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Jingthing

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

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OK, this one just might be my personal undoing living abroad.

The major IRA firms (Fidelity, Vanguard) etc. are not only not welcoming new expat business for IRA accounts under 500K USD, they are kicking out long time existing customers.

So you (I) might be forced to close accounts / "roll over" ... to what firm exactly?

For traditional IRAs the TAX (and early withdrawal penalty) hit from selling out an entire large account could be ruinous.

I don't even know an established reliable firm that WOULD welcome such expat accounts. Yes I mention an odd firm here, but I've never heard of them and they sound like goldbugs .. SCARY!

I know what you're thinking ... if you've got a U.S. address on record, no problema, well think again ... maybe still a problema.

From the login screen at Fidelity:

You are visiting Fidelity.com from outside of the United States and you must accept the International Usage Agreement before you can proceed.

This web site is intended to be made available only to individuals in the United States. Nothing on this site shall be considered a solicitation to buy or an offer to sell a security, or any other product or service, to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful under the laws of such jurisdiction and none of the securities, products or services described herein have been authorized to be solicited, offered, purchased or sold outside of the United States of America. By using this site, you consent to the use of cookies which collect information about site visitors. To continue to this site, you must acknowledge that you understand and agree to these terms of use by clicking "I Accept" below.

Note it doesn't speak about a U.S. address. This text is implying they just won't deal with you if you don't LIVE in the U.S. It sounds like even with a U.S. address if you're living abroad, you're not even supposed to sell portions of existing investments, as retirees generally do annually.

More evidence this is real and possibly very serious for a lot of people:

http://www.certifiedgoldexchange.com/vanguard-ira-services-expats-not-welcome/

Vanguard IRA Services has evidently closed the door on American expatriates with retirement accounts valued at less than $500,000, according to a recent International Advisor article. Vanguard, along with eight other IRA custodians, including Scottrade, Fidelity, T.D. Ameritrade, Morgan Stanley and Merrill Lynch, is no longer accepting applications for self-directed IRA plans when the IRA owner is an expat (a U.S. citizen living abroad) and when the account in question is valued at $500,000 or less.

It is unclear whether Vanguard is forcing current expat IRA clients to move elsewhere, as are some of the aforementioned custodians, or whether Vanguard is only denying expats incoming or new IRAs. What’s certain is that U.S. expats the world over are scrambling to find an IRA custodian that is willing to manage expat retirement accounts.

And more:

http://www.international-adviser.com/news/tax---regulation/us-institutions-to-expats-take-your-retirement

First American expatriates were told that their bank accounts weren’t welcome, either in the US or in their new countries of residence, because of the growing hassles and expense banks have to deal with when they have American citizens as clients.

Now, it is emerging, Americans’ tax-deferred retirement accounts – many of which were set up decades ago, and never touched since – are also increasingly unwanted by US financial institutions, unless these accounts are of significant size.

So anyway ... HELP PLEASE ... what's an expat to do?

Have you encountered this issue personally yet?

In other words a long term IRA customer discovered to be logging in from abroad ... and then contacted to close your account?

Again, rollover to where?

Any other ideas on how to cope with this?

Yes there is VPN. Legal to use in such a way to show U.S. login or not? I really want to know. In a case where you do have a U.S. address on record, isn't that a stronger case for not being forced to close? But then there is the issue of logging in from outside the U.S. and forced to sign agreements about non-service for people outside the U.S.?

Edited by Jingthing
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Just last month I rolled over/moved my Beneficiary IRA (only around $15K) from a U.S. bank to a "new" Beneficiary IRA account with Franklin-Templeton Investments/Mutual Funds. On the forms I mailed to Franklin-Templeton to accomplish the transfer I only used my Thailand military APO address. Took about 3 weeks for my bank and F-T to complete the transfer which as mentioned was the establishment of a new IRA with F-T. No problems....my Beneficiary IRA is now with F-T.

Those disclaimers in the OP seem standard issue/been around for a while when they detect you are connecting from a foreign IP address or sometimes even when connecting from within the U.S....guess they just want to make sure you understand some of their products/services only apply to U.S. residents....then you get into the debate of exactly what is a U.S. resident in the eyes of the company.

Edited by Pib
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The possibility of having our investment and/or retirement accounts closed back in the States is a real threat, although not yet. I previously received Fidelity's warning and so now use a vpn. Having worked in the financial sector in the US before retiring I recognize the motivation behind Fidelity's warning as an attempt to show that they are not soliciting business abroad and therefore, not subject to regulation in those jurisdictions. If they ever were to have to bear the cost of meeting the regulations in foreign countries like Thailand, they would dump our accounts in the blink of an eye. That hasn't happened so far and may not in the future. However, there is always the risk of tightening of Patriot Act-type or anti-tax evasion restrictions that catch us the net and make our current arrangements untenable. There is no guarantee that the regulations of Thailand and the US will be harmonized sufficiently to enable us to continue to live here. That applies to income tax considerations, but also to banking and investments. We are not a priority for Thailand, because we are not important to the Thai economy. It's a little different for expats working in a multi-national that is indeed providing some essential service to Thailand. We may continue to be able to get by by being lumped with them, but not necessarily. We are not important to the US because expats do not represent a single voting constituency.

In the meantime, it becomes more important to resemble an everyday customer as much as possible. To that end it behooves us to use a US mailing address, a US telephone number accessible here, and a vpn. Also, the more different accounts we set up before expatting the better our chances to avoid being shut down. That's the best we can do. We can fall through the cracks because we decided to place ourselves between those very cracks.

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Some institutions say they are not showing overseas clients with US retirement accounts to the door. “We have not asked any of our non-US clients to close accounts,” a spokesperson for Charles Schwab told International Adviser.

“We continue to open accounts for non-US residents who want to open IRAs with us, and comply with related IRS reporting requirements.”

http://www.international-adviser.com/news/tax---regulation/us-institutions-to-expats-take-your-retirement

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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...

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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 as 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.

Edited by Jingthing

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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.

Edited by CaptHaddock
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I agree, that wouldn't be the only reason not to expatriate. However, I think most potential expats minimize the U.S. presence issues and the hassles they are setting themselves up for. It definitely belongs on the con list in a pro and con decision process. I agree there are better tools now than ever ... especially for U.S. telephone presence.

OK, sorry, probably the focus here should be IRA accounts ...

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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.

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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?

Jing, I've never had any issues with using a VPN. But have had when NOT using one.

As I mentioned above, my recommendation is, if possible, to use a VPN service that has servers located in or near where one's residence address is, just for consistency and uniformity. In reality, I think using an IP anywhere in the U.S., as opposed to international, ought to be OK. But these days, most good sized VPN services have server locations available in many major city areas across the U.S. So finding a "local" VPN server for your residence address usually isn't a problem.

As for VPN IP addresses, yes, they operate in ranges, and typically will change slightly with different log-ins. That's called dynamic IP as opposed to static IP addressing. But I don't believe that's terribly different than what you'd get if you were using a U.S. cable or DSL provider, where the default accounts usually are Dynamic IP ones. At any rate, I don't believe any of the financial firms discriminate against (or flag in any way) any of their customers just for using a VPN for log-ins.

BTW, re one of the issues being raised above, the bad situation where a customer is being forced to close their U.S. retirement account at a particular brokerage is not necessarily the same thing as being forced to liquidate/withdraw the funds and incur penalties, taxes, etc. Provided, of course, that the accountholder can find a different brokerage willing to accept the rollover. Right now, especially if someone is not promoting any foreign status, I think finding a rollover at a different firm ought to be generally achievable.

Edited by TallGuyJohninBKK
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Thanks for the guidance comrades. I won't panic yet.coffee1.gif

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