Expat Frozen IRA Accounts | Your Options
If you're a U.S. expat living overseas, you may be surprised to learn that your IRA account could be considered 'frozen' by your brokerage firm. This article explores what frozen IRA accounts really mean for expats, why it happens, and what you can do about it.
- What a frozen IRA account is and why it affects U.S. expats
- Which types of IRAs are impacted by overseas residency
- What your options are if your IRA is frozen while living abroad
- How to complete an IRA Rollover as an expat
- Tax implications of IRAs abroad
Understanding Frozen IRAs for US Expats
Why Some U.S. Retirement Accounts Get Locked Abroad
Many U.S. expats report issues accessing or managing their retirement accounts, particularly Traditional IRAs and Roth IRAs. This usually happens when brokerages place restrictions on accounts owned by clients with foreign addresses, effectively 'freezing' them. You may be unable to make trades, transfer funds, or contribute further.
This isn’t due to IRS rules, but rather the policies of individual financial institutions who want to limit their exposure to international regulations, especially those related to anti-money laundering (AML), tax compliance, and Know Your Customer (KYC) laws. In these instances, accounts are typically frozen for a 60 day period whilst clients are encouraged to identify an alternative international IRA provider.
Definition: What is a Frozen ISA?
A frozen IRA account is one that you still legally own and that continues to accrue any gains or losses based on existing investments, but you can’t actively manage it in the same way you would if you were U.S.-based.
Here’s what might be restricted:
- Buying or selling assets within the IR
- Re-balancing your portfolio
- Rolling over into another retirement account
- Making new contributions
Your US Retirement Account Options Abroad
If your retirement or investment accounts have been frozen, or you're being instructed to find a new home for your assets, there are options available. At The Wealth Genesis, we specialise in providing bespoke and independent advice to US expats around the world. We work with international brokerage providers and assess the suitability of each option before providing advice.
Top Tip
If you're planning a move abroad, do not update your brokerage account with a foreign address until you've reviewed your provider's expat policies. In some cases, your account could be locked immediately after the update.
IRA Rollovers For US Expats
Our IRA rollover process for US expats is straightforward. We begin with an initial discovery meeting to understand your position in detail, assess your objectives, risk profile and aspirations - from there, we will begin putting our transfer reports together. These reports will detail our advice moving forward, along with the underlying investment portfolio.
If you are happy at this stage, we can begin opening your new US expat brokerage accounts and request the transfers. In total, the process typically takes a couple of weeks.
We do not charge any initial fees for our US expat brokerage service, and our annual management fee is 0.85% per annum (further reduced for High Net Worth investors).
Individual Retirement Accounts Abroad | Tax Implications
It's important to understand how traditional IRAs (and Roth IRA rules) from a double taxation perspective and your US IRS tax obligations. Living abroad, US tax rules will apply to all US connected persons. An individual is US connected if any of the below criteria apply:
- US Citizen/Green card holde
- US tax resident
- Holding a US passport, or citizenship due to a parent holding a US passport
Generally speaking, IRA accounts will have a 30% withholding tax levied on US expats taking withdrawals overseas. If you are a US connected person living in a country that has a double taxation agreement with the United States, through the use of a W-8 BEN form, your IRA brokerage can pay your proceeds out free of any withholding tax. The W-8 BEN form essentially confirms your foreign residence status with the withholding agent or payer (in this case, your IRA provider).
In countries with double taxation agreements with the US, you will never have to pay taxes in both countries, and you can claim relief if you have through foreign earned income exclusion.
If you are unsure on your international tax obligations, we suggest engaging with a regulated adviser to ascertain your position and international tax liability on foreign income etc.
Investment Management For US Citizens Abroad
At The Wealth Genesis, we are regulated throughout the world to advise US citizens - we are SEC regulated in the United States, EU regulated throughout Europe, along with further licenses depending on your country of residence.
All our advisers are UK, US and EU qualified with a minimum of 10 years experience in advising clients globally.
Our investment proposition is entirely bespoke - we do not utilise model portfolio solutions or expensive external fund managers. We operate streamlined, cost-effective brokerage accounts for our US expat clients.
