Are You Considering a Roth 401(k)?

We consistently say on the podcast to do your research and to ask questions. This approach applies to the recruiting process and to all aspects of life as an international educator. From signing a lease on an apartment to buying a car to all that goes into finances, put in the time to research and ask questions of people “in the know” to help you make these important decisions!

If your school offers a retirement program, what are your options? We learned from our guest Dr. Stephen Boush that some schools offer the Roth 401(k) for American teachers. You can learn more by listening to episodes 2: International Teacher Finances: An Interview with Millionaire Teacher Andrew Hallam, 5: Much Ado about Money! An Interview with Dr. Stephen Boush of TIE TAX, and 16B. Demystifying Taxes & Investing for Americans with Dr. Jeff Devens.

After recording these episodes, I did some research to build my knowledge of Roth 401(k)s to support our guiding mantra of “eyes wide open” when it comes to living life as an international educator. I’m writing this post to help readers begin their own research efforts. My disclaimer is that I am not a financial planner and am not offering financial advice. I would like to direct you to resources and offer some considerations that might help guide your search. 

Let’s start with a definition. Investopedia states, 

“A Roth 401(k) is an employer-sponsored retirement savings account funded using after-tax dollars. This means that income tax is paid immediately on the earnings the employee deducts from each paycheck and deposits into the account. Withdrawals from the account are tax-free upon retirement.” 

As a US citizen teaching internationally, your foreign-earned income exclusion for 2023 is USD 120,000, according to the IRS. Connecting to the Roth means you can put some of your salaries - tax-free under the income exclusion - into a school-provided Roth 401(k) to be invested through the plan’s investment offerings. Your investment will not be taxed for dividends or for capital gains annually. When you reach retirement age, there will be no taxes to pay, and you will be able to draw funds from the Roth. 

How much can an international teacher contribute annually to a Roth 401(k)? According to Andrew Hallam, writing in 2019, “Teachers who are below the age of 50 can contribute USD 18,000 per calendar year. Teachers over 50 can contribute USD 24,000 per calendar year.”

Let’s take a look at the costs. According to Stephen, it costs more for international schools to administer a Roth 401(k) than for US-based schools because they are overseas. Thus, more parties are involved in administering it. 

Does investing in the Roth 401(k) - with higher fees but no taxation - come out ahead over individually making the same investments but in taxable accounts - i.e., ETFs, Mutual Funds, etc.? According to Andrew Hallam, the higher fees over time lead to a lower return on your investment from the Roth 410 (k) compared to a taxable low-cost investment account. Read Andrew’s complete comparison here

Considerations: 

All of our podcast guests speaking about finances have pointed out that US citizens can only sign up for brokerage accounts with American providers - such as Vanguard, Fidelity, and Schwab - if they have a US address and don’t disclose that they are living overseas. Keep this in mind. 

Also consider:

  • What are your comfort and knowledge levels regarding financial planning and investment choices? Would you benefit from working with a financial advisor? 

  • How disciplined are you in making contributions to your investment portfolio? 

  • How would investing in ETFs or mutual funds that put off regular dividends or consistently have capital gains affect whether the Roth 401(k) or regular taxable investment account provides higher returns?  

  • Does your school match a portion of your contribution to the Roth 401(k)? This is a part of the equation because the matching might offset, to some degree, the extra fees paid.

  • Does your school cover some of the administrative costs of their Roth 401(k), or do the teachers pay these in full? 

  • Do you have children who will attend university in the US? See Andrew’s point below.

  • If you already have a financial advisor, what is their take on having a Roth 401(K) as part of a diversified portfolio? 

  • Do you see yourself returning to the US in the near future? If so, this probably means that your tax bracket will increase. How will being in a higher tax bracket affect the long-term earning potential of your Roth 401(k) compared to having those funds in a taxable brokerage account? 

  • Would it make sense to at some point roll out of a Roth 401(k) into a regular Roth IRA – in order to reduce the fees you’ll be paying – while remaining an international educator? Is there a cost to doing this? Does a transfer jeopardize your standing with your US brokerage company? Should you perhaps wait until you repatriate to the US to make this transfer?

Here are some more considerations from Andrew’s article

“I’m not saying international teachers shouldn’t contribute to a Roth 401(k). There are plenty of pros and cons. And people’s situations vary. For example, such money would be designated as a retirement account. As such, it wouldn’t jeopardize a parent’s chance of earning financial aid for their children’s education. And when international teachers leave their current employer, they might be able to roll over their Roth 401(k) into a low-cost IRA if their new employer doesn’t offer a Roth 401(k).

But these Roth 401(k)s are expensive. And they might not be as legally solid as those offered to stateside employees. Ask your provider this: “If the IRS challenges these things many years from now, will you legally stand by your Roth 401(k) for international teachers?” I asked the lawyer who represented one of these firms. He firmly said, “No.”

Hopefully, this blog post adds to your understanding of the Roth 401(k). Remember that in no way is there any intent on my part to provide financial advice. I think the most important step you can take is to follow Stephen’s and Jeff’s advice to ask questions – lots of questions – about your financial situation to the HR department at your school and – if you have a financial advisor – to seek out advice for your individual needs and situation.  


Related Educators Going Global Resources: 

Episode 2: International Teacher Finances: An Interview with Millionaire Teacher Andrew Hallam

Episode 5: Much Ado about Money! An Interview with Dr. Stephen Boush of TIE TAX, and 

Episode 16B. Demystifying Taxes & Investing for Americans with Dr. Jeff Devens. 

Other Resources: 

The Kiplinger Personal Finance Website and Magazine has several articles on Roth 401(k)s.

Image Source

Related Blog Posts

Leading Leadership Searches for Search: A Conversation with Dr. Brent Mutsch

5/25/2023
loading

The Foundational Series of Podcast Episodes

by David Carpenter - 5/24/2023
loading

Meet David: Podcast Co-host

by David Carpenter - 12/15/2022
loading

Meet Audrey: Podcast Co-host

by Audrey Forgeron - 5/15/2023
loading

Podcast Episode 16B - Bonus Series: Demystifying Taxes and Investing for Americans with Dr. Jeff Devens

3/23/2023
loading

For-Profit Versus Not-For-Profit Schools

by David Carpenter - 5/16/2023
loading

Designing and Implementing an Elementary School Wellness Program

by David Carpenter - 5/22/2023
loading

What's Next for International Schools in China?

by Guest Blogger, Claire Gaul - 5/18/2023
loading

Introducing the International School Community Website - a Fabulous Resource! (Ep #26)

5/10/2023
loading

Podcast - Across Oceans

12/1/2022
loading

A Conversation with "Ed Kid" (International Teachers' Kid) Julia Walker of Across Oceans (Ep #25)

5/10/2023
loading

Learn About Inclusive Education with SENIA Executive Director Lori Boll (Ep #24)

5/4/2023
loading

Current Trends in International Education - an Informative Conversation with Dr. Heather Naro (Ep #23)

4/29/2023
loading

Integrating Outdoor Education and Learning Outcomes - An Interview With Zack Beaty (Ep #22)

4/26/2023
loading

Andrew Hallam’s Take on the Roth 401(k) Versus Individual Investing

1/1/2023
loading

Ghazi - Memorable SCUBA Moment

4/24/2023
loading

Going Mobile with the EGG Podcast

by David Carpenter - 4/7/2023
loading

Travel Through an Art Lens: A Case Study

by David Carpenter - 4/19/2023
loading

Our Approach to Travel

by David Carpenter - 4/15/2023
loading

Factors Associated with the Quality of International High Schools in the EARCOS Region - Doctoral Thesis by Dr. Heather Naro

4/11/2023
loading

The Academy for International School Heads (AISH) Resource List for Innovation in Schools

4/9/2023
loading

Quirky Travel Story - Greg Lemoine in Egypt

by Greg Lemoine - 12/10/2022
loading

Greg Lemoine - Quirky Travel Adventure in Venezuela

by Greg Lemoine - 12/1/2022
loading

Greg Lemoine - Small World Story in the Maldives

by Greg Lemoine - 11/19/2022
loading

Ghazi - Quirky Travel Adventure in Malaysia

4/19/2023
loading

Audrey - Visiting the Cape Flats in Cape Town, South Africa

4/12/2023
loading

Audrey - Currency Acrobatics in Ethiopia in the 90s

4/3/2023
loading

Audrey - Challenging Chalkboards in Ethiopia

4/13/2023
loading

Audrey - Grocery Shopping Adventures in Ethiopia

4/4/2023
loading

Audrey - Americana in Ethiopia

4/7/2023
loading

Audrey - Special Running Track in Saudi Arabia

4/8/2023
loading

Audrey - Awkward Border Crossing in Saudi Arabia

4/1/2023
loading

Audrey -- Small World Story in Singapore

4/20/2023
loading

COST: Consortium for Overseas Student Teaching 

2/8/2023
loading

Demystifying Taxes & Investing for Americans with Dr. Jeff Devens, Part 2 - Optimizing Brokerage Accounts (Bonus Ep# 16)

3/20/2023
loading

A theory-building case study examining the relevance and impact of intersectionality on the lived experiences of black women superintendents and heads of school. 

by Nadine N’tasha Richards - 4/1/2023
loading

The relationship between professional development and professional capital: a case study of international schools in Asia. 

by Dana Specker Watts - 4/1/2023
loading

Dancing With The Stars!

4/1/2023
loading

GO Overseas

4/1/2023
loading

Educational Partners International (EPI)

4/1/2023
loading

Podcast - The International Teacher Podcast

12/1/2022
loading

CCK Extraordinaire: Meet Chinese-Italian-International Student Hai Yang "Harry" Qian (Ep #22)

4/16/2023
loading

Elevating Teacher Voices Around the Globe: An Interview with Podcast Host Jackie Scully (Ep #16)

4/15/2023
loading

Student Teaching Overseas? -- Sweet! An Overview of the COST Program, with Dr. Danielle Carrier (Ep #20)

4/5/2023
loading

Teach Away

4/5/2023
loading

Taking Your Teaching Career Overseas (ISS Webinar)

4/5/2023
loading

Book - Safe Passage: How Mobility Affects People and What International Schools Should Do About It, by Douglas Ota

12/1/2022
loading

Behind the Scenes at ISS: An Interview with Dana Specker Watts and Nadine Richards (Ep #19)

3/29/2023
loading

Are You Considering a Roth 401(k)?

by David Carpenter - 3/23/2023
loading

Podcast - SENIA Happy Hour, with Lori Boll

3/28/2023
loading

Transitions - Safe Passage: A Book Review

by David Carpenter - 11/19/2022
loading

International Schools Database

3/26/2023
loading

Introducing The Consortium of Overseas Student Teaching (COST) Program

by David Carpenter - 3/26/2023
loading

Advice from a Legend: Bob Gross Provides Advice for Aspiring International Educators (Ep #17)

3/18/2023
loading

Demystifying Taxes and Investing for Americans with Dr. Jeff Devens, Part 1 - Tax Buckets & Credits (Bonus Ep# 16)

3/20/2023
loading

Demystifying Taxes & Investing for Americans with Dr. Jeff Devens, Part 3 - Qualifying for Social Security & Medicare (Bonus Ep# 16)

3/20/2023
loading

Current Trends in (International) Consulting: An Interview with Jeff Utecht. (Ep #15)

2/3/2023
loading

New to International Teaching: An Interview With Mel and Cole in Abu Dhabi (Ep #13)

by Audrey Forgeron and David Carpenter - 11/22/2022
loading

What Happens After I Sign the Contract? An Interview With Jacqueline Mallais (Ep #11)

by David Carpenter and Audrey Forgeron - 11/26/2022
loading

Recruiting - from the Other Side of the Table: An Interview with Heather Naro, School Administrator. (Bonus Ep #10B)

2/6/2023
loading

Crafting an Impactful International Teaching Cover Letter with the Help of a Consultant (Bonus Ep #9B)

1/31/2023
loading

Crafting an Impactful International Teaching CV with the Help of a Consultant (Bonus Ep #8B)

1/24/2023
loading

Third Culture Kid/Cross-Cultural Kid Turned International Educator: An Interview With Ghazi Gashut (Ep #18)

3/25/2023
loading

Podcast - Educators Without Borders

12/1/2022
loading

Finding the Right Fit - A Book Review

by David Carpenter - 11/5/2022
loading

Article - Filing U.S. Taxes from Abroad: Avoiding Double Taxation

by TieTax - 3/24/2023
loading

International Health Insurance

by David Carpenter - 11/19/2022
loading

Trends in International Education

by David Carpenter - 11/19/2022
loading

Queen's University Overseas Recruiting Fair (TORF)

11/5/2022
loading

Global Recruitment Collaborative

11/30/2022
loading

Carney Sandoe - US-based International and Independent Schools Recruitment

11/16/2022
loading

Schrole

11/5/2022
loading

Edvectus

11/5/2022
loading

International Schools Services

12/2/2022
loading

ECIS - Educational Collaborative for International Schools

11/16/2022
loading

AMISA - American International Schools in the Americas.

11/16/2022
loading

Staffroom

11/5/2022
loading

The International Educator

11/5/2022
loading

Times Educational Supplement - Job Search Tool

11/5/2022
loading

Teacher Horizons

11/5/2022
loading

Joy Jobs

11/5/2022
loading

Council of International Schools (CIS)

11/5/2022
loading

Asia Society - Center for Global Education

11/5/2022
loading

Investment with Low-Cost ETFs and Index Mutual Funds

by David Carpenter - 11/13/2022
loading

Welcome to Educators Going Global! (Introductory Episode).

by David Carpenter and Audrey Forgeron - 12/4/2022
loading

University of Northern Iowa - Recruiting Fair

11/30/2022
loading

Association of International Schools in Africa (AISA)

11/5/2022
loading

Central & Eastern European Schools Association (CEESA)

11/5/2022
loading

East Asia Regional Council of Schools (EARCOS)

11/5/2022
loading

JPMINT Consulting

11/5/2022
loading

Mediterranean Association of International Schools (MAIS)

11/5/2022
loading

Near East South Asia Council of Overseas Schools (NESA)

11/5/2022
loading

LinkedIn

11/5/2022
loading

Association for the Advancement of International Education (AAIE)

11/5/2022
loading

QSI - Quality Schools International

11/5/2022
loading

School Rubric

11/5/2022
loading

The International Educator (TIE Online Newspaper)

11/5/2022
loading

Teacher Wit

11/5/2022
loading

Tri-Association of American Schools of Central America, Colombia - Caribbean and Mexico

11/5/2022
loading

Art and Design by Maryam Khalifah

11/5/2022
loading

Bogleheads Discussion Board

11/5/2022
loading

China Exodus - Posts on LinkedIn

11/5/2022
loading

Foreign Earned Income Exclusion (IRS listings)

11/5/2022
loading

Numbeo - The world’s largest cost of living database.

11/5/2022
loading

Plan Vision Investing Services for Expatriates

11/5/2022
loading

SENIA International

11/5/2022
loading

The Merriman Financial Education Foundation

11/5/2022
loading

Virtual Interview Tips from The Muse

11/5/2022
loading

US Office of Overseas Schools

11/5/2022
loading

Search Associates

12/15/2022
loading

ISS Newslinks

11/5/2022
loading

International Schools Review

11/5/2022
loading

World Teachers

11/5/2022
loading

Vlog - Strictly Dumpling, with Mike Chen

12/1/2022
loading

Podcast - Heads Up

12/1/2022
loading

Podcast - Shifting Schools Podcast

12/1/2022
loading

Podcast - The International Schools Podcast

12/1/2022
loading

Podcast - The Teacher Story

12/1/2022
loading

International Living

11/5/2022
loading

Blog - Pancake on a Stick - Tony de Prato’s blog about international education.

12/1/2022
loading

Blog - Lessons Learned - David Carpenter’s blog

12/1/2022
loading

Podcast - Recruiting in 2009 - Shifting Our Schools Podcast Episode

11/5/2022
loading

Article - Recruiter Documents Racism in Hiring - Medium article

11/1/2022
loading

Article - Racism in Recruiting: The Elephant in Our International Education Room - TIE Article

11/2/2022
loading

Group - The Teacher Circle on LinkedIn

11/5/2022
loading

Article - Teaching Abroad Article from 2008

by David Carpenter - 11/5/2022
loading

Tales from a Small Planet

11/5/2022
loading

Group - New to International Schools Teachers Facebook Group

11/5/2022
loading

Group - Educators Going Global Facebook Group

11/5/2022
loading

Group - Reddit r/InternationalTeachers 

11/5/2022
loading

Group - International Teachers of Colour Facebook Group

11/5/2022
loading

Group - International Teachers Community Facebook Group

11/5/2022
loading

Group - International Teachers Facebook Group

11/5/2022
loading

Group - International School Educators Facebook Group

11/5/2022
loading

Group - Global Educator Collective Facebook Group

11/5/2022
loading

Vlog - Mark Weins - Migrationology

12/18/2022
loading

Group - International School Teachers Facebook Group

11/5/2022
loading

Australia & New Zealand SEARCH Associates Resources

11/5/2022
loading

Multi Language Learning with Tan Huynh

12/23/2022
loading

TieTax

11/5/2022
loading

Book - Third Culture Kids: Growing Up Among Worlds

1/1/2023
loading

"Third Cultured" LinkedIn Community

2/1/2023
loading

International School Community

11/5/2022
loading

ISC Research

11/5/2022
loading

Book - Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, by Andrew Hallam

12/1/2022
loading

Book - Millionaire Expat, by Andrew Hallam

12/1/2022
loading

Book - Balance, by Andrew Hallam

12/1/2022
loading

Book - Finding the Right Fit, by Greg Lemoine

12/16/2022
loading

Book - Guide To Raising Exceptional Expat Kids, by Joni Kerr

12/1/2022
loading

Finance for International Educators - A slide deck by Dr. Jeff Devens

11/5/2022
loading

Book - International Education Leadership, by Catrina Chen, Lindsay Prendergast, Wallace Ting

12/1/2022
loading

Book - A Parent’s Guide to Raising Kids Overseas by Jeff Devens

12/16/2022
loading

Book - Becoming An International School Educator, edited by Dana Specker Watts and Jayson Richardson

12/1/2022
loading

Podcast - (A)Broad in Education

1/4/2023
loading

Book - International Teaching: Teach, Travel and Save, by Kent Blakeney

12/1/2022
loading

Book - International Schooling: The Teacher’s Guide, by Denry Machin and Stephen Whitehead

12/1/2022
loading

Book - Becoming a Successful International Teacher: A Concise Step-By-Step Guide to International Teaching, by Jess Gosling

12/1/2022
loading

Vlog - Best Ever Food Review Show - Foodie Travel Stories

12/1/2022
loading

Group - Expats & International School Educators - Financial Advice Facebook Group

12/3/2022
loading

Subbing Internationally: True Teaching Flying Squad

1/5/2023
loading

Book - Third Culture Kids: The Children of Educators in International Schools

1/5/2023
loading

Job Hunt Help with Scott Schaffner

3/19/2023
loading

21st Century Learning International

3/19/2023
loading

Better See V with Valeria Laitinen

3/19/2023
loading

Podcast - Where’s Your Head At?

3/19/2023
loading

Meet EGGHead Claire Gaul

12/3/2022
loading

The Importance of Developing a Community of International School Educators

by Ron Rosenow (ISC) - 3/10/2023
loading

Meet EGGhead Beth Yates

12/5/2022
loading

Meet EGGhead Maxwell Carpenter

12/5/2022
loading

YouTube Channel: SchoolRubric

2/1/2023
loading

International Substitute Teachers (IST)

2/1/2023
loading

Wellness: Who Should Care About Wellness in International Schools?

by David Carpenter - 11/19/2022
loading

Wellness: How Can Leveraging Character Strengths Improve My Life?

by David Carpenter - 1/1/2023
loading

Wellness: Why You Should Leave Your Comfort Zone - and 7 Ways to Do So

by David Carpenter - 1/1/2023
loading

Wellness: Boost Your Wellness Using PERMAH

by David Carpenter - 1/1/2023
loading

David Carpenter - Exploring Your New City

12/25/2022
loading

Foundational Series, Part 7 - The inside scoop on what you might want to look (out) for in a school (Ep #14)

by Audrey Forgeron and David Carpenter - 11/22/2022
loading

Foundational Series, Part 6 - What else is in it for me? (More Benefits) (Ep #12)

by David Carpenter and Audrey Forgeron - 11/22/2022
loading

Foundational Series, Part 2 - More on the Nature of the Beast: What Are International Schools? (Ep #3)

by David Carpenter and Audrey Forgeron - 12/18/2022
loading

Foundational Series, Part 1 - The Nature of the Beast: What are International Schools? (Ep #1)

by David Carpenter and Audrey Forgeron - 11/17/2022
loading

Foundational Series, Part 5 - What's in it for Me? (Specific Benefits) (Ep #10)

by David Carpenter and Audrey Forgeron - 11/22/2022
loading

Foundational Series, Part 4 - Really Thinking About all the Ramifications of Going Global. (Ep #8)

by Audrey Forgeron and David Carpenter - 11/21/2022
loading

Foundational Series, Part 3 - Cha-ching! The Bottom Line: Salary and Benefits (Ep #6)

by David Carpenter and Audrey Forgeron - 11/21/2022
loading

David Carpenter - Raising Children Overseas

by David Carpenter - 11/19/2022
loading

David - Artwork and Cultural Artifacts

by David Carpenter - 11/19/2022
loading

Meet EGGhead Rob Howe

12/3/2022
loading

Meet EGGhead Jacqueline P. Mallais

12/3/2022
loading

Much Ado About Money! An Interview with Dr. Stephen Boush of TIE TAX (Ep. #5)

12/30/2022
loading

David Carpenter - Finance: Salary and Benefits

12/25/2022
loading

David Carpenter - Recruiting and First Overseas Job

12/25/2022
loading

Going Global Stories Riff - David and Audrey (Bonus Ep. #4B)

12/25/2022
loading

Finding the Right Fit: An Interview With Greg Lemoine, author (Ep #10)

by Audrey Forgeron and David Carpenter - 11/22/2022
loading

International Teacher Finances: An Interview with Millionaire Teacher Andrew Hallam (Ep #2)

by Audrey Forgeron and David Carpenter - 12/3/2022
loading

Getting Ready for the International Recruiting Fair: An Interview with Jacqueline Mallais, Consultant (Ep #6)

by Audrey and David - 10/5/2022
loading

Taking the First Steps To Become an International Educator: An Interview With Jacqueline Mallais, Consultant (Ep #4)

by David Carpenter and Audrey Forgeron - 9/19/2022
loading

Mel and Cole - Quirky Travel Adventure in Abu Dhabi

by Mel and Cole - 11/19/2022
loading

Jacqueline Mallais - Quirky Travel Adventure in China

by Jacqueline Mallais - 11/19/2022
loading

Greg Lemoine - Small World Story in Australia

by Greg Lemoine - 11/19/2022
loading

Jacqueline Mallais - Slice of Life Story

by Jacqueline Mallais - 11/19/2022
loading

Shifting From PD to Personalized Learning

by David Carpenter - 11/19/2022
loading

Health Insurance in Salary and Benefits Packages

by David Carpenter - 11/19/2022
loading

Health Insurance When Returning to One’s Home Country

by David Carpenter - 11/19/2022
loading