September 21, 2010
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Like me, you might be hearing the siren song calling you to retire overseas. I don’t know yet whether I’ll ever yield to that call, but at the very least I am taking my nest egg offshore.

Although I’ve been investing in overseas markets for the last decade and a half, my retirement money has remained in a U.S.-based account. That money currently is weighted largely toward cash and international investments that, to my disliking, are exclusively mutual funds.

Since leaving a previous job, I’ve been looking at the possibility of rolling over this retirement cash into a self-directed IRA that might allow me to utilize the overseas brokerage firms I’ve worked with for year, but I wasn’t sure if such an option existed. My colleague, Eric Roseman, knew I was looking and knew I was heading to Copenhagen last month and said, “Talk to ‘JayGam’ while you’re in Denmark. They can manage an IRA offshore.”

I had no clue what “JayGam” was. Turns out, it’s Jyske Global Asset Management, or JGAM, the U.S.-client-focused asset-management arm of Jyske Bank, Denmark’s second-largest bank.

I might as well give away the end of the story here, since ultimately it’s the least important part. I am opening an IRA at JGAM so that my retirement funds are offshore, in Denmark.

And here’s why:

Would America Nationalize the Pension System?

I’ve managed my money my entire life; I have never used a private money manager before.

But with this large piece of my nest egg – money accumulated over nearly two decades of work – I see a great benefit in allowing someone else to take over now.

I see an equally useful benefit if that someone is outside the U.S.

I am increasingly disenchanted with the direction politicians are taking my country. Moreover, I worry about the implications of America’s debt problems … and those problems aren’t just the size of the debt, but the challenge of rolling it over from month to month and year to year.

The U.S. has to sell increasingly more Treasury bills, notes and bonds to finance America’s debt. But foreign and domestic buyers can only absorb so much paper before their appetite runs dry.

The U.S. government is, for the time being, in the markets alongside China and others buying its own debt – an oddball scenario that can only last so long. After all, a snake eating its own tail ultimately consumes itself.

If traditional – and even the untraditional – sources of cash become bloated with U.S. debt and curtail their purchases … then what?

My concern is the possibility that lawmakers and bureaucrats might one day look upon America’s retirement assets as a source of ready capital to buy U.S. government debt. What I’m talking about is essentially the nationalization of America’s 401(k) plans and IRAs.

I’m not saying this will happen. But it is clearly an option, and not one out of the realm of reality.

Indeed, Argentina, circa 2008, nationalized its pensions under the bogus guise of protecting plan participants.

And here at home, the state of New York recently looked to borrow $6 billion from a state pension plan in order to … drum roll … make its contribution payments to that very same pension plan!

What Would a Nationalized Pension Plan Look Like?

Americans have some $16.5 trillion stuffed into various kinds of retirement plans, according to the Investment Company Institute. If foreign buyers slow their purchases of Treasury debt, that retirement money suddenly becomes very appealing to politicians.

After all, if foreign inflows into the Treasury market slow or stop, interest rates in the U.S. balloon quickly … meaning higher interest payments on outstanding debt … meaning less cash for politicians to spend here at home. The chain reaction would ripple across the country, and politicians would latch onto any fix they could find.

The government could write rules mandating that U.S. retirement plans convert some or all existing holdings, and some or all future worker contributions, to U.S. Treasury paper.

Lawmakers might couch such a decree in “We’re guaranteeing the safety of workers’ futures by ensuring that Wall Street’s hell-demons don’t destroy retirement assets by investing in stocks. Workers need their money in the world’s safest asset: U.S. Treasury bonds.”

Do I think this will actually happen? I can’t say that it will but given what Washington has done in recent years across so many different areas of the economy and society, I can’t be certain that it won’t.

Preparing for the future means accounting for Black Swans that appear unexpectedly. With the fiscal challenges America faces, and the storms that will assault the dollar, count me as one future retiree who does not want the “safety” of American debt.

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A New Retirement Home … For My Money

By hooking up with JGAM, I’m taking my money outside the immediate purview of U.S. lawmakers.

JGAM has no offices in the U.S. but it is registered with the Securities and Exchange Commission to work with American clients, so you’re not flouting any U.S. laws. And while JGAM has linked up with a U.S.-based IRA custodian in Texas, the firm holds the assets physically in Copenhagen.

Now, because JGAM does work with a U.S custodian, my money probably remains within reach of U.S. retirement rules. But the easiest target for lawmakers who might go after pension-plan assets is clearly the largest, lowest hanging fruit – the vast trillions of retirement money housed onshore .

Lawmakers, if they do make a move to nationalize pensions, might not chase the relatively small amounts of offshore money – though there are no guarantees.

Still, I would rather take the chance that my funds remain undisturbed overseas than risk that they’re forced into U.S. government debt at some point here in the States.

And even if Congress never makes a play for pensions, then I have other reasons to go offshore with my IRA.

Not only does the move address my pension-nationalization concerns, but it provides me with what I’ll call intellectual diversification. Non-American portfolio managers see the world from a different perspective than do money managers sitting in New York, L.A. or Boston.

As such, along with asset and geographic diversification, I get someone who’s thinking about the world differently.

How to Open Your Account

The process of opening an account at JGAM (jgam.com) takes four to six weeks, which includes a 30-day “cooling off” period mandated by Danish authorities, just in case you change your mind. (If you open the account in Denmark physically, you can skip the cooling-off period.) You can start the process online or e-mail Senior Vice President, and my friend, Thomas Fischer at fischer@jgam.com.

JGAM manages your money. Account statements and annual tax forms come from Texas-based GoldStar Trust Co. For offshore accounts, GoldStar charges a $200 annual fee.

JGAM requires a $100,000 minimum. All accounts below $1 million are discretionary, meaning JGAM’s portfolio managers make all investment selections. But you can provide input if you have certain requests, like you want none of your money held in U.S.-dollar assets.

Portfolios below $200,000 typically own mutual funds and ETFs. JGAM builds larger portfolios from individual stocks, bonds and currencies, which is what attracted me to the account.

Services are fee-based only, so JGAM will not load your portfolio with investments for which it receives incentive payments from third parties you don’t know about. The annual fees charged are between 1% and 2% of the assets under management, depending on the size of the account.

You will also pay the trading costs imposed by the broker dealers JGAM uses to place trades (Jyske Bank or Morgan Stanley), and that will add roughly an additional 1% on an annual basis.

Costs are a hurdle any money manager must clear to keep clients happy. And JGAM is doing a good job of that. JGAM’s IRA accounts in 2009 gained between 12% and 15% before fees, depending on whether you’re looking at the low-, medium- or high-risk portfolio.

A Home for My Money Abroad

As a 44-year-old who still has a few decades to go before settling down – to Northern Ireland, New Zealand or maybe the Dalmatian coast? – I’m putting my money into JGAM’s high-risk portfolio, which has the smallest exposure to the greenback, and the largest exposure to medium- and small-company stocks and bonds and the emerging markets.

I haven’t decided whether I prefer no dollar exposure at all.

I’m not saying anyone should necessarily follow my lead; I’m just letting you know what I’m doing and why. Everyone has their specific needs to address.

But I am saying that anyone with a substantial nest egg in a 401(k), a 403(b), an IRA or what have you, should certainly think about the benefits of putting some or all of that money offshore.

America, at the moment, is a place in turmoil and transition. No one can say where this road ends. But based on what I do see, I want my retirement assets out of the way of any potential wrecking ball.

And I found a home for them in Copenhagen.

Until next time, keep a global view …

Jeff D. Opdyke

Senior Editor

The Sovereign Society

P.S. You don’t need to visit Copenhagen to open an IRA at JGAM (though the 843-year-old city is beautiful). You can meet my friend Thomas Fischer and start the process at the Offshore Advantage Academy Nov. 3-6 in Los Cabos, Mexico.

Experts from across the globe will gather to speak and to meet readers like you. To learn more about the event and to take advantage of the Early Bird discount that expires 1 week from today, click here .