More and more, investors who are approaching retirement are becoming interested in offshore IRA accounts, either because they plan on retiring overseas, or they are interested in investing their retirement capital in offshore assets.
There is in fact, few restrictions on what investments you can make with your IRA account, and by investing overseas you are opening yourself up to thousands of investment options that your US broker may not be able to recommend (brokers in the United States are not allowed to recommend securities that are not either registered with the SEC, or that qualify for an SEC exemption).
It is, however, legal for you to purchase these “forbidden” investments, and one of the best avenues you can take is to invest offshore through your retirement plan. You can realize all of the benefits of overseas investing including asset protection, privacy, diversification, currency, and higher returns.
Moving IRA Accounts Offshore: Taxation
If is also said that by moving IRA accounts offshore you can avoid income taxes, but you may be wondering how true this is. While it is perfectly legal to move your accounts to a foreign country or into an offshore account, you still must abide by Federal taxation rules.
In offshore IRA accounts your funds grow US tax-deferred until you realize profits, or in the case of a Roth IRA you will never pay tax on the profits. A possible exception may be estate taxes, which, with proper planning, may also be avoided.
Consult with a professional estate planner or retirement specialist, such as the trained professionals at ETrade, to discuss your unique tax and estate situation.
Offshore IRA Accounts: Diversification
Investing in offshore IRA accounts is an excellent way to diversify your retirement portfolio, and hedge against domestic risk. Although you probably will not hear about offshore investment options from your broker, it is legal to put offshore funds and securities into your IRA.
With moving IRA accounts offshore you can postpone paying US income tax until you begin taking distributions from your plan. A retirement plan is currently the only way a US citizen can own offshore funds tax efficiently, as well as make buying or selling decisions concerning these funds.
You will also be able to invest across a broad spectrum of asset classes, including international real estate, office buildings, private residences, raw land, and even tax-lien certificates inside and outside the US. You can also purchase interests in one or more international businesses, as long as that interest does not exceed 50% of the total value of all asset classes of the business’ corporate stock.
Offshore IRA Accounts: Restrictions On Investments
You can invest in which ever international business you would like, as long as that businesses’ practices are not in conflict with the laws of the United States. Your retirement plan can own up to 50% interest in a corporation that operates an offshore website, or up to 50% interest in a yacht company in Spain.
For US tax purposes, it does not matter how the business is organized, allowing you the freedom to invest in international business company, partnership, or other corporate structure. The entire amount of profits attributed to your retirement plan grow safe and secure, tax-free until you realize profits in the way of distributions from your IRA.
A Roth IRA allows you to never pay US income taxes on your gains, and also allows you to bequeath the IRA to your heirs, who would also be able to take tax-free distributions from the Roth account.
Every situation is unique, and moving IRA accounts offshore may not be right for everyone. Speak with an adviser at ETrade, or a trusted financial professional to find out if this strategy is right for you.
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