Asian-Americans Start To Embrace New Attitudes Toward Retirement

Seventy-two percent of the Asian markets said they should be doing or should have done more for their parents, and 42% were caring for older adults.

Less than one-third of all U.S. residents told AARP they expected their children to take care of them in their old age, but half of Asian-Americans said they expected this.

One of the most important services financial advisors can perform for new Asian-American immigrants is to explain that their children might not be able to support them in their old age, especially if they need long-term care, Khan says.

Determining how much Asian-Americans really save for their own retirement is a little complicated.

The Employee Benefit Research Institute, Washington, reports in its 2001 Minority Retirement Confidence Survey that 74% of Asian-Americans are very or somewhat confident about having enough money to live comfortably throughout retirement, compared with 63% of all Americans.

Asian-Americans were also more likely to say they had started saving for retirement: 78% told researchers their households had retirement savings, while only 69% of all Americans claimed to have retirement savings.

But Asian-Americans werent much more likely to have calculated their retirement savings needs, and 43% admitted to having less than $50,000 in retirement savings.

When financial advisors help Asian-American U.S. citizens who plan to spend all or most of their time in the U.S. after retirement, the technical details are the same as for other U.S. citizens.

But when the clients are permanent residents of the U.S. and citizens of another country, or citizens of both the U.S. and an Asian country, the details might be a little more complicated, even if the clients plan to spend most or all of their retirement years in the U.S., experts say.

Permanent residents “are basically subject to the same tax rules as U.S. citizens,” says Vernon Jacobs, a Prairie Village, Kan., international financial planning specialist.

Permanent residents of the U.S. could have trouble collecting Social Security benefits, and clients who are citizens of other countries should probably see accountants and lawyers familiar with their old home countries to learn what pension, disability and health benefits might be available from those countries.

But Jacobs says the most serious headaches face permanent residents who decide to move back to their home countries when they retire.

If permanent residents who have lived in the U.S. for eight of the last 15 years go back, they have to take “positive steps” to give up normal U.S. citizen tax treatment, Jacobs says. “Theyre subject to U.S. income tax on U.S.-source income for up to 10 years after expatriating.”

That means that the Internal Revenue Service might treat the former permanent residents U.S. pension income and U.S. investment income as taxable income.

Tax treaties between the United States and countries such as Japan often protect people who move from one country to the other against double taxation.

The U.S. also has negotiated several treaties, including one with Japan, that permit affected taxpayers to get credit in one country for Social Security contributions made in the other country.

But “there arent a whole lot of accountants who understand tax treaties,” Jacobs says.

The complexity means that even families of modest means should talk to experts familiar with the tax laws in both the U.S. and their old home countries about plans to retire in their old home countries, just so they know what to expect, experts say.

Families that have more than about $250,000 in investable assets can do more active tax planning by investing some of their retirement assets in variable annuities and variable life insurance policies issued by offshore life insurers, Jacobs says.

For affluent Asians who spend time living in the U.S. but suspect they might go back to their home countries, parking cash in VAs issued by a company based in Bermuda or the Isle of Man could be a strategy for protecting retirement savings from U.S. income taxes after they have returned home, Jacobs says.

Good advisors who specialize in selling retirement services to Asian-American consumers should be familiar enough with their target communities to make referrals to excellent accountants and lawyers who specialize in helping members from those communities, Khan says.

Working closely with accountants and lawyers who serve Asian-American communities can also be a way for the advisors to get referrals, Khan says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 9, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.