The 401(k) You Forgot About

Janice:
Welcome to Rethink Expats, where global life meets financial reality. I’m Janice Diaz, joined by Robert Rigby Hall. Together, we unpack what it really takes to build wealth, structure, and sanity across borders. From tax traps to relocation myths, we bring you stories and strategies that cut through the noise of expat life. Disclaimer, Rethink Expats is an educational program. It does not provide investment, tax, or legal advice. Listeners should consult licensed professionals before making financial decisions. Opinions are our own, based on experience in the global financial industry. Let’s get started.

Janice:
Hi, Robert. I’m excited that after a decade of working together, producing financial education for Americans abroad, living the expat life, we are bringing our conversations to life here.

Robert:
Hey, Janice. Well, it’s great to be back talking about rethinking expats and what expats could be doing when they think about moving overseas. And this really is some of the foundational things to be thinking about. And there’s a lot in the press right now, lots of coverage about Americans thinking about moving overseas, particularly places like Spain, like Portugal, like Costa Rica. And I think the stats from the US State Department said that there’s over 9 million Americans living abroad, which is a huge number. And it’s worth thinking about, so what does it take to move overseas? And in particular, what do Americans need to think about when they start planning for that move from a financial perspective? So let’s start with, just in general, thoughts about moving overseas. What are your thoughts on that? So from my own experience moving overseas, I think that now there’s a

Janice:
there’s an insistence of how do we do it? How do we do it? You know, there’s, there’s a lot of movement of, we want to move overseas and you hear every day, people are moving to all those places that you mentioned. But when I was moving over about 10 years ago, I just moved over. I didn’t even wonder about taxes. I didn’t wonder anything. Now, granted I was single and maybe that’s why I thought it didn’t matter, but it matters to all of us. And I think that what they’re looking to understand now, those people who are actually becoming expats is how do we do this? And how do we make sure that we’re not making mistakes? And how do we make sure that we understand what to look out for you? Like the PFIC, you know, things that only until I was doing financial education, did I start really educating myself on what that was, but you know, what, what a you know, talking to an accountant who doesn’t understand that you have to file taxes, you have to do so many things. So I think people are, are, are really looking to be more prepared now and to understand what living abroad really looks like.

Robert:
That’s a great point. And interestingly, differently for me, when I first moved overseas, what, 15 or so years ago, more than that, I did it with a company. So I had the benefit of being given that tax advice, that financial advisor. And now I reflect back on if I’d had to do it myself, some of the challenges of doing that would have been pretty substantial. And there’s a lot of misbeliefs, I think. case. They’re fine. I can just leave them alone. Don’t worry about that. It’ll just sit there. But we know there’s penalties for early withdrawals. There’s required minimum distributions. There’s a lot of tax confusion. And again, I think I saw a stat that said there was like $1. 3, $1. 4 trillion in abandoned 401ks where people had just forgotten about it. And it seems like there’s a large number of expats that either move and leave their 401k or even don’t think about what they need to do for retirement planning. And you and I have talked about this a lot in the past. The banks have increasingly started scrutinizing accounts for Americans living overseas and for U. S. connected people living overseas. And they started monitoring IP addresses. They started monitoring phone numbers that people call in from. And we’ve known professionally that they started closing down those accounts. And I certainly got a number of personal friends who ‘ve had those accounts closed down. So that’s creating a real challenge when we look at how people can best plan for their financial stability while they’re overseas or if they’re permanently overseas. And then if I think about the politics, Janice, what are your thoughts around changing tax laws, the evolution of

Janice:
What’s going on in the U. S. and how it impacts people living internationally? So I think that, you know, there’s a hot political environment. But being an expat, I’m in the mind frame that, you know, I have to pay attention to everything U. S. no matter where I am because I’m a U. S. citizen. citizen and so I I don’t really I stop thinking about taxes ever. I have to follow what it’s looking like. But at the end of the day, I’ve accepted that I have to maintain good status with the United States because I’m an American exp at, but living outside of that, then, you know, I like I’m in Italy right now. So what, what does that look like in Italy? What are those tax situations look like? And you see so many things online and you, you know, you, you try to understand, you go to people, they don’t know certain things from the US, US people don’t know things from Italy. And then quickly you understand that you have to have almost like an entourage of consultants who have to really help you understand what those situations are. All we know is that we watch TV and we see things going up and down, but at the heart of it, we’re American, right? Unless you’re giving up your citizenship and moving along, everything in America affects you no matter how long you’ve been outside.

Robert:
Yeah, and certainly when I talk to expats, there’s a sense that what happens in the U. S. and the sort of political shifts does negatively affect their financial life because it creates a level of uncertainty and uncertainty. You know, those political shifts, whether they’re tax treaties or, as we’re now seeing in the U. S., a lot of movement, a lot of discussion, and a lot of changes to tariffs. But there’s also things like foreign bank account rules, and we saw… FAC have come in many years ago now, which led to a lot of bank account closures. And you’re right, having to follow U. S. tax laws means that no matter what happens, if it’s something occurring in the U. S., it’s inevitably going to have a knock-on effect to you as an expat living somewhere else, which I think is a great point and leads really well to the sort of trigger points for needing to seek advice. And I’d love to hear your thoughts around how you vet a cross -border advisor when it comes to finances.

Janice:
72% of Americans abroad don’t have a financial advisor, according to CNBC and their Global Wealth Survey. That’s a staggeringly high statistic. So when someone comes and says they’re thinking about finding a financial advisor to help them, what are the first few things that come to your mind in terms of how they should vet that advisor? They should understand if that advisor, I think it’s very important that the advisor know about the U. S. system because too often we find cross-border advisors who know about their local systems and they want to work with the American because we tend to have higher salaries or more property overseas. And so they’re looking for those local assets. But if I’m vetting someone, I want to know that one, that they hold a Series 65 because then I know at least you’ve taken the time to understand the system. So even if you’re working with me, on my local stuff, I know that you’re conscious of the things that I need to be conscious of, you know, the filings and what I can or cannot invest in because it may raise my taxes. And so if they don’t understand that, or at least aren’t able to link me to a tax advisor who could bridge that together, then that’s probably not the advisor that I’m going for. Because as an American, also it’s common knowledge overseas, that we tend to ask a lot more questions when it comes to this topic. And so we can quickly understand if someone in the vetting process is up to par. And that usually means that they know at least the basics and we can then enter into a relationship with them. but they have to at least know the basics or be connected enough to be able to help us holistically.

Robert:
So what I heard was they have to have an affinity for working with Americans, They need to have expertise in both the U. S. side of the house and the local country that you’re in, or at least the local continent that you’re in. And then a network of other advisors, such as tax advisors, potentially estate planning or lawyers who they could refer you to. That sounds like great advice. Yeah, that’s it. Because if you can’t get that, then it’s not a true holistic service. We need to be careful because one mistake now, three years from now, can turn into a big penalty. So we talked a little bit about 401 ks and leaving those behind and forgetting about those. And there’s real challenges associated with that as a lot of those plans sort of auto-convert to long-term annuities. So let’s leave those for one moment. Roth IRAs, challenges there because a number of countries don’t honor the tax treatment of Roth IRAs. So thinking carefully about the penalties associated with that and the challenges of managing a Roth IRA once you’re overseas. PFICs, a lot of people have heard about that. Punitive tax treatments and tax rates for certain investments. If you’re a… A U. S. citizen or U. S. connected person and the annuity that you’re investing in outside the U. S., doesn’t have a favorable tax treatment. So those are three areas. Then the fourth one that comes to mind is around currency. there’s always a need to be moving currency if you’re an expat living abroad. What needs to be thought of

Janice:
What needs to be done? I was going to jump in and say currency is a major topic because, you know, if say I’m a digital nomad or I’m a freelancer or I’m living overseas and I’m making money in one currency, dollars, and then I’m supporting my European, you know, euros, those political issues, those tariffs, everything that’s happening falls into there. And so… If I’m getting paid a certain amount one month in euros, the equivalent of euros from dollars, and then the next month something happens with the dollar and it goes down, the euro is going more and more up, then I’m having a bit of a problem and that can cause problems. budget issues for people who are living on more fixed incomes. For me, then I have to go and figure out more clients and keep with the current. But there are people who are living on more fixed incomes and those things can be very heavy on their lifestyle when they start to happen. So currency exchange is a huge issue. And exchange rates, depending on who you’re using, if you use

Robert:
they’re taking the money out of your bank account. They’re then not actually putting it into your new bank account locally for maybe three or four days. So they’re earning interest on it during that period. They’re charging you a wire fee, and I’ve seen international wire fees of $50 and $75. And then they’re using an exchange rate that is significantly beneficial to them. Really shopping around and looking at different tools to move that money can be a way of simplifying how you’re going to manage currency fluctuations and the cost of moving money. So well worth investing a little bit of time and talking to people who are used to moving money around so that you can get a sense as to what’s the best way to do that. Exactly. I mean, there are a lot of great tools. As expats, we learn very quickly how to transfer money, how to make phone calls. Sometimes even that can be an issue. When you were talking about their tracking, bank IP numbers and stuff like that and closing accounts. But it’s amazing because as Americans, we always keep

Janice:
a U. S. bank account.

Robert:
we have to keep a US phone number. We’re still American. We have to pay taxes. And so there are certain things that we have to keep for that. But yet you hear about accounts being closed and stuff like that because people are overseas or having a hard time opening things. And it’s like that, that’s that little gray area that no one really kind of tells you about or talks to you about and says, you’re going to hit some bumps over here, but this might be a good way to do it instead of that. And I think now podcasts like this and people coming up on forums a lot and saying, how do we do this? We want to do this. We want to live this lifestyle, but how do we actually do this? That’s great. There’s some really great advice there on some of the challenges associated with living overseas, how some of the politics that occurs in the US has an impact, importance of finding the right advisor, thinking about how you treat retirement assets, and also thinking about how you treat your family. So I think that’s a really good advice. So let’s change gears. Let’s talk a little bit about motivation and mindset. Why is it that so many expats don’t seek advice? There seems to be this mentality of, I’ll figure it out later. So some sort of sense of DIY confidence. Maybe there’s some shame and guilt over some past experiences or past mistakes. A lot of expats that I talked to are looking on Reddit and Facebook to get their financial advice and find out what’s going on. And I’m sure there’s a number who don’t want to do it because they don’t want to do it. And I think that’s a really good advice. Because of the potential cost. But I’d love to hear your thoughts around the whole area of why don’t any expats choose to get the financial advice that they so much need?

Janice:
I can tell you why I was probably very naive when I made the move. For me, it was… And I don’t know, maybe sometimes we Americans live more in a bubble than we understand. But I think it was as simple as, OK, I can, you know, move over there and I… will file my taxes every year and that’ll be what it is. But you don’t understand the things that are in the way now because you have a pension in another country, maybe you’re contributing to, or you’re banking in another country or you’re investing or something is happening that changes it. Sometimes people move overseas and they’re leaving an employer and now they’re becoming their own employer and they don’t realize how that changes your taxes. And so… for me, I was just naive. I guess I thought that I’m American and whatever I have to do, I’ll do. But I didn’t understand all the many, you know, Tetris levels that were involved and now being considered a local and out of my country, but still always having to do the tax thing in the United States. And so I was just naive. I think a lot of people may be naive because they just think it’s an easy thing. You’re American, you just get up and go and you’re whatever, you don’t really study it. I think that maybe they just want to see how the lifestyle is and they don’t understand how far that can take them. Yeah, I think that makes a lot of sense. And part of that, that you’re saying is in part cultural as well and culture and upbringing shapes tolerance to risk as well. And I think there’s also an emotional attachment people get. I know

Robert:
you’re you know, as listeners can hear, I’m originally British, although I spent a lot of time in the US and a lot of time in Asia and Europe working. I really, really struggled with wanting to delay converting my UK retirement assets into US dollars, even though in my case, I’d already always planned to retire in the US, but I held on and I had this emotional attachment to the British pound and didn’t want to convert to US dollars. Now, out of pure luck, that was probably a very sound decision currently, 10 years from now, who knows what the situation will be. And that comes on to another topic of diversification of assets. And if you’re living internationally, diversification of currencies, but we could talk more about that a little bit later on.

Janice:
That’s a whole other episode. A lot to talk about on that.

Robert:
So let’s just pause for a moment and talk about U. S.-connected individuals, dual citizens. It’s a complicated space because the Inland Revenue taxes individuals, even if they’re not U. S. citizens, but they are married to U. S. citizens, green card holders the same way as well. There’s more than a million U. S. citizens holding dual citizenship, which means that they’re also paying their U. S. income tax as well. That requires filing in both countries. So like you, Janice, living in Italy, you’re filing in Italy, but you’re also filing in the U. S. So that makes all of this space particularly complicated. Tax advice needed there. What are your thoughts around that? I think everything starts with the tax advisor. But what I have also found is that you need to be honest about everything that you have and everything that you’re planning to do, because sometimes we go to a tax advisor and they just see the situation right now. But. But, you know, that’s why a financial advisor would say, OK, well, in the long run and for your life events and your retirement, you know, what are you looking at? But I think everything starts at the tax advice and understanding what you have to do to stay legitimate and to stay clean and clear, you know, wherever you’re living and then.

Janice:
hopefully that tax advisor is also speaking to that financial advisor somehow through you and all of that feels more holistic that way because sometimes, I kind of had it in pieces, and then I understood that I had to be clear about what I was telling my tax advisor and my financial advisor as to what I wanted to do so that I could really have a plan not, you know,

Robert:
I’m having one conversation here and another conversation there. So it has to somehow mesh together. And, you know, there are good advisors who have great relationships with tax advisors as well as tax advisors who have great relationships with financial advisors. And the U. S. is one of the few countries that continues to tax citizens on their income and their assets globally. And the IRS has extremely long arms and a punitive approach to banks, which is forcing banks internationally to declare U. S. citizens’ assets back. And that complexity extends also into penalties. People failing to file their foreign bank account reporting or FBAR, I think it’s a $10,000 penalty for failing to complete an FBAR. So the U. S. really does keep on controlling a lot. of how you have to operate from a financial perspective. no matter where you are in the world, and escaping that is really hard to do. Time and effort, if you chose to renounce your U. S. citizenship, and the cost of doing that is pretty expensive as well. Don’t think if someone, in terms of our listeners, is thinking about a move internationally, don’t think that this is going to let you escape all of the hassle you have with your financial reporting. Now, that continues on, and the fact gets a little bit more complex, but you get to live a very different lifestyle when you’re living outside the U. S., and that appeals to many people. So, Janice, as people start to think about, well, where do I go for this advice? What are your thoughts on how you select the right advisor to choose from? I think selecting the right advisor is, first, your mindset and understanding what it is that you really want to do. You know, if this is a dream of yours, then how does it look? Five, 10, you know, 15 years from now, you know, doing your search on an advisor, like you said before, there are a lot of people who are cross-border advisors.

Janice:
you know, but aren’t really working with Americans. There are groups of advisors who are heavily, you know, entrenched with Americans or expats who are in the United States. And so finding that licensed advisor, making sure that they have decent connections to people who are our tax advisors as well, who understand your situation. Um, and… doing your research, you have to really research. You can’t just download a tax guide and then assume that, you know, that firm knows what they’re doing because everybody puts those out. You have to really know what questions to ask. And that’s probably going to be based on what your goals are.

Robert:
That’s great advice. So this has been a great discussion around the motivation and mindset of thinking about a move internationally if you’re a US citizen, the importance of getting great financial advice, particularly if you’re also a dual citizen, that adds another layer of complexity. And in terms of selecting an advisor, how you find someone who is used to working with Americans, someone who has both local expertise and US expertise, and someone who you can really turn to because they also have a network of other advisors, whether it’s tax, legal, estate planning. That’s wonderful. Thanks very much, Janice.

Janice:
That’s it for today’s episode of Rethink Expats. If you found this useful, share it with someone who’s building a life across borders. They’ll thank you later. You can find more resources, guides, and upcoming episodes at RethinkExpats. com. Until next time, keep your money smart, your paperwork clean, and your mindset global.