How an offshore Self-Directed IRA can protect your retirement account

Written by Andrew Henderson

Dateline: Helsinki, Finland

Keeping your retirement nest egg offshore could earn you higher returns and offer protection from government confiscation in an age of sovereign defaults.

Around the world, retirement account confiscation is a huge issue. Governments around the western world have shown that they are all too happy to help themselves to their citizens’ hard-earned retirement money when “needed”.

As a result, moving your IRA offshore is not only a sound strategy to earn higher returns and defer taxes, it’s also a good asset protection strategy to make sure your nest egg isn’t taken from you.

If you think that your retirement account isn’t fair game, think again. Here in Europe, Hungary was among the first countries to nationalize pensions.

A few years ago, the government gave pensioners an ultimatum: put your retirement savings into our government bonds and hope for the best… or lose your pension.

Imagine paying for years into a government-run pension program only to be told you were going to lose everything after following the law. In cases like these, “the law” can not protect you.

That’s how the government works: they can change the rules at any time.

Since then, countries from Ireland to Poland have enacted their own schemes to “borrow” and even outright confiscate retirement accounts from their citizens. In the United States, Social Security presents great cause for concern as politicians promote ways to means test it, raise the retirement age, or cut benefits.

My belief is that rather than make tough choices about Social Security and have to face an angry electorate, US politicians will choose to quietly “borrow” private retirement savings to keep their scheme afloat.

In a best-case scenario, US Social Security will be means-tested so that the likes of you will barely see anything. In a worst-case scenario, they’ll default the entire program under the pressure of more than $100 trillion in unfunded liabilities, leaving you with nothing.

That’s why I favor the chances that they’ll take your IRA or 401(k) with them. Private retirement accounts are the last untapped bastion of wealth for greedy governments to get their hands on.

The Cyprus bank confiscation set the stage: governments can use some fancy news speak like “stability levy” and – like magic – take the money right from your account.

Even if they don’t go that far, they could easily force you to hold worthless US Treasuries in your retirement account. Have fun retiring on the tiny interest that those pay, if you ever get paid at all.

All of these are reasons why I have never had an IRA account myself, and why I advise others not to have an IRA. The government already controls enough of your financial freedom merely by controlling the currency you use and the economy you live under; why give them any more power?

However, if you already have an IRA, you can convert it into an offshore IRA – more commonly known as a Self Directed IRA or SDIRA – to give yourself total freedom to invest your money as you wish and enjoy freedom from coming wealth confiscation measures.

Even if you believe that programs like Social Security will be wonderfully solvent, an SDIRA offers benefits beyond asset protection; namely, the ability to earn higher returns in asset classes of your choice.

When you combined higher returns with the long-term tax-deferred status of an IRA, you can achieve amazing results.

Just consider that a penny doubled each day for one month gives you more than $5 million. However, when you pay taxes on each daily gain, you earn less than $100,000 in that month. The same principle applies to gains in your IRA; move your IRA money to greener pastures and your gains can multiply much faster than they would in a taxable investment.

Why use an offshore Self-Directed IRA?

Converting your traditional IRA into the Self Directed version helps you regain control over one of your most important investment accounts. By going offshore with your Self Directed IRA, you can access new investments formerly available only to the wealthiest citizens.

In fact, among all of the bludgeoning presidential candidate Mitt Romney took in the US 2012 elections, part of the beating involved his own Self Directed IRA. Since you’re not a politician, you only need to worry about the benefits of an SDIRA, not the political fallout.

For years, IRA investors were confined to a menu of “sucker bets” for placing their retirement cash. Mutual funds and CDs paying tiny interest – in US dollars, of course – were among the top picks for IRA investors.

It wasn’t until recently that anyone even discussed the idea of owning physical precious metals in an IRA, and no one I’ve ever heard in the US has discussed how to actually de-peg your IRA from the weakening US dollar, let alone how to hold assets offshore.

The good news is that a Self Directed IRA offers you choice where you had none before. A Self Directed IRA involves moving your accumulated retirement account assets into a domestic or offshore LLC and appointing yourself the manager of that LLC.

From there, you can make just about any investment you like.

Want to invest in racehorses in Dubai? No problem.

Open a high-interest European bank CD paying 5% in a stable foreign currency? Done.

How about high-yield foreign real estate? You got it, so long as you don’t use the property for your own use (you can’t benefit from your IRA while it’s growing, after all).

These options aren’t just limited to IRA holders. You can use this strategy with just about any tax-exempt account with the exception of some defined benefit plans. Your 401(k), SEP, SARSEP, Roth IRA, Keogh plan, and 403(b) can all be eligible.

Also, you should be aware that retirement accounts parked with your current employer may not be convertible; you’ll have to ask human resources.

Self-Directed IRAs vs. Self Directed IRA LLCs

There are two types of Self Directed IRAs: the traditional Self Directed IRA, and the Self Directed IRA LLC. The former involves placing your account with a custodian who has some responsibility for your money. If you are a US resident, this puts you in the same position as you had with your non-Self Directed IRA.

Why? Because it requires you to ask permission for the types of assets you place in the IRA. A custodian based in the United States bears some responsibility for the investments you make, and in the litigious American culture, won’t necessarily want you to invest in Iraq real estate or high-yield bank CDs.

If your custodian or broker doesn’t understand the investment you want to make – be it IPO stocks, overseas real estate, etc. – you might be stuck with the same weak investments you had in your traditional retirement plan.

With a Self Directed IRA LLC, that same custodian is merely responsible for reporting your offshore LLC to the US tax authorities and moving your IRA assets into your new LLC. From there, it is up to you – the manager or member of the LLC – to determine how and where to invest.

Even using a US LLC, your IRA LLC can hold things like tax liens or OTC stocks.

However, by taking that LLC offshore, you can open brokerage accounts in foreign countries, hold or trade foreign currencies, and take more speculative investments. Plus, you get the added benefit of having your money offshore as an extra layer of protection from the greedy US government.

To me, it’s a no-brainer; any time you can move assets away from a weak currency and bankrupt government, you should.

A lot of people in this business are marketing Offshore IRAs, but I’ve found few really grasp the difference between a traditional Self Directed IRA and an LLC. Finding the right person to help is crucial if you have any level of assets in your retirement account.

If you cherish the money in your IRA, moving it away from greedy politicians in Washington be one of the most important steps you take to protect it from seizure.

Andrew Henderson
Last updated: Dec 29, 2019 at 5:40AM

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4 Comments

  1. Monroe Ficus

    Andrew do you think that this will provide decent layer of protection, or do you think when SHTF, the Us govt. will just use its dwindling powers to extract these dollars from wherever one keeps them? (If the USG wanted to tax roth iras, would they send in the army into, say singapore, and demand the American’s IRA money?)

    Reply
  2. you don' juan to know...

    Be very careful before you take the penalty from withdrawing funds from your retirement account early. There are ways to mitigate those fees. For example, you could pull your money out of your IRA and immediately invest it in real estate and then use the depreciation from your real estate holdings to shelter you from having to pay the tax penalty on the early withdrawal. There are other options besides this, but you should speak with an attorney who is familiar with these types of transactions before you resign yourself to the penalty.

    Reply
  3. Constance Quigley

    My thoughts exactly. So unless you take the tax hit and renounce your citizenship, you’re pretty much under the thumb of Uncle Sam, if our fearless leaders decide to confiscate savers’ assets. There’s really nothing preventing them from setting up taxes on real estate either. It’s a free-for-all in the Land of the Free.

    Reply
  4. deborah rose

    I opened an account with Midland Self directed IRA, opened a roth IRA
    then I opened a llc in Wyoming, as member, Midland trust co as custodian fbo (my name) acct.#
    my intent is to open an offshore forex account to be able to trade with leverage in forex I didn’t want to get a ein number, so I’m having trouble putting it all together.
    The bank account for the LLC with no EIN number and the Forex account with no
    offshore address.
    what do i do.

    Reply

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