1. US Retirement Accounts Still Work For You

If you've contributed to a 401(k), IRA, or SEP-IRA while working in the US, those accounts remain yours. They continue to grow tax-deferred regardless of where you live. You can name a beneficiary in either country, and you don't need to liquidate them when you move. The key issue is taxation at withdrawal — which country has the right to tax your distributions depends on your residency status and the US–Mexico tax treaty.

2. The US–Mexico Tax Treaty Matters

The two countries have a tax treaty that generally prevents double taxation of retirement income. Under the treaty, pension and retirement distributions are typically taxed only in the country of residence at the time of withdrawal — not where the money was originally earned. This is a significant planning tool for people who expect to retire in Mexico while drawing from US accounts.

3. Mexico's Afore System Is Portable — But Different

Mexico's mandatory retirement system (IMSS/Afore) accumulates through employer and employee contributions during your years working in Mexico. Unlike a US IRA, you cannot make voluntary contributions above the mandated amounts in most cases. If you later return to the US, those funds remain in Mexico until retirement age. Working with an advisor who understands both systems helps you avoid gaps in your retirement income picture.

4. FBAR and Reporting Requirements Don't Disappear

US citizens and residents with foreign financial accounts above $10,000 at any point during the year are required to file an FBAR (FinCEN 114). If you have an Afore account or a Mexican bank account, it likely falls under this requirement. FATCA reporting obligations may apply as well. These are not optional — penalties for non-filing can be severe.

5. Planning Both Sides Together Produces Better Outcomes

Most financial advisors are licensed in one country and unfamiliar with the other. A cross-border plan that accounts for US account growth strategies, Mexican retirement benefits, currency risk, and treaty provisions will consistently outperform two separate plans managed in isolation. If you've never had both systems reviewed together, that conversation is worth having.

The Self-Employment Tax Burden Is Real

When you work for an employer, Social Security and Medicare taxes are split between you and your employer (7.65% each). When you're self-employed, you pay both halves — 15.3% on net earnings — on top of your regular income tax. On $150,000 of net income, that's over $21,000 in self-employment tax alone before any federal income tax. The good news: there are legal, IRS-approved ways to significantly reduce your taxable income.

What Is a SEP-IRA?

A Simplified Employee Pension (SEP-IRA) allows self-employed individuals and small business owners to contribute up to 25% of net compensation to a retirement account — up to the 2026 IRS limit of $72,000. Every dollar you contribute reduces your taxable income dollar-for-dollar. If you're in the 24% federal bracket and contribute $40,000, you've reduced your tax bill by approximately $9,600. The money then grows tax-deferred until retirement.

A Simple Example

Say you're a sole proprietor with $200,000 in gross income and $50,000 in business expenses — leaving you with $150,000 in net income. After the self-employment tax deduction, your net compensation is roughly $143,000. A 25% SEP-IRA contribution would be approximately $35,700. At a 24% federal bracket, that contribution saves you around $8,568 in federal income tax for that year alone — while growing your retirement savings at the same time.

Who Qualifies?

• Sole proprietors and independent contractors
• Partners in a business partnership
• S-Corp owners who receive W-2 wages from their S-Corp
• LLC owners (depending on tax election)

You can even set up a SEP-IRA and make contributions for the prior tax year up until your tax filing deadline (including extensions) — meaning there's still time to reduce last year's tax bill.

If you haven't explored whether a SEP-IRA, Solo 401(k), or defined benefit plan makes sense for your situation, this is one of the most impactful planning conversations we can have.