As Sir John Templeton said: The best time to invest is when you have the money – The 7 Habits Of Highly Effective #Americansabroad

The late Sir John Templeton pioneered the concept of “international” investing. Of course, by the standards of today, this would be considered “offshore investing”. He also pioneered the concept of “renouncing U.S. citizenship“. It is clear that Sir John’s renunciation of U.S. citizenship was the best investment decision he ever made. Like many Americans who are forced to renounce U.S. citizenship to create business opportunities, Sir John likely renounced to save his mutual fund business.
Sir John was fond of saying:
“The best time to invest is when you have money.”
Of course, that is a more difficult concept for Americans abroad. (The problem is particularly acute in Australia where it is believed that the Australian Superannuation may be subject to U.S. taxation.) Time after time, in country after country, I speak with people who avoid investing because they are Americans abroad. This is a great mistake.
It’s important for Americans abroad to heed the teaching of Sir John Templeton. They must (1) learn to invest when they have the money and (2) discipline themselves to acquire the money to invest!
One of my most consistently read posts is “The biggest cost of being a “dual Canada/U.S. tax filer” is the “lost opportunity” available to pure Canadians“.


I have been meaning to write a “follow up” post for a long time. Perhaps, the message was too simple. Perhaps it is only worth a tweet. Perhaps it’s dangerous to expand such a simple thought into multiple paragraphs, but here goes …

I hear time after time from Americans abroad (or those who fear they might be accused of being American) that they have put their financial and retirement planning on hold. They are afraid of investing in Canadian TFSAs (are TFSAs protected by the Canada U.S. tax treaty?) or UK ISAs. They are not interested in buying a house because they fear U.S. capital gains taxes. They won’t invest in mutual funds because they understand that non-U.S. mutual funds are PFICs (whatever that is). In fact, they have basically given up on the chance of being able to invest for their retirement. Usually, this decision (or perhaps lack of decision) results from one or more of the following:
– a tax advisor telling them to avoid certain kinds of investments (TFSA, etc.)
– using financial planners who have no understanding of the disabilities of being a U.S. citizen
– blog postings that say that all non-U.S. investments are PFICs
– fear of the U.S. tax system confiscating their assets (a real fear for those Americans abroad who have been filing U.S. taxes and revealed that they have been carrying on a business through a non-U.S. corporation. They are now being told they are subject to the “Sec. 965 transition tax“.)
– general laziness (and they are glad to have the excuse that they are American)
– in some cases a sense of “learned helplessness” (they have simply given up and accepted the restrictions on being a citizen of “The Land Of The Free”)
What to do (or not do) …
Under NO CIRCUMSTANCES should you refrain from responsible financial and retirement planning. You have an obligation to yourself, to take care of yourself, your family and plan for your future. Unfortunately, the excuse “I’m American” doesn’t cut it! What should you do?
7 Habits Of Highly Effective Americans Abroad
1. With respect to your U.S. citizenship, you make a clear and final decision whether to “Retain Or Renounce“. If there is no meaningful change in the taxation of Americans Abroad by December 31, 2018 you renounce unless you are one (the silent majority) of Americans abroad who has never entered the U.S. tax system.(see point 3).
2. You understand/investigate the “tax consequences” of renouncing U.S. citizenship. Many Americans abroad can avoid the S. 877A Exit Tax today. They will NOT be able to avoid the Exit Tax down the road because of “inflation” in asset values. Bottom line: Many Americans abroad are perilously close to the 2 million dollar Exit Tax threshold today. It won’t take long before they cross the threshold and their assets will be subject to confiscation. (Note that those who are dual citizens from birth may be able to avoid the Exit Tax. Interestingly this provides EXTRA incentives, for those who are NOT dual citizens from birth, to renounce U.S. citizenship. In other words: Get out while you can!)
3. In the long run the only Americans abroad who will be able to retain U.S. citizenship are those who do not enter the U.S. tax system. Even so, failure to enter the system will carry certain “long term” risks. The risks are magnified if you have or will receive U.S. taxable assets (including IRA, 401K, etc). Imagine a situation where you are forced to file a U.S. tax return when you have not been in the U.S. tax system!
4. If you are currently in the U.S. tax system and wish to “play it out” for a few more years, you should learn how to file your own taxes. You cannot allow your destiny to be controlled by the “tax compliance” community (many people have been forced to pay the “Net Investment Income Tax” and the “Transition Tax” by their accountants).
5. You use ONLY financial planners who understand the problems of U.S. citizenship. They are few and far between. But, they do exist. All other things being equal, you do not want to exacerbate problems.
6. The U.S. Internal Revenue Code is based on the assumption that the FBAR marriage (a marriage to a non-U.S. citizen AKA “alien”) is a form of tax evasion. Yes, absolutely you should ensure that “family assets” are owned in the most “U.S. Tax Advantageous Way”.
7. Barack Obama once said that: “The circumstances of your birth should not control the outcome of your life“. The problem is that U.S. citizens generally believe that their U.S. citizenship does control their lives. Time to let go of that thought. Your life belongs to you and only to you. Take control of it!
In closing …
I will not wish you luck. But, I will wish you the strength of character, presence of mind and courage to make the decisions that you need to make.
John Richardson

Leave a Reply