4 Ways American Immigrants Can Manage the Transfer of Wealth With Commitments at Home and Abroad
Written by
Lina Patel
Edited by
Rebekah Evans
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American immigrants face unique challenges when preparing for retirement, such as providing financial support to extended family members abroad through remittances. A remittance is the transfer of money by a member of a diasporic community to their family back home to help with household and other expenses.
The fundamentals of saving for retirement for American immigrants are similar to those of American-born citizens without family overseas. These fundamentals include planning ahead, having a savings plan and consulting financial experts about investment decisions to ensure alignment with an individual’s goals and lifestyle.
For professional immigrants living in America who are managing wealth transfers and retirement planning while fulfilling obligations in their country of origin, here are four key things to consider.
Detailed Financial Planning
Immigrants should consider the whole picture and create a financial plan that accommodates their retirement goals and obligations to family abroad. This means allocating specific portions of an individual’s income with this dual focus in mind. Part of a comprehensive financial plan includes establishing an emergency fund to ensure that unexpected expenses, like medical emergencies or home repairs, can be addressed without affecting retirement plans or the ability to send remittances. Remember, an emergency fund is separate from retirement and other savings accounts.
Taxes
Dennis Shirshikov, head of growth at Awning advises engaging with an experienced financial advisor to fully grasp an individual’s tax obligations in the U.S. and their country of origin. Real estate, additional investments, professional income and even cross-border gifts carry tax implications that may affect an individual’s financial plans.
Investments
Financial planners commonly suggest diversifying investment portfolios to spread risk and bolster retirement stability. Be sure to consult a financial advisor well-versed in the minutiae of international wealth management for bespoke strategies that consider personal and familial commitments.
Totalization Agreements
Lara Bianco of My Dolce Casa not only researches the unique financial issues affecting immigrants but has worked and lived overseas, herself. Bianco says that it’s essential to know about totalization agreements. These agreements were established in the 1970s and significantly benefit American immigrants by optimizing the use of an individual’s international work history for social security benefits. Totalization agreements help coordinate social security coverage and payments between the U.S. and participating countries, preventing the complications of dual social security taxation.
These agreements are crucial for individuals who have careers spanning multiple countries, ensuring they receive their benefits no matter where they currently reside. Without such agreements, individuals could be liable for paying taxes in their host country and the U.S. These agreements allow the aggregation of work periods across countries, determining the appropriate coverage. In addition to securing benefits earned by an individual, these agreements allow the individual to draw benefits according to their residency and allow the collection of proportional benefits from each country where they have accrued sufficient work credits.
As Bianco says, if she had not known about totalization agreements she’d be, “…in a tough spot trying to qualify for benefits in either country because of my split work history. But, thanks to the totalization agreement between the U.S. and Germany, I can merge my work credits from both places to meet the benefit eligibility requirements in either country. This way, every bit of my work, no matter where it is, helps me towards my retirement.”
Final Thoughts
The complexities of wealth transfer and retirement planning for American immigrants involve a balancing of financial planning, tax strategies, wise investment choices and an understanding of international agreements. With a financial advisor, immigrants can fulfill overseas familial obligations while ensuring their own retirement goals. We live in a global world and the ability to integrate cross-border financial management into an individual’s retirement planning is a necessity.
Wherever life takes an individual, the journey toward retirement can be made with confidence when armed with knowledge. Be sure to research and seek expert guidance to make every work credit count and every investment secure, both abroad and at home.
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