For most of us, our IRA or 401K is our biggest liquid asset. We have equity in our homes, but our savings and investments are in our retirement accounts. If you want to diversify out of the US and out of the dollar, here’s how to take your IRA offshore. How to take control of your retirement account, protect your savings, and increase your returns on investment.
No matter what your investment advisor tells you, there is no reason to leave your money with Schwab or Fidelity earning half of one percent. All you are doing is putting that advisor’s kids through school.
Your retirement account belongs to you… take control of your future, take your IRA offshore, and make your own international investment decisions.
Here’s how to take your IRA offshore.
Note that only vested IRAs and 401Ks qualify to go offshore. An IRA typically “vests” when you leave your job. A retirement account from your current employer is probably not vested and can’t be moved away from the manager chosen by your company.
- If you’ve been at the same company for many years, some of your retirement account could have vested. Ask your HR department if you’re not sure.
The first step in moving your retirement account offshore is getting it away from your current investment advisor and over to a US custodian that allows for international investments. Firms like Fidelity, Merrill Lynch, and Vanguarde all make money by telling you what to invest in. They will not allow you to invest offshore because they don’t earn a commission on those transactions.
So, move your account away from these firm and over to one that allows for international (commission free) investments. Custodians that we recommend include NuView, Midland, Entrust, SunTrust, and others.
- A US retirement account will always need a US custodian. They file your US forms for you and are required under IRS regulations.
The key to selecting a custodian is to find one that won’t charge a fee for each investment you make. One that will charge a flat rate for the year, usually about $350, and not attempt to profit from your hard work or by billing based on assets under management.
Once your money is at a compatible custodian, we will form an offshore Limited Liability Company for you. This entity is owned by your retirement account and you are the manager of the LLC. This offshore IRA LLC structure is what allows you to move your IRA offshore, take control of the investments, and maintain the tax deferred status of the retirement account.
- For example, the owner of your offshore IRA LLC if your custodian is Midland would be: Midland IRA Inc. FBO Bob Smith IRA #55-5555555
Next, we open bank and brokerage accounts under your offshore IRA LLC. The custodian will make only one investment. They will invest your retirement account into your offshore IRA LLC by sending a wire to your international bank account.
From here, it’s up to you to manage the IRA assets. You can buy foreign real estate, invest in stocks and bonds, buy gold, and make just about any other type of investment you like. You could also just hold the money in a bank account in a different currency as a hedge against the dollar. It’s all up to you.
Of course, there are a few rules you need to follow when you take your IRA offshore and move it into an international structure like an IRA LLC.
Remember that the purpose of taking your IRA offshore is twofold: 1) to diversify out of the US and 2) maintain the tax deferred status of your retirement account. Sure, you can cash out your IRA, pay the tax and the penalty (if applicable), and then move the remaining balance offshore… but, what would be the fun in that?
To maintain the retirement status, you must to treat your IRA LLC as a professional investment advisor would. Manage the account as you would expect an independent advisor to and all will be well. Manage the assets for the benefit of the retirement account, and not for your personal gain, and you will be safe.
The first and most important rule is no self dealing is permitted in your offshore IRA LLC. Don’t borrow from the account, don’t pay personal expenses from the LLC, don’t buy real estate and live in it, don’t draw a “salary” or otherwise take money from the account, don’t pay for your travel expenses, etc. Again, manage the LLC for the benefit of the owner (the IRA account) and as you would expect a professional to manage it, and you will be fine.
Then there are a few unique rules when you take your IRA offshore:
- I said it above, but it’s worth repeating. You must have a U.S. licensed IRA custodian when you take your retirement account offshore.
- That custodian must report account activity each year to the IRS. This includes an annual valuation of IRA.
- The IRA must be the owner of the LLC. You can be the manager of the LLC.
- You can’t borrow from the IRA LLC.
- You can’t pledge your retirement account as collateral for ANY purpose. This means that any debt must be in the form of a non-recourse loan… which are common in offshore real estate transactions.
- You must maintain adequate books and records to evidence your use of funds and investment returns.
- You’re prohibited from investing in life insurance contracts and “collectables” such as rugs, works of art, stamps and coins.
- You may not lend to any disqualified persons, such as your immediate family or to a business that you own more than 50% of or are an officer, director or highly compensated employee.
So long as you always think like an independent investment advisor rather than the account owner, you will stay within the lines and maintain the tax status of your retirement account.
Now you are ready to take your IRA offshore. To regain control of your most important liquid asset. To put your money to work in investments with solid returns that are outside of the US and truly diversified.
I hope you have found this article on taking your IRA offshore to be helpful. For more information, please contact me at firstname.lastname@example.org or call (619) 550-2743 for a free and confidential consultation.