5 Life and Retirement Traps for Cross-Border Clients – ThinkAdvisor

What You Need to Know

  • Moving retirement savings can be hard.
  • Keeping health coverage in place at all times can be tricky.
  • Some efforts to move or adjust life insurance could wreck estate planning efforts.
Terry Ritchie (Photo: MDRT) Terry Ritchie (Photo: MDRT)

Many people dream of living and retiring outside their home countries, but poor financial planning for clients who cross national borders can lead to nightmares.

Terry Ritchie, a vice president in the Calgary, Alberta, office of Cardinal Point Wealth Management LLC, talked about some of the traps earlier this week, during a session that was part of the Million Dollar Round Table’s annual meeting.

MDRT is a Park Ridge, Illinois-based group that provides educational and networking opportunities for top financial services sales people from all around the world. Because of the COVID-19 pandemic, MDRT held the annual meeting, including Ritchie’s session, online. MDRT has recordings of the sessions on the web, behind a paywall.

Ritchie serves many clients who move from the United States to Canada, or from Canada to the United States, or who live regularly in both countries.

Even though Canada and the United States may seem similar in many ways, and about 1 million U.S. citizens live in Canada, an act as simple as moving from the United States to Canada can lead to big financial problems for clients who don’t know what they’re getting themselves into, Ritchie said.

Here are five traps Ritchie talked about, drawing from the online video of his session.

1. Assuming that it’s easy for U.S. citizens to live where they want to live.

U.S. residents are used to people from Central America having trouble moving legally to the United States.

Financial planning clients have to recognize that they, too, might face bureaucratic constraints when they are trying to move to where they want to be, Ritchie said.

“You can’t just move to a country of your choosing just because you want to,” Ritchie said.

2. Trying to replicate the original retirement savings arrangements in the new home country.

Ritchie said that each country has its own retirement savings arrangements and tax rules, and that arrangements that may offer tax advantages in the United States, such as variable annuities, may offer fewer or no advantages in other countries.

3. Trying to get around restrictions on keeping investment arrangements in place in the original home country.

“Nonresidents of the United States generally can’t maintain investment accounts in the United States,” Ritchie said.

In some cases, Ritchie said, the restrictions apply to retirement savings accounts as well as other types of accounts.