How will you live your golden years?

How will you live your golden years?

Frozen IRAs and Pensions

In the age of FATCA, it’s common for US expats to experience frozen IRAs and pensions. Believe it or not, many prominent US investment houses will freeze your accounts once you move abroad. Fidelity, Schwab, Capital One, and many others will either not accept US expats as clients or, in some cases, they may even freeze the accounts of US expats once they discover you’re not living in the States anymore.

But why? The reason is simple. Since FATCA has made IRS tax reporting requirements for US expats so complicated, all while implementing harsh penalties for any misreporting, these investment houses find it easier and less risky to not have US expat clients. Good luck if you’re trying to start an IRA or continue contributing/growing your pension pot while living outside of the USA.

Many prominent US investment houses will freeze your accounts once you move abroad

Now what do you do if you get a letter from your pension provider stating that your account is frozen due to being an expat? At first it may be horrifying! After contributing to and growing your nest egg for so many years (or even decades), it may feel that you’ll have to work until age 80 just to make ends meet.

Luckily, there are solutions for frozen IRAs.

Similar to some of the other strategies out there for US expats, it is possible to rollover your frozen IRA, unfreeze it, and start contributing to/growing your assets again. (Note: it’s possible to do this with Traditional and Roth IRAs, 401(k)s, and other types of US-approved pension funds). The beauty of everything as well is that your pension will be subject to the same tax liabilities as if you never left the States (i.e. if you have a Traditional IRA, it will remain in its tax-differed state until retirement and follow yearly maximum contribution regulations).

As you can see, frozen IRAs, 401(k)s and pensions aren’t something to worry about. With a simple rollover to a registered US expat investment specialist, you can continue your savings plan in a foreign country as if nothing changed. Feel free to contact us if you are living abroad and have a frozen IRA or other US-approved pension fund.

 



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