How Moving to Mexico Could Affect Your U.S. Mutual Funds

The majority of American retirees that move to Mexico to enjoy their golden years survive entirely on retirement income originating from within the United States.

The most common source is from Uncle Sam in the form of Social Security benefits, but after that, mutual funds are high on the list of income streams for retirees. What many of those retirees don’t realize until it’s too late, is that moving south of the border may affect their ability to manage those mutual fund accounts.

Since I mentioned Social Security benefits, let me quickly address that first.

Good news! If you’re a U.S. citizen, moving to Mexico will NOT impact your ability to collect your Social Security payments. If you want more information, you can read this article about it later:

Will Moving to Mexico Affect My Social Security Payments? 

On the other hand, if you have U.S. based mutual funds, there is a strong possibility that the financial institution handling your mutual funds may block you from making any additional purchases or changes, effectively freezing your account.

The reason is because in order to do business with a foreign resident — even if that person is a U.S. citizen — the fund would have to be registered with the appropriate regulatory bodies in that foreign country, and be subject to their oversight and enforcement.

In layman’s terms, that means your fund isn’t allowed to do business with you now that you’re buying and selling stocks from your new home in Mexico.

According to an article from Thun Financial Advisors, many financial institutions in the U.S. have started to restrict or even close the mutual fund accounts of Americans living abroad. Some of the more notable institutions taking this action are Morgan Stanley, Fidelity, Merrill Lynch, Ameriprise, TIAA, Edward Jones, Wells Fargo, USAA, and UBS.

Whenever I tell an aspiring expat about this potential problem, the typical response is to ask me the following:

What If I Maintain a U.S. Mailing Address?

I can best answer this one by first sharing a story from real-life.

One of our friends is originally from Texas, but he’s lived in Mexico for the last few years. He maintains a mailing address in the U.S.; however, he no longer owns real property there.

About two years ago, he received a notice from the company handling his mutual funds – a very well known investment company – advising him that he could no longer make purchases through the fund. According to the notification, they determined that he was a foreign resident because he had been logging on repeatedly from a Mexican IP address over an extended period of time.

We know several American expats who use a VPN to hide their location when online for this very reason. But, tracking IP addresses is not the only way that these companies find out that a customer has moved abroad. Another popular investigative tool is social media.

That’s right. If you changed your place of residence on your Facebook profile to Cancun, Mexico, it won’t take Columbo to figure out you’ve moved away.

In case you’re wondering how our friend handled it, he flew back to the States and moved his money to a different type of account.

Let’s Wrap This Up

Not every investment company takes such a hard line approach to their U.S. customers living abroad. However, if you have money invested in a mutual fund, I recommend that you contact the investment company prior to moving to see if there will be any negative consequences.

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About the Author

Qroo Paul
Paul Kurtzweil (Q-Roo Paul) was a deputy sheriff in Florida for 25 years before retiring at the rank of lieutenant in 2015. He and his wife moved to Mexico looking to maximize their retirement income. They later started a blog called Two Expats Mexico (qroo.us) to share their experiences as well as information about the logistical and legal aspects of retiring south of the border.

19 Comments on "How Moving to Mexico Could Affect Your U.S. Mutual Funds"

  1. One possible solution is to move mutual fund investments to a target date retirement fund, that is to a fund that automatically rebalances itself as you age. A side benefit is that doing so also gives added assurance your investment will still automatically do for you what you now want, even if later you become mentally incompetent. I got that idea from an older relative, and agree that putting complex decisions on a trustworthy autopilot does help simplify retirement life, no matter your country of residence.

  2. Solution: Solo 401K

  3. My problem right now is just trying to maintain a physical address for my American Express credit cards. Their system recognizes all mail forwarding companies and ups locations for example. I’ve been using personal mail box locations since 2007 when I started full-time Raving. Lots of people use family and friends addresses. But I don’t have that luxury. Soon, I will be applying for a permanent residency visa, even though I just received my renewal for a temporary one in November. I may ultimately need to cancel all my credit cards with AMEX, unfortunately. Depending on what information they obtain from my internal credit report when I receive permanent residency.

  4. If you have a US address you can live aboard Anywhere in the world to manage any portfolio whatsoever… Been doing it for 25 years sir.

    • Who do you use as a brokerage firm? Fisher listed below but looking for alternatives. Fisher spends too much on Marketing.

  5. Solution: We use an an investment company that is qualified to handle accounts overseas anywhere in the world. (Fisher Investments Camas, Washington.) They also provide a non-fee debit/credit card that has no international fees and provides a very high exchange rate upon withdrawal from the ATM. Problems solved. 🙂

  6. Paul, any recommendations on low-cost brokerages that are more friendly to US expats in Mexico? With the number of expats down there specifically, I have to think there are companies that will let you trade from there without reverting to using travelling mailboxes, etc. Maybe I’m too optimistic?

  7. ive being experiening this problem for some months now…thank you for this post

  8. well good info, i kept a usa address for this reason, guess it doesnt matter after reading this, now to figure out what to do, well thats if this coronavirus thing doesnt deplete us, have been losing like crazy in the last week, thanks for the tip, will follow up with our brokers and find out exactly what we are to do. Never bothered to ask them before we moved, thought we would be safe having the usa address.

  9. Deborah Soloway | February 29, 2020 at 1:52 pm | Reply

    Good info, Paul. I hope I can add to the discussion, having dealt with this since 2013 when we moved to Canada and then to Mexico in 2018. Any PERMANENT resident of Mexico can invest with Charles Schwab International with US$25K in cash, retirement accounts, or a combination. No, you can’t trade in mutual funds, but you can buy ETFs, individual stocks, and bonds online with no fees. Your Social Security payments can be deposited with them and accessed with a no-fee debit card (all ATM fees are rebated) or by wire transfer (no more than $25). Their Fx rates are excellent and wires are quick. No US address needed!
    More info can be found at https://international.schwab.com/public/international/us_investing/us_expat_essentials or +1-415-667-7870.
    I’m not a Schwab employee, only a happy customer.

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