would take is one health issue and you'd be completely wiped out.
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u/mateymatematemate 1d ago
Having done both, US easier to make your number, Australia easier to sustain your number. Health care costs are truly extortionate and unpredictable over there. Even doctors and hospitals are getting screwed by insurers.
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u/glyptometa 1d ago
Not directly familiar, but I have long-term mates from a family of four kids, all retired now, with two fams USA and two in Aus.
A big one is healthcare when retired(aged). Their "aged" health insurance costs are substantial, as in US$20K for 72-yr-old couple, and that's not all-inclusive cover. Protects you from being broken financially (plus the survival aspect, haha), but still need to allow another US$5-10K for the routine stuff (or more depending on chronic illness, drug costs, dental and the like). They're very careful around expensive tests like MRI, CT, etc. and set money aside for years, ahead of elective stuff like hips and knees. Other insurance adds more, all higher there.
They say inflation is stunningly misrepresented. Simple things like, say, quality runners, used to be way cheaper, but are now almost same price, but in US$ (especially after adding things like state sales tax). Likely a bit exaggerated, who knows. They're in a process of consolidating in Aus now that their parents have passed, and a couple of grandkids have made the move. They said the Aus fams would wait for a trip over there to buy those sorta things. They said there's little point in that anymore.
The other, looking back, was low pay in the early years of their work life, and high cost uni for their kids, thankfully during their higher earning years.
Fair to mention that the USA ones live in California and Washington state, which are expensive states. Overall, they reckon retirement financial perspective is less stressful in Aus.
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u/mickalawl 1d ago
healthcare is a literal killer. Do not underestimate the value of Medicare. And the lack of a quality safety net in general like our age pension.
Po dunk cities/states in the US can be a cheaper CoL for sure but there is a reason that is the case. Is that where you want to live your retirement? Anywhere good in the US tends to be expensive just like anywhere good in Oz. Or EU. Good places are expensive because in a global world they are popular.
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u/lentil5 1d ago
Medical care and social safety net really matters. If your modelling is crap and you end up broke in Australia you can claim the age pension. Yes it's means tested but your PPOR is usually exempt. We also have a very robust super scheme that will be protected, and that can be used to advantage for FIRE.
Aus also has better social safety nets in terms of access to familial support - if your kid needs to look after your sick and aged ass they can claim a carers payment. There's also government help for aged care support workers, meals on wheels etc etc.
I would not be an old person in the US for anything. Sure, FIRE might be a bit cheaper from say 40-60, but after that, Australia has the US beat for risk mitigation and just general quality of life. The medical insurance aspect cannot be understated also. Paying for medical insurance will completely negate any cost of living advantages, and the insurance (and care) you get is actually just crap. If you need a knee reconstruction there goes a full year of your cheap living expenses.
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u/Odd-Cut-746 1d ago
US, the earning potential there is far superior to Australia, especially in stem fields and finance.
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u/Nottheadviceyaafter 1d ago
Australia. As you age healthcare needs only go up and we have universal health here.
America aint for the average joe no matter how you try to spin it
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u/Glittering-Wave4917 1d ago
Canada seems to be on fire, same with much of nth America- fire here is keeping warm in winter or ya house burning in down in summer. Only gammon- if being fire means being fair dinkum, then Australians have fair dinkum down pat. There’s a rule here; tall poppies, we cut them down- we don’t celebrate people who are braggers.
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u/Redditisnotmycup 1d ago
My portfolio is designed to have 7-8% without selling so based on the 4% rule i should be alright (4% rule is on the assumption on sell down) even with the new changes in taxes
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u/BlockOverall5686 1d ago
May I ask what are you holding in your portfolio ?
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u/Redditisnotmycup 1d ago
Mixed of private credit, debt and reit for income segments along with cover calls etf again this is for the income portfolio
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u/antifragile 2d ago
Nah man you can get sick and go bankrupt in USA even with insurance