iDeCo for Americans and the FBAR

[SeaDaddy]

So my Rakuten Shoken iDeCo is listed as 外国株式 , which I believe is a mutual fund?

Can I change to a time deposit?

[Haystack]

So my Rakuten Shoken iDeCo is listed as 外国株式 , which I believe is a mutual fund?

Can I change to a time deposit?

You are invested in a foreign stock fund. Yes it will be a mutual fund.

Install chrome. Install Google translate. Login to Rakuten. Checkout the options.

You'll want to sell out, and deal with the tax issue this year. Consult your tax accountant.

[konbinibento]

I'm puzzled. On the instructions for form 8938, I see amounts that are greater than specified in comments above:

Taxpayers living outside the United States. If your tax home is in a foreign country, you meet one of the presence abroad tests described next, and no exception applies, file Form 8938 with your income tax return if you satisfy the reporting threshold discussed next that applies to you.

Unmarried taxpayers. If you are not married, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.

Married taxpayers filing a joint income tax return. If you are married and you and your spouse file a joint income tax return, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.

Married taxpayers filing separate income tax returns. If you are married and file a separate income tax return from your spouse, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.

https://www.irs.gov/instructions/i8938

Yes, that is incorrect! The amounts listed earlier in this post (foreign assets are more than $50,000 at year end or greater than $75,000 at any time during the year) for form 8938 are for individuals living in the United States who are unmarried! The amounts you have listed are correct for expats. Nice catch. Thanks!

[esotEric]

I hope it's OK for me to piggyback off of this thread with questions related to the same topic (i.e. Americans and iDeCo).

1. My wife is a Japanese national who doesn't work/pay income tax. I file with the IRS as "head of household"; she doesn't have any involvement with US tax filing. My understanding is that she can contribute 23,000 yen/mo (presumably from my earnings). She'll be 60 in 10 years, and we have to get the money back when she's between the ages of 60-70. If the account is in her name, I won't save anything on my income tax, but we wouldn't have to pay tax on any earnings on the investment (dividends, increase in fund value, etc.). Taking into account fees and the limited time frame, would this still be worthwhile?

2. I know some Japanese people use insurance plans with guaranteed payouts after a set number of years as a low-risk method of investment. On this overview page (https://www.retirejapan.com/ideco-j401k/), it lists insurance products as possible iDeCo investments. Does anyone have experience with this? I'm assuming that would have to come through the financial institution you signed up with. Are insurance products penalized as PFIC in the same way that mutual funds are? (I already have life insurance with Aflac in Japan, so I'm hoping not.)

3. This Bogleheads post (https://www.bogleheads.org/wiki/Investi ... _residents) says that SMBC Nikko offers a US-domiciled ETF, SPY, which seems to be the SPDR S&P500 ETF. That wouldn't be a bad investment option for Americans. I haven't seen it discussed here though. Is there something I'm missing?

4. Do any iDeCo institutions have access to US treasury bonds (e.g. as an ETF)?

5. Junior NISA isn't a good option for children with dual citizenship. Is that correct?

6. You can receive the iDeCo payout as a lumpsum or as an annuity. I don't really understand how the latter option works. Is it calculated based on the value of the investment at the time you decide to start receiving the annuity or does it continue to fluctuate with the market?

Thanks in advance to anyone who responds.

[RetireJapan]

1. My wife is a Japanese national who doesn't work/pay income tax. I file with the IRS as "head of household"; she doesn't have any involvement with US tax filing. My understanding is that she can contribute 23,000 yen/mo (presumably from my earnings). She'll be 60 in 10 years, and we have to get the money back when she's between the ages of 60-70. If the account is in her name, I won't save anything on my income tax, but we wouldn't have to pay tax on any earnings on the investment (dividends, increase in fund value, etc.). Taking into account fees and the limited time frame, would this still be worthwhile?

Assuming your wife doesn't have an IRS problem, does she already use NISA? That might be better than iDeCo for a non-income tax paying person. Of course both work well too, but if I were to choose between the two NISA seems a better option.

Really good question about how the iDeCo 'pension' option works. I have to admit I am not sure! Will look into it.

[TokyoBoglehead]

1. No idea, sorry.

2. A company or corporation does not need to state if the are a PFIC, and they may not necessarily know. It would depend on how the products are invested.

3. There is talk on reddit/Reitre Japan that Monex required Americans invested in this ADR to sell their holdings so, Caveat Emptor.

4. No ETFs in iDeco only Japanese trusts and deposits. (mutual funds and term deposits).

5. J-Nisa is fine, just Japanese equities with no PFICs.

6. -> https://www.ideco-koushiki.jp/guide/structure.html

① Receive a lump sum as a lump sum
○ Once you reach the age at which you are eligible to receive benefits (generally 60 years old), you can receive a lump-sum payment until you reach 75 years old.
② Receive as an annuity
○ If iDeCo is received as an annuity, it will be treated as a fixed-term annuity (5 years or more and 20 years or less).
○ You can choose when to start receiving benefits until you reach the age of 75.
○ Once you reach the age at which you are entitled to receive benefits (generally 60 years old), you can receive benefits for a period of 5 to 20 years in a manner determined by the administration and management organization.
*Depending on the financial institution, you may receive it as a life annuity.
③ Receive a combination of a lump sum and an annuity
○ There are also administration and management institutions that handle the method of receiving a portion of the pension assets as a lump sum upon reaching the age at which the right to receive benefits (generally 60 years old) is reached, and receiving the rest of the pension assets as an annuity

[esotEric]

1. My wife is a Japanese national who doesn't work/pay income tax. I file with the IRS as "head of household"; she doesn't have any involvement with US tax filing. My understanding is that she can contribute 23,000 yen/mo (presumably from my earnings). She'll be 60 in 10 years, and we have to get the money back when she's between the ages of 60-70. If the account is in her name, I won't save anything on my income tax, but we wouldn't have to pay tax on any earnings on the investment (dividends, increase in fund value, etc.). Taking into account fees and the limited time frame, would this still be worthwhile?

Assuming your wife doesn't have an IRS problem, does she already use NISA? That might be better than iDeCo for a non-income tax paying person. Of course both work well too, but if I were to choose between the two NISA seems a better option.

Really good question about how the iDeCo 'pension' option works. I have to admit I am not sure! Will look into it.

I the five year limit on the NISA was a drawback, but I guess if you can roll it over multiple times it's not. I guess I should look into NISA more. What do you see at the benefit of NISA over iDeCo?

[TokyoBoglehead]

1. My wife is a Japanese national who doesn't work/pay income tax. I file with the IRS as "head of household"; she doesn't have any involvement with US tax filing. My understanding is that she can contribute 23,000 yen/mo (presumably from my earnings). She'll be 60 in 10 years, and we have to get the money back when she's between the ages of 60-70. If the account is in her name, I won't save anything on my income tax, but we wouldn't have to pay tax on any earnings on the investment (dividends, increase in fund value, etc.). Taking into account fees and the limited time frame, would this still be worthwhile?

Assuming your wife doesn't have an IRS problem, does she already use NISA? That might be better than iDeCo for a non-income tax paying person. Of course both work well too, but if I were to choose between the two NISA seems a better option.

Really good question about how the iDeCo 'pension' option works. I have to admit I am not sure! Will look into it.

I the five year limit on the NISA was a drawback, but I guess if you can roll it over multiple times it's not. I guess I should look into NISA more. What do you see at the benefit of NISA over iDeCo?

The NISA is being completely revamped. New details will be released this month. Until then all information will be outdated.

Stay tuned.