Expat Pension Elections
Living his best life in New York City, Paolo, 52, is a personable, fit and single statistician with a life sciences company. He loves living in Manhattan and when the weekend arrives, he straps his Bianchi Infinito road bike to the back of his Outback and heads north for an endurance training ride in the Berkshires.
His career with the US-based life sciences company has unfolded from his native Argentina. Over 25 years, he had worked in Buenos Aires before accepting assignments in Switzerland, Japan and the U.S., under an L1 Visa. He has left a trail of assets custodied in the countries where he has worked. As these small accounts have grown and multiplied in each of the four countries, his pension accounts and financial wealth feel distant – or perhaps disperse - but not forgotten.
Since he moved to New York in 2017, he frets over his trail of global accounts. To be honest, he knows that having accumulated $4.2 million puts him in a good position. The scientific mind wants to gain certainty about his entire financial picture well in advance of his eventual retirement at age 66.
Annual Elections – His four pensions are domiciled in each of the four countries where he was stationed. He has kept on retainer the highly reputable global accounting firm his company uses. Even so, how does someone make sense of his annual elections when the four pensions are subject to four country jurisdictions? For each of his basic pension and excess plans, he can elect either an annual pension, a lump sum payment at age 55 or 62 or later, or a blend of the two. His elections are compounded by the tax implications of the region and the impact on his projected resources.
Equity Awards – He has earned equity awards abroad with different tax treatments. Some have already been taxed while others will be subject to tax. As an insider, he is aware of company selling windows, but has preferred to let his Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) accumulate. The varying tax treatment and status makes for dizzying calculations about the true net value of what he has and his future pension income.
Bank and Investment Accounts – Paolo feels uneasy about having his investment and bank accounts dispersed without a unifying plan for building wealth or a solid understanding of his financial security.
Though he has strong financial skills and excellent tax counsel, Paolo has acknowledged his head is spinning and he needs help. What he lacks is a knowledgeable advisor to coordinate his decisions, advocate on his behalf and collaborate with his accounting firm team. And importantly, he needs a comprehensive plan that pulls together a single plan for assets and future income, regardless of where the assets are held.
He awaits his next assignment here or abroad and wants to evaluate exit tax planning. He is open to staying in the US; his healthy lifestyle and burgeoning career have all come together here, although it is too soon to say where he might retire.
*The name, likeness, and circumstances in this example are a fictional composite of facts from executives similar to actual SFG Clients.