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I’m a US citizen living abroad for the last 10+ years. Initially, I went abroad in my early 20s to explore and get my master’s degree (a time period when I should have been thinking of starting a retirement account or some form of investments, but I didn’t). I’m now in my early 30s and I’m looking for ways to start, but I have been reading that US citizens overseas cannot invest in US mutual funds/investment options. Is that the case? How can I start my retirement planning/investments from abroad? — Retirement Planning From Abroad
Dear Retirement Planning,
It’s not that US citizens living overseas can’t invest in US mutual funds; it’s that many US brokerages don’t want to deal with the administrative hassle of managing nonresident accounts. A few brokerages, including Charles Schwab, welcome US expatriate clients and offer services that allow you to set up and manage your accounts without running afoul of the Foreign Account Tax Compliance Act, aka FACTA.
That said, there are other ways for you to get started with retirement planning, including the simple and often overlooked step of putting money into a high-yield savings account. Many people incorrectly assume that they’re only saving for retirement if they’re setting up an IRA or contributing to an employer-sponsored 401(k) account. Here’s the secret: Any money you don’t spend until you retire counts as retirement savings. It doesn’t need to be invested in a mutual fund or stashed in a 401(k) or IRA, especially if those options are going to be more expensive for you as an expatriate.
So do the math on the pros and cons of investing, talk to somebody at a brokerage like Charles Schwab, and—no matter where you end up putting your money—make sure you pay all the appropriate taxes on anything you earn, save, or invest as you prepare to retire.—Nicole Dieker, Money Scoop guest columnist
