With the mention of offshore banking, some have visions of mansions, traveling by private jet, and being driven around town in a limousine. That’s because some people assume that having offshore financial accounts requires having lots of money or because they’ve watched too many James Bond movies.
In reality, you don’t have to be rich in order to establish an offshore account.
People in many different lines of work have offshore accounts right this minute and they’re not all wealthy. Some of them have annual incomes that place them somewhere along the spectrum of middle-class living.
Exploring your options and establishing a relationship with an offshore bank might be a smart move. Here are some of the reasons why this approach is worth your consideration.
A Great Way to Protect Some of Your Assets
All types of personal financial accounts must comply with the laws and regulations currently in effect. That’s true for offshore as well as domestic accounts. On the surface, that may not seem like a reason to find the right institution, deposit at least the minimum amount required into a lifestyle account or a demand deposit account, and incrementally add to the balance. The point that’s missing here is to what extent those domestic banking regulations may change.
What would happen to your assets if new fees and charges were approved? How about the loss of your balances if a severe economic crisis in your home country took place? It’s happened in times past and is happening in some countries at the moment. How would you survive if all of your financial assets were held in your country?
Setting up an offshore account provides a type of diversification protection from losing everything you’ve worked so hard to accumulate. Even if the economy at home sours, the odds are slim to none that your offshore balances will be adversely affected. At the very least, you have resources that help you start over or hold on until some sort of economic recovery takes place.
Keep in mind that some of the better offshore banking institutions don’t require a large initial deposit. There are reputable banks based in financially stable nations that will open a savings or checking account with as little as USD $1,000.00. Even if it takes a few months to save up, someone working a middle-class job can set aside enough to get started.
That Includes Protecting Assets from Seizure
Maybe you aren’t worried about the domestic economy going belly-up. While that’s still a possibility you should consider, an offshore account can protect your assets in another way. That’s preventing the funds in those accounts from being seized by a tax agency or confiscated in order to settle some type of legal judgment against you.
You may not realize that seizing assets to settle legal judgments, as part of bankruptcy proceedings, or fulfilling a claim by a tax agency, typically focuses on your domestic assets. There’s an entirely different process required to gain access to any assets you have placed with an offshore bank. In some situations, there is no way for those assets to be touched by anyone but you.
If you were to lose a lawsuit or file bankruptcy, it’s often still necessary to reveal those offshore assets. In the interest of transparency, you should do so. Just remember that the ability for those assets to be seized due to a domestic legal action is limited at best.
Earning Greater Interest on Your Deposited Funds
One attribute that attracts the wealthy to open offshore accounts is the rate of interest they earn on certain types of accounts. By depositing at least, the minimum required, you may be able to generate a greater amount of interest than you would by depositing that same amount in a domestic savings account.
Consider the benefits of opening a term deposit account with an offshore bank. Essentially, you’re placing the funds into a savings account for a specified term. It may be anywhere between one to five years. The interest rate applied to that balance is more than you can get closer to home. The income you generate can be retained in the account balance, transferred to your lifestyle or demand deposit account, or even set up for automatic transfer to a domestic account.
Whatever your choice, you end up earning more money on the funds you’ve set aside.
Lower Fees and Charges When You Do Travel Abroad
Traveling abroad may not be something you do often. If you should take a vacation, some of the fees and charges that your domestic bank applies could come as a surprise. They may even have you convinced that those charges are found everywhere, which may not necessarily be the case.
If you have offshore banking accounts in place, there’s the possibility of not incurring some of those fees. Even if they still apply, the costs to you may be lower. There’s also the possibility that the current rate of exchange between your destination and the country where your offshore accounts reside could be more favorable.
Consider what it may cost you to make a debit card purchase using a card that’s tied to your domestic checking account. Compare that to what you would pay using a debit card connected with a demand deposit account based in a different country.
If the plan is to use a card for most of your travel expenses, the savings could be significant over the course of a two-week holiday.
Institutions with Varied Investment Opportunities
International banks may have investment opportunities that aren’t offered by institutions in your country of origin. The potential connection with a wider range of investment options is obvious. What sweetens the deal is that the potential returns on those investments may be higher than what you could expect from domestic investments.
To make things even better, an investment account based in a nation with favorable investment regulations could mean lower fees and little to no increased risk. See this as a way to build financial resources for use later in life. Investments made and held in offshore accounts could increase your wealth in a way that provides financial security for your retirement years.
Given how many people have lost the balances in their retirement funds since the last recession and never quite recovered, investments housed in more stable settings is a great way to protect your future.
Preparing for Retiring Abroad
You’ve researched possible international locations for retirement. The cost of living, the culture, and the political stability of those locations all influence your choice. Think of how nice it would be to already have bank accounts established before you retire. Along the way, you learn more about banking laws, what to expect in terms of service and support, and how you can structure your assets to ensure that they will keep you comfortable for a long time.
Remember that many of the reasons for establishing and growing balances in offshore accounts have to do with financial security when you are no longer active in the workforce. If you’re seriously considering the idea of moving to another nation after retiring, look closely at what that country offers in terms of banking options. The right accounts in the right place will make the transition smoother.
The team at Caye International Bank is ready to help you establish your first offshore account. Visit us today and learn more about what we have to offer. Consider this your first step toward greater financial security!