Japanese citizen returnee with US IRA in American Bank, options? (long, sorry)

[wrought-iron-sedan]

Hi everone,

This is my first post on Retire Japan. I'm hoping someone here has either 1) been in a similar situation, or 2) is knowledgeable enough to give me a little advice. I'll do my best to keep this as concise as possible.

My wife—a Japanese citizen—lived in the US for 20+ years, and returned to live in Japan a few years ago. Recently she was required to surrender her US residency and Green Card. Her entire professional career had been in the US, and she had managed to save and invest some money there.

For the purposes of this post, let's say her assets are split 50/50 between retirement savings (IRA) and "regular" mutual funds—at "American Bank A."

However, when she gave up her US residency, she had not anticipated that from the point of view of Bank A (and the US government), she would suddenly become a "foreign investor." Bank A is not equipped/licensed to service foreign investors, so it became necessary for her to move her assets to a bank able to accommodate this foreign investor status.

Luckily, she already had a small account with Charles Schwab. Charles Schwab opened an international account for her, and she moved her existing Schwab assets to that account.

She was also able to move the majority of her Bank A assets to the newly-created Schwab International account.

However, she was not able to move the retirement assets in her IRA from Bank A to the Schwab International account—because it's a US retirement account and she's legally become a foreigner (I think).

Since she is not yet 59.5 years old, I think she cannot withdraw these retirement funds without incurring a steep penalty.

One option would be to leave this IRA as-is. Bank A has made it clear that since they are not able to service foreign investors, she will need to get this money out of their bank. However, they have not been very aggressive about asking her to move the money.

My questions are:
1) is there any way for someone with her status (Japanese citizen, former US Green Card holder) to transfer or otherwise manage these American IRA funds?

2) if it turns out it's okay to just leave the IRA as-is, would it be best to just forget about this for the 5+ years till my wife turns 59.5, and then revisit this situation when she is eligible to make penalty-free withdrawals?

3) Should she be consulting with a tax expert familiar with both the US and Japan tax issues? (If so, where would one even begin with this? Does anyone have any recommendations?)

4) Has anyone here been in a similar situation?

Many thanks in advance for any insights anyone has.

(Edit: changed hypothetical US $ figure to 50/50 ratio, number wasn't really relevant to the questions)

[wrought-iron-sedan]

I'm updating my own post here. We got a little more information. It's a little embarrassing, but I'll leave this up in case it can help someone in the future:

We completely misunderstood the situation. There is no requirement for my wife to move her IRA out of Bank A. Apparently when they told her they could no longer manage her accounts because of her change in residence status, she interpreted that as a requirement to move her funds.

She contacted her previous financial advisor, and he set us straight. So for now, she will leave that IRA as is till she can access it penalty-free at age 59.5 (or longer). This is a relief—"don't do anything" is always a welcome option.

A little more background: Since my wife no longer has access to her US-based financial advisor, for the first time she will need to make investment decisions on her own. This is not something she wants to learn about, really. And until now, I have carefully avoided getting involved in (or even knowing about) her personal finances—we have kept our money completely separate. This seemed like a good way to avoid bad vibes in the household, and since I'm also not an expert on financial matters (but still somehow have a lot of opinions), also a good way to avoid getting blamed for bad outcomes!

However, I have now been reluctantly pressed into service helping her research and make decisions about how to proceed going forward. From my point of view, this is a role with a lot of downside and no advantages. But so far, it has been okay, and has led to a lot of discussion between us about retirement and future plans that we probably would have otherwise postponed a little too long.

I suspect I will have more questions for the forum in the future. Hopefully they will be more relevant!

[RetireJapan]

Good news!

And also good that you are talking about money and the future. I believe this is a very healthy habit for couples.

[zeroshiki]

I do not yet have a family so maybe people can set me straight on this but one of the advice I've seen financial advisors give in Japan is that couples should always be aware of each other's finances and if possible should pool it and work off of an allowance system. Does it not work like this for the people here?

[RetireJapan]

I do not yet have a family so maybe people can set me straight on this but one of the advice I've seen financial advisors give in Japan is that couples should always be aware of each other's finances and if possible should pool it and work off of an allowance system. Does it not work like this for the people here?

Not a fan of this. I see it in many couples around us (my wife's friends). The default is that the wife controls and manages the money for the whole family, regardless of how able or suited she is to do this, and the husband gets an allowance to use. Of course, the default is also that the husband works full-time and the wife doesn't.

Lots of horror stories of losing money due to ill-advised investments, spending the money without telling the husband, or hiding the money in preparation for divorce

Much better in my mind (however the couple chooses to divide responsibility) to to discuss and manage the money together, so both partners are aware of what is going on and both have a say in how the money is managed.

In my case, both my wife and I work so we both have our own separate accounts and pay for different things. I manage my wife's investment accounts for her because she is not at all interested but they remain in her name. This works for us but might not for others.

In any case I think it is healthy to sit down and talk about money and finances at least once or twice a year if not more often.

[zeroshiki]

I don't disagree with letting whoever is more capable manage the finances (and I don't particularly like the allowance system) but going through most of your life with both of you unaware of each other's finances sounds so weird to me. What if one of you was racking up massive debt?