Maximize your 401k in USA by using your South African funds

If you have settled in the USA and hope to get your 401k or any other defined contribution plan on track for retirement there is a new route that has opened to you. The maximum contribution on 401k for 2012 is $17,000, or $22,500 if you're 50 or older. At the current exchange rate of 8.3 this is about R141,000 or R186,750 that you could invest in America, not be exposed to currency or political risk in the future, and get the tax refund. Thus the refund in on your US pension investment can recoup most if not all tax and fees paid in SA.

If you have funds tied up in retirement annuities in South Africa, an amendment to the Income Tax Act in 2008 now makes it possible to withdraw the value in full, before retirement age. This requires that your emigrant status to be recorded with the South African Reserve Bank. When recording such status you do not relinquish your South African citizenship and can retain your South African passport.

You will also require an active up-to-date tax record, various tax clearances and directives from SARS, a blocked rand bank account with an authorised dealer in South Africa, policy surrender paperwork and certain specific documents from your local tax authorities.

Blocked rand account: this is the vehicle via which all capital transfers out of South Africa must flow for exchange control purposes, once your emigrant status has been recorded with the Reserve Bank. Acquiring such status will allow you to utilise emigration allowances which are currently R4 000 000 for an individual and R8 000 000 for a family unit. Higher amounts can be withdrawn with additional permission fro the SARB. As an emigrant you may also surrender retirement annuities and transfer the proceeds to your bank account in Canada.

Inheritance from South Africa

If you live overseas and are likely to be the beneficiary of an inheritance consideryour status from the perspective of the South African authorities, given the potential impact of exchange control regulations. Without some advance planning there is a risk that payments due to you from an inheritance cannot be effected without making retrospective application to the Reserve Bank.

If you have formally emigrated from South Africa:

In regard to inheritances (i.e. legacies and distributions from estates in South Africa) accruing to each non-resident or emigrant beneficiary:

·         The first amount of R500 000 is freely remittable

·         The balance may be remitted upon application to the Reserve Bank, which is   
           straightforward process

If the beneficiary of an inheritance is an emigrant, it is important to note that such inheritance may only be remitted offshore if the date of their emigration precedes the date of death of the individual concerned.

So don’t delay.  Get your financial affairs in order in South Africa, maximize your retirement planning and rest easy that your inheritance will reach you there.

For more information regarding Global Financial Migration contact Lizette at the North American Division of cashkows.com. Our website www.cashkows.com or email lizette@cashkows.com. 

www.cashkows.com

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