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Retirement tax optimization for US residents and US expats

calendar 2/19/2021 8:00:00 AM
author Admin System

Many US residents and US expats are keen to protect some of their assets against any claims being made by creditors, a divorcing spouse, ex-spouses, and other claimants. Similarly, it is important to many US citizens that taxation can be legitimately minimized. Luckily, at Mundo we have a highly suitable plan that meets these requirements.

What is the plan?

The International Retirement Plan (IRP) is fully approved by the US government and its Internal Revenue Service (IRS). The plan is a Defined Contribution Retirement Plan that provides retirement benefits to the member in the form of a lump sum payment and/or an income stream for life.

The word ‘retirement’ is a bit of a misnomer, as it is acceptable to 'drawdown' tax-free cash at age 55 and anytime after that age, and any level of income. It is not necessary to “retire”, i.e., you can continue working in whatever capacity required.

The scheme also creates asset protection if any creditor claims were to arise. These include the ones being made by a divorcing spouse, ex-spouses, and other claimants. Hence, both the plan ‘member’ and his dependents/beneficiaries are provided a great deal of protection for assets transferred into the scheme.

Contributions are usually made from post-tax earnings or from personal capital. The plan does not permit transfers from retirement plans where the members have received tax relief on contributions to that plan.

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Contract-based plan

Upon admission to the plan, the member will receive a Certificate of Membership, the Plan Rules, and the Key Features, which will constitute the contract.

There are key benefits:

  1. No upper contribution limits. The plan can be set up with transfers from existing investment arrangements and this can be based on a Lump Sum. There is no obligation for further contributions, but these can be made whenever required.
  2. Tax-deferred ‘retirement' account.
  3. Tax-efficient retirement benefits can be taken from age 50 in the form of an initial lump sum of up to 30% of the value – not subject to federal taxes (if the person is living in the US, this age is probably going to be 55). As mentioned, ‘retirement’ is a misnomer as one can continue working.
  4. Direct income drawdown. If, perchance, you are resident subsequently in a low-tax jurisdiction, then, your income drawdown may be tax-free.
  5. IRS compliant.
  6. Protection from creditors, a divorcing spouse, and any other claimants would be very much in place for both the plan member and his/her dependents/beneficiaries.
  7. Multi-currency options; retirement funds can be denominated in currencies other than the dollar.
  8. Portability; individuals who have left their home country may reside in several different locations whilst their plan remains in a single tax-efficient jurisdiction.
  9. A transparent and low fee structure.
  10. Open architecture for investments.

Who is eligible to be a member of the plan?

Any individual aged 18 years or over is eligible to become a Member of the Plan, provided always that by the age of 75 he/she has taken his/her tax lump sum of up to 30% of the plan value and /or draws down a regular income.


Members may make a single lump sum and/or regular contributions from taxed earnings or personal capital. Contributions may be made in cash or by transfer of assets.

Currency options

Members can choose to have the plan set up in US Dollars or other currencies. Members can also choose to receive benefits in a currency that will match their expenditure in their country or imminent new country of residence.

What advice is required before an applicant is accepted into the plan?The plan is able to receive cash transfer values from any type of registered Retirement Scheme except where a Member has already purchased an Insurance Annuity.

In-specie transfers are considered on a case-by-case basis provided that an independent valuation of such transfers is provided, unless the assets are traded on a recognized stock exchange.

How much can be contributed to the plan?

Initial contributions of a minimum of $65,000 can be made and Plan Members may continue to make further contributions to the Plan, subject to a minimum of $25,000 (or currency equivalent) per annum or as otherwise agreed from time to time.

When  can benefits be taken from the plan?

Benefits can commence on a Member attaining such age stipulated by the law of their country of residence and/or domicile, provided that it is not earlier than age 50. However, if the Member becomes incapacitated before attaining the relevant age, it may be possible for benefits to be paid earlier.

What benefit options are available from the plan?

Lump sum

The maximum lump sum that can be taken from the Plan is 30% of the total value of the Plan. Lump sums are paid out as tax-free payments. However, Members should obtain advice in the jurisdiction in which they are residents to ascertain any lump-sum’s tax treatment. The remainder of the Plan value must be used to provide an income stream to the Member. 

The lump-sum is only available to the Member at age 50 or 55 and onwards and must be taken within one year from the date of commencement of benefit payments.

Income Drawdown

Drawdown can be paid to the Member for the Member’s lifetime or until the plan value is exhausted.

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What death benefits are payable?

Any benefits described below may be subject to tax under the law of the Member’s country of residence. If the plan value has not all been used by the time that the Member dies and he/she is survived by one or more dependents or other nominated beneficiaries, then the plan will provide an immediate cash lump sum (being the balance of the plan value) to the Member’s dependents or other nominated beneficiaries.

If the Member dies without being survived by one or more dependents or other nominated beneficiaries, the plan trustees will exercise their discretion concerning the distribution of any amounts remaining within the plan.

How does the member nominate the individuals whom they wish to benefit on their death?

During their lifetime, the Member may amend their list of named dependents or other nominated beneficiaries at any time in writing to reflect their changed circumstances or wishes and may also at any time specify in writing which of their named dependents or other nominated beneficiaries are to receive death benefits.

Through our partners, you can receive top tax optimization even if you are an American resident. Many firms run away from American clients, but we don’t. Contact us right now, and we’ll put you in touch with our experts.

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