If you’ve moved overseas to open a business or to work for another company you may be wondering how you can contribute to a retirement plan. It's certainly not easy as rules range from limited investment options to not being able to contribute to an IRA unless your earned income is sourced in the US. It's also worth noting that any investment you make overseas requires additional reporting along with your US taxes. Everyone has their own unique circumstance for moving overseas and each case is different, however, here are some things to consider as you make plans for retirement savings.
For those who have moved overseas to work for a foreign company, you may already be enrolled in the state or company sponsored pension plan. Just about every country in the European Union, and others elsewhere, require certain withholding from a paycheck to be diverted toward the social security system. This may not answer your question, however, of being able to invest or choose investments, while receiving tax-deferred status on your contributions.
If your company offers a tax-deferred retirement plan of sorts, keep in mind that any investments made overseas must be reported on your US taxes. Also, the tax treatment that you are receiving in the EU country may not be the same with regard to US taxes. In other words, you could be paying taxes on dividends and capital gains regardless of the tax-advantaged nature listed on the account.
For those who are self-employed earning income in the US, there are additional options for opening and funding a retirement plan that has US tax benefits, such as a SEP, SIMPLE, IRA and others. Depending on your situation and available cash flow, each plan offers its own unique benefits.
For those who are overseas looking to fund retirement, the simplest option appears to be the best option in most cases. And that is to open up a taxable, US based investment account and fund it on a continuous basis. You will need to make sure that the US based brokerage firm will accept your foreign address and that you comply with both EU and US Patriot Act rules when investing. For more on EU investment limitations, see my blog post here.
Retirement planning is more than just navigating the many rules and restrictions with regard to how to go about funding such a plan, it's about a commitment to maintain a funding strategy that lasts until you reach retirement. It’s also about not being tempted to tap into your savings early, giving up the ability for the account to earn compound interest in the future.
At Eureka Wealth Management, I help my clients overseas make their own retirement plan that also creates the simplest tax reporting and complies with EU and US rules when investing. I also calculate retirement and help my clients commit to their savings goals by working with them each year, tracking their progress. Call for a free, initial consultation at +1(760)537-0791 or online at eurekawealthmanagement.com/expats.
Patriot Act overview: https://www.americansabroad.org/banking-and-the-patriot-act/
Consult a local tax advisor for advice related to taxes.