How to Invest for US Expats

Mar 7, 2023 | US Expats

For Americans living abroad, the process of investing can seem like a headache. Between figuring out which US-based companies to invest in and managing currency conversions, it’s enough to make anyone’s head spin.

But it doesn’t have to be that complicated. With a little research and guidance, you can easily find ways to invest your money no matter where in the world you live. Here are a few tips to get you started.

Challenges

As a U.S. citizen, you are in the unenviable position of being taxed on your worldwide income and gains. This simple fact causes many challenges for Americans when trying to build a thoughtful investment plan. Some questions to consider are:

  • How do you design a portfolio that can meet your risk and return objectives with only a limited array of available investment options?
  • How do you invest in a tax-efficient way that stays compliant with the ever-changing tax laws and regulations in multiple jurisdictions?
  • How do you manage your currency risk in order to meet your financial liabilities in the future?

Investment Options

We work alongside US-compliant platforms that are designed for US expats. This allows US expats to invest in a wide array of investments such as ETFs, mutual funds, DFM, stocks and bonds. Platforms also report directly to the IRS with both the 1099 and 1042 reports and any withholding tax is deducted directly from the investor’s portfolio and paid to the IRS monthly. They provide comprehensive reports that are sent to advisers and investors on an annual basis. These reports are what investors can use to file to the IRS. Other benefits include:

  • Can invest in any major currency – GBP/EUR/USD
  • Provide IRS requirements for US expats
  • Non-PFIF investment options such as ETFs, mutual funds, stocks and shares, bonds etc
  • A flexible account with no hidden fees or surrender penalties
  • Online access

FATCA – Compliant Retirement Plans

Foreign US-style personal pension plans comply with FATCA and provide additional tax benefits for individuals returning to the US.

One of the main characteristics of this type of plan is that it is contract-based instead of trust-based. This simplifies tax reporting and brings the asset outside of the US, allowing the assets to grow in a tax-friendly environment.

Underlying investments within these plans are not classed as PFIC by the IRS, opening a much more excellent investment choice for investors.

 Other benefits include:

  • Can invest in any major currency – GBP/EUR/USD
  • Can access from age 55
  • Withdraw up to 30% Pension Commencement Lump Sum
  • Annual Income capped at 8% GAD rate
  • Benefit from gross roll-up – no tax applicable until you withdraw funds from the policy
  • Funds paid from the plan are often paid gross of tax
  • In the event of the member’s death, there is no requirement for probate
  • No limits on the amount you can contribute to the plan
  • Assets are held outside of the estate from a UK IHT perspective
  • Up to 30% of loans can be taken before age 55
  • Reporting provided to do individual filing to the IRS

This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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Schedule an Obligation-free Call With an Adviser

By scheduling an appointment with an adviser they will reach out to you at your requested time. 
Personal advice, whenever it suits you.

SJB Global