Thorny new issue on the radar for U.S. expats regarding IRA accounts

[partington]

I'm just wondering how much of a percentage I should have them hold back for taxes. I was thinking 25%, but somebody here is saying 30%? OW!!

The 30% is for non-resident aliens. You do not choose it, it is automatically withheld, unless you can invoke a tax treaty by filling in a W8-BEN form. I don't think it applies if you have a US address and citizenship.

Living in Thailand I can't fill in a W8-BEN, as I can't prove tax residence in the UK, and therefore that the US/UK tax treaty applies. The US/UK tax treaty says IRA distributions are taxed by the country of residence,not country of origin, that is they would be taxed in the UK, not the US. This would result in a much lower than 30% rate for me.

As I planned to move back to the UK eventually, perhaps in 10 years time, and apply for IRA distributions at that point, I did not foresee a problem.

However if they abruptly close my account tomorrow these plans would be moot, and I would lose 40% in total, as I am under 59.5 years old, and so would incur the early withdrawal penalty too.

[Pib]

What percentage may "initially" be withheld is not the final tax. When you file your yearly tax return if you have overpaid taxes you'll get a refund.

[peterb17]

Wow what a lot of abbreviations- IRA has a slightly different meaning to us Brits- plain English please.

[TallGuyJohninBKK]

I should say, the issues here being discussed about potential involuntary Individual Retirement Account (IRA) account closures for expats are really mainly related to accounts held by American expats with U.S. brokerage houses. IRAs are a kind of tax-deferred private retirement account allowed under U.S. law as a means to encourage retirement savings.

The U.S. financial account hassles for Americans living abroad are all part of the wild, wacky and wonderful world of post 9/11 security in the U.S. along with various other factors.

Edited May 21, 2014 by TallGuyJohninBKK

[partington]

Wow what a lot of abbreviations- IRA has a slightly different meaning to us Brits- plain English please.

It means Individual Retirement Account. It has no relevance to any Brit who hasn't got one, and any Brit who has one knows what it is!

Edited May 21, 2014 by partington

[skatewash]

Wow what a lot of abbreviations- IRA has a slightly different meaning to us Brits- plain English please.

An Individual Retirement Account is a form of "individual retirement plan", provided by many financial institutions, that provides tax advantages for retirement savings in the United States. - http://en.wikipedia.org/wiki/Individual_retirement_account

[partington]

What percentage may "initially" be withheld is not the final tax. When you file your yearly tax return if you have overpaid taxes you'll get a refund.

Yes but if you are forced to take your entire account in a single year, and it is a huge amount, then your tax liability is massive compared to taking it as say 15 annual distributions! I don't know if it would be 30% but it might be close!

[Frank James]

What percentage may "initially" be withheld is not the final tax. When you file your yearly tax return if you have overpaid taxes you'll get a refund.

Well, everybody's situation is different, so it may be impossible to even guess what amount should be withheld. However, I took a rather small distribution a few years ago, and had them hold out 20% for taxes. Wrong. I had a nasty surprise when it came time to file. As I understand it, the amount of tax owed is at least partly based on how much the asset has appreciated from the time you bought it(?) Great risk of showing my ignorance here, and being boring besides.

[skatewash]

Re using PO Boxes, it depends on whether a person means an actual P.O. Box, or a mail forwarding address, which are two different things.

...

Rather, they tend to give the customer a "#????" account number that can be expressed for mail addressing purposes as "Unit #????" or "Apt #????" or "Suite #????". The Unit / Apt. / Suite references don't carry any of the same limitations as the use of "P.O. Box" does, and would be generally indistinguishable from traditional physical addresses.

I have been using a mail forwarding service for a couple years called Traveling Mailbox primarily to scan and read my mail online, although on a rare occasion I will have them forward the physical mail to me. My mailing address is in a format as described by TallGuy above. I am mostly paperless with my online financial accounts, but despite this I occasionally get a letter from one of these institutions sent to my forwarding service (when changing security questions, for example).

The cost of scanning my mail is covered by my annual fee ($200). The cost of forwarding mail is extra. This service has met my needs and I would recommend for someone with similar requirements. One big negative with this service is that they refuse to forward parcels to Thailand (almost every other country in the world, but not Thailand). I don't purchase anything from the US if I can't have it shipped directly to Thailand (certainly not all US companies will do that), so I haven't been affected by this limitation, but one should certainly take it into consideration in evaluating the suitability of this service for your purposes.

I established residence in one of the US states without a state income tax before I moved to Thailand and my mailing address is maintained in that state. I also have a VOIP phone number in the US (magicJack). So far have not had any problems maintaining my financial accounts in the US from Thailand. Hope that continues.

[partington]

What percentage may "initially" be withheld is not the final tax. When you file your yearly tax return if you have overpaid taxes you'll get a refund.

Well, everybody's situation is different, so it may be impossible to even guess what amount should be withheld. However, I took a rather small distribution a few years ago, and had them hold out 20% for taxes. Wrong. I had a nasty surprise when it came time to file. As I understand it, the amount of tax owed is at least partly based on how much the asset has appreciated from the time you bought it(?) Great risk of showing my ignorance here, and being boring besides.

My impression was, that since the original contributions were tax deferred, and so no tax has been paid on them, then withdrawals (comprising a mix of the original contribution and any capital appreciation) are therefore taxed as simple income in total..

[davidstipek]

I too have been fearing this development for a long time now.

For me it has the extra wrinkle that I am not and have never been a US citizen, simply worked there for more than a dozen years, though always intending this would be temporary.

However the highest earning phase of my career occurred there, and my company's 401k scheme was very good, since they made matching contributions if you joined the scheme, (that is free money!) and everyone advised me that the tax benefits for contributing were too good to ignore.

Even so, I worried about the fact that I always intended to return to the UK, and how this would affect the accessibility and safety of the money. Of course Fidelity assured me there would be no problem at the time, and told me this again when I rolled this money over to a personal IRA just before I left. Of course their assurances were worthless.

Now and for the last five years they have had the UK as my home address - I have no green card and no right to live in the US , so there is no possibility that I can fool them into believing that I live there.

If they close my account not only will I get the 10% tax penalty for early withdrawal, but will also get the 30% flat tax they impose on lump sum withdrawals to foreign addresses, so I will lose 40% of the money at a stroke. This could make a huge difference to my retirement (it's a very significant amount, though short of the $500k that apparently protects you from closure), and I simply have no course of action other than to hope it doesn't occur.

Obviously if I had been able to foresee this I would just have saved the money in a bank account and taken it with me. A retirement account that you cannot use to retire abroad seems baffling to me as a European...

This will help you with the 30% tax Penalty to foreign address.

Get a Bangkok Bank Account, They have an Office in New York, NY. Now here is trick....

Use their Routing Number: 026-008-691

This will fill all needs in this area.

For those who wish to know more:

Swift Code is: BKKBTHBK

Telex Number: 82638,82670 BK BANK TH

Only thing needed to deposit is:

Bank Name

Account Number of Individual

Routing Number

With this info it does not show as a foreign Account and funds are available within minutes of deposit. I believe fee is 200 Baht. You can even set up here to have Bangkok Bank send you an text with all Iformation as pertaining to Deposit, which you will receive within Seconds of accepted deposit.

Worked for me... just as my SSI and other retirement is done and has been done for years. If you have issue with setting up account. Have your Branch Manager setup appointment with Main Branch in Bangkok. They have a Special Office Crew to help you complete everything CORRECTLY!!

Well worth the travel!!!

I believe there is a Bangkok Bank also in London. Discuss this with Department @ BBK in Bangkok.

Edited May 21, 2014 by davidstipek

[partington]

I too have been fearing this development for a long time now.

For me it has the extra wrinkle that I am not and have never been a US citizen, simply worked there for more than a dozen years, though always intending this would be temporary.

However the highest earning phase of my career occurred there, and my company's 401k scheme was very good, since they made matching contributions if you joined the scheme, (that is free money!) and everyone advised me that the tax benefits for contributing were too good to ignore.

Even so, I worried about the fact that I always intended to return to the UK, and how this would affect the accessibility and safety of the money. Of course Fidelity assured me there would be no problem at the time, and told me this again when I rolled this money over to a personal IRA just before I left. Of course their assurances were worthless.

Now and for the last five years they have had the UK as my home address - I have no green card and no right to live in the US , so there is no possibility that I can fool them into believing that I live there.

If they close my account not only will I get the 10% tax penalty for early withdrawal, but will also get the 30% flat tax they impose on lump sum withdrawals to foreign addresses, so I will lose 40% of the money at a stroke. This could make a huge difference to my retirement (it's a very significant amount, though short of the $500k that apparently protects you from closure), and I simply have no course of action other than to hope it doesn't occur.

Obviously if I had been able to foresee this I would just have saved the money in a bank account and taken it with me. A retirement account that you cannot use to retire abroad seems baffling to me as a European...

This will help you with the 30% tax Penalty to foreign address.

Get a Bangkok Bank Account, They have an Office in New York, NY. Now here is trick....

Use their Routing Number: 026-008-691

This will fill all needs in this area.

For those who wish to know more:

Swift Code is: BKKBTHBK

Telex Number: 82638,82670 BK BANK TH

Only thing needed to deposit is:

Bank Name

Account Number of Individual

Routing Number

With this info it does not show as a foreign Account and funds are available within minutes of deposit. I believe fee is 200 Baht. You can even set up here to have Bangkok Bank send you an text with all Iformation as pertaining to Deposit, which you will receive within Seconds of accepted deposit.

Worked for me... just as my SSI and other retirement is done and has been done for years. If you have issue with setting up account. Have your Branch Manager setup appointment with Main Branch in Bangkok. They have a Special Office Crew to help you complete everything CORRECTLY!!

Well worth the travel!!!

I believe there is a Bangkok Bank also in London. Discuss this with Department @ BBK in Bangkok.

You don't get it: it is not the foreign address but the status as a non-resident ALIEN that incurs the 30% flat tax rate. SSI payments can be made freely to foreign countries, and to non-citizens wherever they may be and this has never been a problem. We are talking about IRAs here and these are a different matter.

My citizenship and country of residence are already on record with my IRA provider as being the UK- this cannot now be changed.

Edited May 21, 2014 by partington

[IBoldnewguy]

Hey Jing, thanks for jump-starting my paranoia. I was all right, for a while. Now this to be concerned about.

I have a modest IRA account of long standing with the most excellent company called Vanguard. I am preparing to make a withdrawal, (take a distribution, it's called) which I haven't done for a long time. So just today I listed Bangkok Bank as my bank of record, to which they will be sending the "distribution". This caused no alarms in the system. They seemed entirely familiar with BKK Bank and its routing number. I still have a US residential address, and phone number. This was a good move because I can bypass my US credit union (my former bank of record) who loves to give me a $40 dollar enema (soon to go up, or so they say), along with a hard time, every time they transfer me my own money in any amount, even though it's routed to Bangkok bank's US HQ.

I have logged into my Vanguard account from here hundreds of times, and nothing was ever said. I always am required to answer a "security question."

I'm just wondering how much of a percentage I should have them hold back for taxes. I was thinking 25%, but somebody here is saying 30%? OW!!

I also this very day e-filed that FBAR report, that every American with a foreign bank account containing more than $10,000 at any point in the year, must file with the US Treasury. I'm convinced a lot of people don't yet know about this. Too bad, because they can bone you with a HUGE fine, and ignorance won't cut ice with them. It's done electronically now, which is a big improvement from prior years, when one had to download the form, fill it out by hand, and mail it to Detroit, of all places. Must be done by June 30.

Like Bobby Dylan says, To live outside the law, you must be HONEST, and a man can't give his address out to Bad Company.

What next, I ask you!

If you are younger than 59 1/2 a Traditional IRA distribution is subject to a 10% penalty plus a mandatory 20% IRS w/h. The 10% is lost and is not deductable.The 20% may be partially refunded when your taxes for the year are filed.

If one is 59 1/2 or older - the rules change (no 10% penalty) - the distribution form should give you a IRS w/h choice. I do my own taxes and have already calc'd my distribution/tax due for the year, so I choose no w/h or 0.0.

The amount to w/h depends upon addn'l income - for instance; if your yearly tax bite is 10% (without a distribution) then that % could be a good indicator of how much to have w/h. Best regards....

Edited May 21, 2014 by IBoldnewguy

[searcherkind666]

What happens to your IRA when the dollar crashe's ? Im hedging with physical Gold and silver and select gold and silver miners . the dark clouds are building .economy's sliding even after trillions in QE food shortages looming global warming sociopathic governments etc etc . transfer to a gold ira . gold is at just under 1300 that's lower then the average cost to mine and ounce of gold and the easy surface gold is gone no way for gold to go but up for the next few decades get a gold ira and sit back and relax your good .

[movsrus]

Hey Jing, thanks for jump-starting my paranoia. I was all right, for a while. Now this to be concerned about.

I have a modest IRA account of long standing with the most excellent company called Vanguard. I am preparing to make a withdrawal, (take a distribution, it's called) which I haven't done for a long time. So just today I listed Bangkok Bank as my bank of record, to which they will be sending the "distribution". This caused no alarms in the system. They seemed entirely familiar with BKK Bank and its routing number. I still have a US residential address, and phone number. This was a good move because I can bypass my US credit union (my former bank of record) who loves to give me a $40 dollar enema (soon to go up, or so they say), along with a hard time, every time they transfer me my own money in any amount, even though it's routed to Bangkok bank's US HQ.

I have logged into my Vanguard account from here hundreds of times, and nothing was ever said. I always am required to answer a "security question."

I'm just wondering how much of a percentage I should have them hold back for taxes. I was thinking 25%, but somebody here is saying 30%? OW!!

I also this very day e-filed that FBAR report, that every American with a foreign bank account containing more than $10,000 at any point in the year, must file with the US Treasury. I'm convinced a lot of people don't yet know about this. Too bad, because they can bone you with a HUGE fine, and ignorance won't cut ice with them. It's done electronically now, which is a big improvement from prior years, when one had to download the form, fill it out by hand, and mail it to Detroit, of all places. Must be done by June 30.

Like Bobby Dylan says, To live outside the law, you must be HONEST, and a man can't give his address out to Bad Company.

What next, I ask you!

You may want to look into establishing an account with CapitalOne and use that to transfer money from the US to Thailand. My local bank in the US will not process SWIFT transactions to accounts outside the US so I opened and internet account with CapitalOne (formerly ING Direct) and use that to move money to my Thai bank account. CapitalOne charges nothing for the transfer and BBL only has a small fee to process the transfer and convert USD into baht. For your local bank to gouge you $40 for an international transfer is rally outrageous.

[movsrus]

Hey Jing, thanks for jump-starting my paranoia. I was all right, for a while. Now this to be concerned about.

I have a modest IRA account of long standing with the most excellent company called Vanguard. I am preparing to make a withdrawal, (take a distribution, it's called) which I haven't done for a long time. So just today I listed Bangkok Bank as my bank of record, to which they will be sending the "distribution". This caused no alarms in the system. They seemed entirely familiar with BKK Bank and its routing number. I still have a US residential address, and phone number. This was a good move because I can bypass my US credit union (my former bank of record) who loves to give me a $40 dollar enema (soon to go up, or so they say), along with a hard time, every time they transfer me my own money in any amount, even though it's routed to Bangkok bank's US HQ.

I have logged into my Vanguard account from here hundreds of times, and nothing was ever said. I always am required to answer a "security question."

I'm just wondering how much of a percentage I should have them hold back for taxes. I was thinking 25%, but somebody here is saying 30%? OW!!

I also this very day e-filed that FBAR report, that every American with a foreign bank account containing more than $10,000 at any point in the year, must file with the US Treasury. I'm convinced a lot of people don't yet know about this. Too bad, because they can bone you with a HUGE fine, and ignorance won't cut ice with them. It's done electronically now, which is a big improvement from prior years, when one had to download the form, fill it out by hand, and mail it to Detroit, of all places. Must be done by June 30.

Like Bobby Dylan says, To live outside the law, you must be HONEST, and a man can't give his address out to Bad Company.

What next, I ask you!

You may want to look into establishing an account with CapitalOne and use that to transfer money from the US to Thailand. My local bank in the US will not process SWIFT transactions to accounts outside the US so I opened and internet account with CapitalOne (formerly ING Direct) and use that to move money to my Thai bank account. CapitalOne charges nothing for the transfer and BBL only has a small fee to process the transfer and convert USD into baht. For your local bank to gouge you $40 for an international transfer is rally outrageous.

[Leung Falang]

The disclaimer may be "nothing new", because there are legal differences in what kinds of securities can be sold/traded to people inside the U.S. vs. outside the U.S.

But the issue of some U.S. brokerages apparently wanting to avoid retirement accounts held by expats is a new/more recent wrinkle.

For a variety of reasons, I think the best course is to maintain a U.S. mailing address used for all one's banking/brokerage accounts, and pick and use the same location VPN server to match it for all log-ins to those accounts. So in other words, if your mailing address is Los Angeles, choose and use a VPN service with a server in Los Angeles. And use it for ALL log-ins without exception.

That also will help avoid a related issue of getting temporarily locked out of your brokerage account because the inhouse security systems for your U.S. account suddenly see a log-in IP address coming from Thailand, and bingo, the brokerage security system suspects fraud. And you'll likely be forced to go thru answering a series of credit report-type questions to verify your identity before they'll be willing to unlock your account.

Their systems look for out-of-the-ordinary log-in activity and flag those. So, I guess, an alternative would be to ONLY do log-ins from a Thailand IP. But for reasons such as the issues/problems Jing raised in the subject OP, I think that's asking for trouble, now or at some point in the future.

Also, FWIW, in some of those same kinds of article about some brokerage houses having problems with expat IRA accounts, I saw representatives from Schwab being quoted as saying they had no problem continuing to provide accounts and service to expats. And of course, Schwab is already probably the best regular banking/ATM card option for expats as well.

No problem with Schwab. They also refund your ATM fees. Easy to do business with. Most of you know how long you need to be out of the USA for your tax return to qualify for foreign income exclusion, that is, a foreign resident.

[1130bobs]

I think the issue is not your actual living here, it is a simple (not) international internet security issue that banks & all financial institutions have to deal with. The costs of trying to deal with (successfully) all international access to a website has many institutions (including my small midwest bank) choosing to just limit or block international access. The US govt social security website is not accessible from overseas as well. i think dealing thru mail / fax channels - to a person, rather than trying to do it all with the 'domestic' website functions will work. also, consider having a trusted friend in usa just do these things for you at your direction.

[TallGuyJohninBKK]

I have a wide variety of financial accounts, ranging from some of the biggest institutions to some pretty small ones. And at least for my accounts, none of them have websites that flatly block log-ins from international locations.

What can sometimes arise is a "security block" where the institution detects a log-in from an unusual and potentially foreign location. But as mentioned above, the solution to that is to choose and consistently use a U.S. VPN service. Problem solved.

As for doing business from Thailand to the U.S. via postal mail, that strikes me as being either very slow (regular airmail) or very expensive ($20 per EMS envelope). But moreso, do you really want to be sending communications to your U.S. financial institution that are postmarked as arriving from Thailand??? I think not.

[IBoldnewguy]

Lots of side trails and snake bites on this thread that have little to do with the OP's initial concerns.

I doubt a US banking institution is going to close an IRA account without a sufficient prior notice regardless of expat status. This doesn't mean one shouldn't be concerned - it means one should have a back up plan. A traditional IRA account is covered up to 250k by FDIC so I'm not sure why one would keep more than that in one account.

A direct rollover from one IRA account to a new IRA account is a simple matter, however it may need a notarized signature to open - plus on the rollover form. I've had a CShwab Bank acct. since 2010 and last July 2013 opened a Traditional IRA with them because I've found them to be reliable, plus their Debit card has saved me a good amount on travel fees.

I am in the planning stage of becoming an expat. Knowing what the rules are is the cure to not falling victim to more rumors and innuendo than necessary. Most of us click the accept conditions box on a daily basis without reading the conditions - to date nothing has come back at me for that laziness.

[Pib]

What percentage may "initially" be withheld is not the final tax. When you file your yearly tax return if you have overpaid taxes you'll get a refund.

Well, everybody's situation is different, so it may be impossible to even guess what amount should be withheld. However, I took a rather small distribution a few years ago, and had them hold out 20% for taxes. Wrong. I had a nasty surprise when it came time to file. As I understand it, the amount of tax owed is at least partly based on how much the asset has appreciated from the time you bought it(?) Great risk of showing my ignorance here, and being boring besides.

Yes, if you are talking out a large amount and/or and how adjustments for capital/dividend gains work out...and depending on what a person's other income adds up to, a person could get a healthy tax surprise...bump you right up into the next higher income bracket. Taking money out of a regular IRA is probably best when your annual income significantly drops...like "after" you have stopped working. The wife and I have several regular IRAs where we'll be facing the same issue...they could very well be the last bit of money we start withdrawing from in our lifetime for tax purposes. We also have Roth IRAs which will have zero tax applied against them...I wish Roth IRAs had become available when we first opened our regular IRA, but Roth IRAs didn't become available until years later. But whether a regular IRA or Roth IRA is best for an individual all comes down to that person's income/tax situation....probably a combination of regular IRAs and Roth IRAs works out best.

[Langsuan Man]

I will look into Schwab. I actually don't want to roll over, really a hassle, so I won't do unless forced, so I will continue to act the non-expat, but they are definitely a legit firm.

What is all the hassle you talk about in rolling over an IRA account ? You fill out a form and send it to them and poof your old IRA is now changed to a Roll Over IRA

Realize that his thread has moved on but my question is still valid

[sandyf]

U.S.people who say this isn't an issue for a lot of people are in denial. This isn't about the U.K. which is an extremely expat friendly country (because of how COMMON it is there). The U.S.A. is pretty much the opposite and recently getting worse.

That Fidelity screen I just saw for the first time. I don't know how long it was up as I hadn't logged in for a long time. I take it and some of the info in the links I posted as evidence this is becoming a bigger issue.

Obviously it won't hit everyone, but it is already hitting some people.

As far a U.S. person with a foreign military address, that's rather a different thing than for a civilian.

There are some good clues here so far as other firms to look at. Probably Vanguard and Fidelity are the top firms and they might be issue firms for some.

The fact that it is news that some places aren't showing customers to the door is more strong evidence some firms ARE and this might be on the rise (see the links).

Rolling over an IRA isn't exactly a bucket of fun ... but if that's possible that's certainly better than being forced to sell all of an account in one year, even worse if you're under age 59 1/2.

If this doesn't concern you personally, good for you, but don't assume because of that it isn't a difficult issue for a significant percentage of U.S. expats. Also, it could hit you later so it's a potential problem worth being aware of and perhaps taking steps to prevent problems later.

I also agree it makes sense to use a U.S. address and U.S. telephone number. HOWEVER, the VPN login concerns me. Wouldn't major firms be savvy to which IP addresses VPN providers use? Is it always the same IP address when using a VPN or do they float? If your address of record is in Florida and you're always logging into an account from Nebraska (with a VPN IP that might be identifiable as such anyway) aren't you kind of in red flag situation?

So far for my many ties to the U.S. financial system, I have followed this tactic of presenting myself as NOT an expat. It feels a little sleazy but in some ways I feel it's not worth the risk to do differently. But until now the login from outside the U.S. has not been an issue to me. But it seems it may become more of an issue.

Also an aspect of this perhaps not mentioned often enough, IF you are playing the faux U.S. person, you are likely burdening someone in the U.S. to help you out with that. Generally a mailing service doesn't cut it for financial institutions. So you're kind of VULNERABLE aren't you ... to changes in the situation to the people helping you out back in the U.S. Is that really a good long term, lifetime solution? Perhaps, depending on your luck and how long your lifetime is, but I hope you get my point. This situation is far from ideal.

This might be stirring it up a bit much, but I want to say this here as it relates. If a person in the U.S. asked me now should they retire abroad at this point based on my experience I would say, probably not ... and a large reason will be the complications they can expect with their financial ties back in the U.S.

The ip addresses used by vpn services are part of pools of addresses assigned to those companies and readily identifiable as such by anyone interested. For a while I used a virtual machine in Amazon's cloud as my vpn, but that was identified by one website on the basis of which they refused me service. In general, if the brokerages decide to investigate us seriously we cannot fool them. The fact that they haven't used the tools available to them to sort us out from those genuinely resident in the US is actually encouraging. It means that, other than a pro forma effort to ward off regulation by foreign jurisdictions, they just aren't interested. They don't have a reason to be interested yet and as long as that remains true, we are likely to be okay.

While I understand the frustration I wouldn't advise anyone not to expat just because of the risks we are discussing. The fact of the matter is, at least for the time being, the tools available to us make it easier than ever to maintain our presence in the US as necessary. Just the other day I deposited my first check by desktop scan to a US bank. Couldn't do that a few years ago. Not a major issue since I seldom receive checks, but it does solve one pesky little problem nicely. So far, the benefits of expatting outweigh the inconveniences, although seeing a coup d'etat go down close is pretty depressing.

By the way, I don't think the UK is all that friendly to their expats. They receive their National Insurance benefits, but are denied the cost-of-living-adjustments forever. That's a slow, cruel squeeze to death for no good reason. Fortunately, the SSA is a far better organization.

Not strictly true, it depends where you live. In Europe, the US and several other countries get the annual increases. However in most of the world including Canada and Thailand you do not. I was quite aware of the fact when I came to live here. In the last 12 months I have gained a great deal more on my pension through the exchange rate than the increases. It is not all bad.

By the way you can always go back to the UK for a couple of months, pick up the increases and come back again. Your choice, "forever" does not really apply.

Edited May 22, 2014 by sandyf

[skatewash]

Yes, if you are talking out a large amount and/or and how adjustments for capital/dividend gains work out...and depending on what a person's other income adds up to, a person could get a healthy tax surprise...bump you right up into the next higher income bracket. Taking money out of a regular IRA is probably best when your annual income significantly drops...like "after" you have stopped working. The wife and I have several regular IRAs where we'll be facing the same issue...they could very well be the last bit of money we start withdrawing from in our lifetime for tax purposes. We also have Roth IRAs which will have zero tax applied against them...I wish Roth IRAs had become available when we first opened our regular IRA, but Roth IRAs didn't become available until years later. But whether a regular IRA or Roth IRA is best for an individual all comes down to that person's income/tax situation....probably a combination of regular IRAs and Roth IRAs works out best.

I ran across a brilliant strategy to convert funds from a traditional IRA to a Roth IRA while avoiding to the extent possible any tax liability. The strategy is called a Roth IRA Conversion Ladder and is explained as follows:

"The IRS rules state that you are able to convert a Traditional IRA to a Roth IRA, as long as you pay ordinary income tax on the conversion. It’s possible though, due to a low amount of income during early retirement, that he won’t have to pay any tax at all on the conversion. If the conversions are tax free, that means he will have avoided paying any tax on the money (tax-free contributions to 401(k)/Traditional IRA, tax-free growth within the retirement accounts, tax-free conversion from 401(k)/Traditional IRA to a Roth IRA, and tax-free distributions from the Roth)!"

Details: http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/

[CaptHaddock]

I doubt a US banking institution is going to close an IRA account without a sufficient prior notice regardless of expat status. This doesn't mean one shouldn't be concerned - it means one should have a back up plan. A traditional IRA account is covered up to 250k by FDIC so I'm not sure why one would keep more than that in one account.

Only an IRA at a bank has FDIC insurance and then only if in bank instruments, like a CD. Brokerage accounts whether at a mutual fund house like Fidelity or Vanguard or at a bank, are not covered by FDIC insurance at all.

Don't be so sure that a bank is not going to close an account abruptly. One reason not to have an IRA at a bank is that the account opening agreement at many banks gives the bank the right to close the IRA account immediately on the death of the owner. They can and do sometimes just cut a check for the full balance and send it to the beneficiary who cannot reverse the transaction and cannot transfer it to another IRA, thereby becoming liable for income tax on the entire amount. The beneficiary is thereby denied the opportunity to inherit the IRA with its tax benefits.

Banks often do not have our interests at heart.

[vaultdweller0013]

What happens to your IRA when the dollar crashe's ? Im hedging with physical Gold and silver and select gold and silver miners . the dark clouds are building .economy's sliding even after trillions in QE food shortages looming global warming sociopathic governments etc etc . transfer to a gold ira . gold is at just under 1300 that's lower then the average cost to mine and ounce of gold and the easy surface gold is gone no way for gold to go but up for the next few decades get a gold ira and sit back and relax your good .

This is spot on -- not in its literal implication though.

Read the articles carefully. The first is a marketing piece trying to sell you a Gold IRA from the company that published it. The second, while interesting, is rather vague and doesn't provide much evidence that the major brokerages are implementing concerted efforts to close down foreign-resident IRA's. Indeed, once source it cites, American Citizens Abroad, states that they counld not independently verify the reports of expats being asked to move or close accounts.

So, be prepared; understand what it would take to move your retirement accounts to another manager, but there is little evidence that there is a major crackdown from the infomation that has been provided..

[TallGuyJohninBKK]

I ran across a brilliant strategy to convert funds from a traditional IRA to a Roth IRA while avoiding to the extent possible any tax liability. The strategy is called a Roth IRA Conversion Ladder and is explained as follows:

"The IRS rules state that you are able to convert a Traditional IRA to a Roth IRA, as long as you pay ordinary income tax on the conversion. It’s possible though, due to a low amount of income during early retirement, that he won’t have to pay any tax at all on the conversion. If the conversions are tax free, that means he will have avoided paying any tax on the money (tax-free contributions to 401(k)/Traditional IRA, tax-free growth within the retirement accounts, tax-free conversion from 401(k)/Traditional IRA to a Roth IRA, and tax-free distributions from the Roth)!"

Details: http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/

I've read the entire post you linked to. But I'm not sure I'd agree with the excerpted portion where it talks about:

"It’s possible though, due to a low amount of income during early retirement, that he won’t have to pay any tax at all on the conversion."

For any regular IRA to Roth IRA conversion, the convert amount is going to be added to one's taxable income for that particular year. So the person's either going to pay their regular tax rate on that amount, or if the converted amount is large enough to push them into a higher tax bracket, potentially even a higher tax amount.

Even the linked article includes the following comment on that issue:

"Assume for this scenario that he is comfortable paying a few hundred dollars in tax each year for the conversion so he decides to convert $12,800 each year to cover over 75% of his $16,800 worth of annual expenses during early retirement."

By my reckoning, if I converted $12,800 from an IRA to a Roth account in a given tax year, I'd likely be increasing my federal income tax amount owed for that year by better than $1000 (assuming a 10% or so federal income tax rate).

I've done IRA to Roth partial conversions, and there's a case to be made for doing so. But I can't quite envision a normal circumstance where doing that is not going to result in taxes being owed on the converted amount.

Edited May 22, 2014 by TallGuyJohninBKK

[IBoldnewguy]

I doubt a US banking institution is going to close an IRA account without a sufficient prior notice regardless of expat status. This doesn't mean one shouldn't be concerned - it means one should have a back up plan. A traditional IRA account is covered up to 250k by FDIC so I'm not sure why one would keep more than that in one account.

Only an IRA at a bank has FDIC insurance and then only if in bank instruments, like a CD. Brokerage accounts whether at a mutual fund house like Fidelity or Vanguard or at a bank, are not covered by FDIC insurance at all.

Don't be so sure that a bank is not going to close an account abruptly. One reason not to have an IRA at a bank is that the account opening agreement at many banks gives the bank the right to close the IRA account immediately on the death of the owner. They can and do sometimes just cut a check for the full balance and send it to the beneficiary who cannot reverse the transaction and cannot transfer it to another IRA, thereby becoming liable for income tax on the entire amount. The beneficiary is thereby denied the opportunity to inherit the IRA with its tax benefits.

Banks often do not have our interests at heart.

What you've written above is nonsense.... you evidently didn't read the OP's initial comments.... or just don't care about the accuracy of the thoughts that escape your thinking....

I am writing about what I know.... I have never experienced an abrupt closing of one of my accounts, regardless of institution. I have 2 IRA savings accts + CDs - 1. FedCU (not a bank) 2. CSchwab Brokerage (not a bank). CSchwab Bank is a seperate entity from the Brokerage Firm. I have had IRA accts. at CU (closed) plus bank (closed) - all have been and those now open fully covered by FDIC up to 250k.

So unless you have personally experienced such an abrupt closing of an account and care to provide details.... your comments come across as being irrelevant to the discussion....

[Pinot]

What happens to your IRA when the dollar crashe's ? Im hedging with physical Gold and silver and select gold and silver miners . the dark clouds are building .economy's sliding even after trillions in QE food shortages looming global warming sociopathic governments etc etc . transfer to a gold ira . gold is at just under 1300 that's lower then the average cost to mine and ounce of gold and the easy surface gold is gone no way for gold to go but up for the next few decades get a gold ira and sit back and relax your good .

The dollar crashing is tin foil hat, ridiculous nonsense. You've been listening to the village idiot, Glen Beck. Gold is and will continue to be a terrible investment. It is purely a speculative play and a bad one at that.

One point that's been mentioned here is establishing an address in a tax free state. If you file your taxes with your Thai address, no state is going to come after you. I use an Ohio address for investment banking purposes.

[Berkshire]

The US govt social security website is not accessible from overseas as well.

Actually, that's not entirely accurate. Someone else had mentioned that previously and I thought it to be the case. I could not open an account with the SSA in Thailand.

However, when I was in the US recently, I visited a SSA office and created my online account through that office. When I returned to Thailand, I was able to access my SSA account online. I've only done it a couple of times, so no telling if it will keep working in the future. But so far so good.

So it's not that the US gov social security website is inaccessible overseas, it's just that you can't "open" a social security account online overseas. You can "access" your account once it's been established in the US.