Beat the US Retirement Plan System - Go Offshore
Guest Comment by Larry Grossman, Certified Financial Planner, managing director of Sovereign International Asset Management Inc. and a member of the Sovereign Society Council of Experts.
Dear A-Letter Reader:
Who needs non-US investments in their retirement plan? You do! If you're a US citizen or US resident, you're the victim of a vast campaign of misinformation concerning how you can invest your retirement plan.
Your broker or custodian doesn't want you to know that many of the world's best investments are only available outside of the US. And that's because it doesn't put any money in their pockets when you invest offshore. Instead, it puts more money in your pocket.
The financial scandals that rocked Wall Street made it clear the US investment system is set up to benefit brokers and their employees -- not you. But you can break that trend by finding the truth -- and acting accordingly.
Imagine owning an exotic beachfront retirement home on a lush tropical island, purchased with the tax deferred dollars you've saved. Add to that the salary your retirement plan will pay you to manage the property. The icing on the cake is the freedom from worries that plague most Americans who worry about their dwindling retirement plan assets.
Your IRA or pension plan can own raw or improved land, condos, office buildings, single or multi-family homes and apartment buildings in any country, so long as the real estate is not for your current personal use. The only investment a retirement plan can't make, domestically or offshore, is in collectibles and some types of insurance. Indeed, most investment restrictions are imposed not by US law, but by domestic American custodians or retirement plan administrators.
Another "off limits" investment to most US investors are offshore funds. Of 80,000 funds trading worldwide, only about 10,000 are registered in the US. Offshore funds are much more profitable, due to the falling dollar, the superior performance of emerging markets and the ability of offshore fund managers to use risk hedging techniques that are impossible to use in domestic US funds.
Unfortunately, due to US securities laws, most offshore funds won't sell directly to US investors. Even if they did, the US tax consequences of direct ownership of most offshore funds can be punitive; unless you purchase them through your IRA or pension plan. And now some US brokerage firms are so paranoid about offshore investing, thanks to the PATRIOT Act, the mere mention of offshore investing has caused some of them to tell their clients to close their accounts and seek advice elsewhere!
Placing a portion of your retirement offshore can also offer protection against the long-term decline of the US dollar.
Asset protection is another reason for placing your retirement plan offshore. In the US, pension assets are at risk. Some retirement plans are protected, but many others are not. If a US creditor gets a judgment against your unprotected plan, forget all hopes of a comfortable retirement. But if your retirement plan is invested in a suitable foreign nation, Switzerland for instance, it can be made essentially judgment proof against almost all claims.
Many reasonable people want a shield against the prying eyes of business partners, estranged family members or identity thieves. Financial privacy can be the best protection against frivolous lawsuits. If you don't appear to have assets to justify a lawsuit's time and expense, you won't be a target. Assets you invest offshore are far more private, because they are off the domestic US asset tracking radar screen.
For many investors a retirement plan is their only major asset. And now thanks to some recent changes in the US tax code your plan has the potential to become the biggest asset an investor may hold. Did you know the new sections of the US tax code allow some retirement plan beneficiaries to contribute up to 70% of their income pre-tax ! Think about how quickly you could accumulate a substantial nest egg that you could protect and invest offshore, all done legally.
Clearly, it is vitally important to you to have your assets placed for access to the most profitable global markets, the world's best investments, while enjoying the strongest asset protection. You can find all that and more -- when you move your retirement plan offshore.
Larry Grossman, CFP