Saving your savings overseas

I can barely type today… I’m actually one-handing it this morning. Why? Because my other hand is thrust victoriously in the air celebrating the renomination of Comrade Bernanke to his post at the Federal Reserve.

Yes, the man who has overseen the most unprecedented expansion of the central bank’s balance sheet in history is going to get a few more years in the saddle.

As you know, I normally don’t comment too much about what’s going on in the United States.  Frankly I don’t really care. I occasionally follow the insipid perorations of the Obama administration as if watching silverback gorillas mate at a local zoo… neither impacts my life, and both are curiously amusing.

In this case, though, I am forced to pause and consider the greater implications on my investment portfolio and determine if there is (a) any money to be made, or (b) any money to be rescued.  I think both.

Recent budget figures released by the federal government indicate a ‘higher than expected’ deficit over the next several years… just like the ‘higher than expected’ death toll in Iraq, and ‘higher than expected’ unemployment figures. Clearly these monkeys never get anything right (no offense to monkeys).

With trillions of dollars looming in the administration’s budget shortfall, you can be sure that taxes are going to rise. It is an absolute certainty. Obama may somehow be able to keep his promise to not raise income taxes on ‘the middle class,’ but they will make up for it in other ways.

Namely, I am afraid for people’s retirement accounts.

Pensions, 401(k)’s, and IRAs represent an enormous, untapped pot of wealth for the US government. Rules allowing for tax-deferred contributions are on the books, which means that the government won’t be seeing most of this money for several years… until they change the rules.

In my assessment, US politicians are going to hatch a scheme to levy a one-time tax on retirement accounts, or require that a certain percentage be invested in the great ponzi scheme of US treasury securities.  Either way, you can be sure that your on-shore retirement savings will be beaten senselessly.

So how to save your savings? One idea that may be worthy of your consideration is to park retirement funds in overseas property.  Internal Revenue Code allows you to invest IRA assets in property, and there is absolutely no geographic restriction whatsoever, so that bungaow in Belize or mountain cabin in Boquete are on the table.

Like other IRA assets, the property purchase must be for investment purposes, not personal use; this would include both rental income as well as speculation for capital appreciation.

There are a couple of key benefits to this plan.

First, retirement funds would no longer be on shore and subject to political control.  This is critical if you want to maximize your financial freedom and keep your money away from politicians.

Second, in most cases, buying property in a foreign country will diversify retirement funds out of the dollar. This will protect savings as the world moves away from the dollar as the world’s reserve currency.

The fact that Bernanke is going to be at the helm for another several years buying the Treasury’s debt almost assures the dollar’s demise.  Carefully selected overseas property investments can mitigate this financial disaster, at least for retirement savings.

Talk to your tax adviser to see if this makes sense for you, and let me know if you want more information on the topic.