Ask the Expert: Offshore Bank Accounts
July 06, 2010
Q: Although I'm not a wealthy person needing a Swiss or a Cayman Islands bank account, keeping all my assets in the US worries me. Are there any good reasons for keeping some of my savings in bank accounts in other countries?
A: That's an interesting question, and the short answer is no, but it's worth breaking the answer down into component parts to look at why some people keep assets offshore, why you shouldn't need to do that, and what you can do to manage country risk.
People generally maintain foreign bank accounts if they are a) doing business in foreign countries, b) trying to avoid U.S. taxes, or c) engaged in illegal activities and are looking to shield assets from U.S. authorities.
Assuming none of the above applies in your case, you shouldn't feel the need to open an offshore bank account. That doesn't mean that you can't take some actions to manage risk.
On the simplest level, make sure that your deposits with any one bank total less than $250,000 (this means you individually -- your spouse's deposits can be counted separately.) This will keep you within the coverage limit of FDIC deposit insurance. That is a level of protection you are not likely to get from a foreign bank.
If you are especially concerned about the U.S. economy, consider diversifying into foreign securities. A mutual fund or other diversified portfolio of non-U.S. stocks can reduce your exposure to events in the U.S., while still giving you the convenience of working with a U.S.-regulated financial institution.
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