The latest figures show that 62% of Americans are worried about retirement.
If you’re worried that you might not have enough money for retirement, you may want to use a ‘passive foreign investment company’ (PFIC). That said, this is a somewhat technical concept, and so you may not know how it works.
Keep reading, and you’ll learn how this concept works as well as how it can help you with retirement. Once you’re finished, you’ll see why this is something you should take seriously.
Let’s begin!
What Is a Passive Foreign Investment Company?
A passive foreign investment company is a foreign company that earns at least 75% of its gross income from ‘passive investments.’
This income typically comes in the form of:
- Interest payments
- Dividends from shares
- Capital appreciation gains
In some cases, a PFIC can also be a foreign company that has at least 50% of its total assets in the form of ‘investments.’ However, these assets must produce an income if they are to be included in the PFIC definition.
How Can A PFIC Help You?
At this point, you might be wondering how a PFIC can help you in regards to retirement.
Well, one of the good things about a PFIC is that it can help you reduce your tax burden.
Thus, if you use a PFIC, you might be able to save more money for retirement without having to increase your earnings. This is generally because you no longer have to put as much money towards taxes.
How Can You Use a PFIC?
One of the unfortunate things about creating and managing a PFIC is that the whole process can be quite complex. That’s because if you adopt this approach, you will have to follow complicated tax guidelines.
You will also have to file some pretty complicated documents such as ‘IRS form 8621.’ If you make a mistake when following guidelines or filling forms, you may get into a lot of trouble, and you could face a fine.
Thus, if you’re going to go down this route, it’s a good idea to work with an expert that understands this concept. An expert will help you set up a PFIC properly, and they’ll also assist you with your tax return.
That said, you should practice a lot of caution when it comes to finding someone for this kind of role.
If you don’t find a competent individual, they might get you into trouble. After all, it’s important to remember that if they make mistakes, you will be the one that is liable.
Will You Have Enough Left Over for Retirement?
As you can see, a passive foreign investment company can help you increase the amount of money you have for retirement.
Note that a PFIC is just one method that you can use to increase your retirement allowance. After all, there are other options you might want to look into as well, such as real estate investment.
Ideally, you will want to adopt several approaches when it comes to retirement planning. In doing so, you can ensure that your retirement plan doesn’t have a single point of failure.
If you enjoyed reading this post, please visit our blog to see some of the other content we have on our site!