An Expat Package Can Boost Your Financial Progress Into Superspeed

One of the ways we were able to save an extra $100,000 to $200,000 was by benefiting from the BigLaw expat package and working abroad for two years.  This was a great way to save some extra money, live in a new place and do tons of traveling.

Expat packages are different depending on the market and the terms in each market are changing all the time.  When I first transferred to the London office the cost of living adjustment (COLA) package was $120,000 a year.  At some point it was cut to $60,000 a year plus some type of complicated housing stipend that kicked in over a certain rent number (obviously incentivizing you to rent a pretty spectacular apartment; that policy was changed shortly after).  I have no idea what the package is like today, especially with the USD strengthening over the last few years. Firms aren’t particularly transparent about these packages either, although they do seem to follow each other in lockstep pretty closely.  In some markets you may get different types of housing allowances or even school tuition for your kids. It all depends on how badly the firm needs more lawyers.

Getting this type of payment on the side is like hitting the super speed stripe in Mario Kart for your savings, especially if you can manage your spending in these markets.  That typically means getting a modest apartment and not going crazy on other stuff. In one year we lived entirely off the COLA payment and effectively had a 100%+ savings rate.

Pros and Cons of Working Abroad

Here are some of the particular benefits of doing a stint abroad:

  • COLA payment (see above).
  • Participate in a reciprocal deferred tax retirement scheme.  I have a “UK pension” from my time abroad, which was deductible on a pre-tax basis just like a 401(k).  In some ways, the UK pension is better than a 401(k) – earlier withdrawal age (55) and the ability to take 25% of the pension out at 55 tax free.
  • Save taxes from the foreign earned income exclusion ($104,100 in 2018 plus potentially some housing costs).  This was never a benefit for me because taxes in the UK are higher than US federal taxes so I had a foreign tax credit every year.  But if you work in a low tax jurisdiction like Dubai, Singapore or Hong Kong, this can be a big benefit.
  • Travel cheaply.  Travel to your surrounding areas on weekend trips for cheap.  Plus, you’ll end up going to client meetings in places like Milan instead of Cleveland (no offense to Cleveland).
  • Potentially get dual citizenship if you stay in that location long enough.  Dual citizenship can have all sorts of life-long benefits.

There are disadvantages though.  Here are a few:

  • You might work harder – even harder than NYC.  Offices abroad can really be sweatshops when business is booming.
  • And if business dries up, you might get let go.  These are often boom-and-bust offices. Even a growing region like Asia can experience severe short-lived economic downturns (see the Asian Contagion in 1997).
  • Your experience may not translate well back home, particularly compared to your experience in a US office.  If you spend your time doing UK law M&A deals or financings, you’ll need to put in the hours to translate those skills into US deals.  It’s doable but it’s an extra burden. Plus people in the US don’t really understand what type of work people do abroad and many of them assume the standards aren’t as high as in the US (which, to be fair, they probably aren’t).
  • If you stay abroad too long, you’ll have trouble getting back to the US.  You might be totally OK with that if you love being in your new city. But if you want to come back to the US, you really shouldn’t say abroad for more than two years.  And I would suggest building in to your transfer contract at the outset that you are only going abroad temporarily for one or two years. If your contract says that explicitly, it should help you get back.  Even if the firm wants you to stay abroad.

So for these reasons I’d seriously recommend looking into doing a stint abroad, especially if you don’t have kids.  But don’t stay too long if you want to get back to the US.

I’d love to hear anyone else’s experience abroad or some recent COLA data!


One thought on “An Expat Package Can Boost Your Financial Progress Into Superspeed”

  1. I’m a first-year (12 months in) associate in Hong Kong, which is a great place to get FIREd. As you described, I get paid at the NY scale plus 80k and get taxed at 15% (I’m not a U.S. citizen). I’m single and frugal and expect to reach lean FIRE by the end of my third year. Hours suck as hell here but I think I can stick it out for another few years for the sweet cash.

    PS: I bumped into your site through a bogleheads thread. I’ve read all your posts and really enjoyed them. Please keep the good work coming!

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