The United States has a long history of immigration tied to its founding and commercial expansion. The Pilgrims were immigrants. Contrary to popular belief, the founding fathers of this country showed fealty to England for a long time because they considered themselves products of English immigration.
George Washington considered himself English and even fought as a commissioned English officer until he became our first president. Before he became our first president, George Washington was devoutly loyal to the English monarchy. The United States was founded on complex immigration politics. Yet, we all know how difficult life is for undocumented immigrants in this political climate. However, they are here, working and contributing to the American experiment. So, can undocumented immigrants open an IRA?
Yes, but the process is complicated and can vary from state to state.
Undocumented immigration is a lever of the industry that financially benefits the United States. We can’t deny that.
While the employment number of undocumented immigrants is not a hefty number, it’s not insignificant either.
While critics of undocumented immigration cite their financial drain on social services, we must assert that they pay taxes.
Undocumented immigrants pay into the American system.
Can undocumented immigrants open an IRA? Yes, but under exacting and qualifying circumstances.
And only possible in states where undocumented immigrants are allowed to get state-validated IDs and bank accounts.
Let’s go through this step-by-step.
Undocumented Immigrants, Taxes, and Driver’s Licenses
Undocumented immigrants can’t have Social Security numbers.
However, they can pay taxes via Individual Taxpayer Identification Numbers (ITIN) and/or payroll taxes.
An ITIN is the closest equivalent of a Social Security card that an undocumented immigrant can own. You can apply for an ITIN via the IRS website.
If you want to answer the question “can undocumented immigrants open an IRA?” it’s important to understand how much they pay into the system.
Over 4.3 million tax returns are filed annually with ITINs, according to IRS statistics.
The inclusion of undocumented immigrants in business life extends to document processing.
After all, it’s irrelevant to ask, “can undocumented immigrants open an IRA?” if they don’t have valid IDs.
Where Can Undocumented Immigrants Get Driver’s Licenses?
Over 13 states, including Oregon, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, New Mexico, New York, Nevada, Utah, Vermont, Washington, and the District of Columbia, allow undocumented immigrants to apply for driver’s licenses.
Many more American states are introducing legislation.
So, if they can do these things, can undocumented immigrants open a bank account?
And, can undocumented immigrants open an IRA?
The answer is yes. However, the processing for such is extremely exacting.
If you know an undocumented immigrant could use this information, here is what you should know.
Can Undocumented Immigrants Open an IRA? – (Yes, But it Depends)
Undocumented immigrants can technically open a 401(k), traditional IRA, or Roth IRA with a qualifying ID like an ITTN.
However, not every state or employer may extend such opportunities.
In states where it is allowed, an undocumented immigrant must be at least 21 years old to qualify for opening an IRA.
Additionally, they must have worked for a qualifying employer offering such retirement plans for a year or at least 1,000 hours.
It takes at least a decade to accrue enough financial value in an IRA. It’s a retirement account, after all. For an undocumented immigrant making relatively lower pay, this process can take decades.
Opening an IRA may be self-defeating for undocumented immigrants planning to return to their home country within a few years.
Undocumented immigrants who are more likely to be financially strapped than American citizens should be aware of all IRA-related financial penalties.
There are 10% financial penalties and taxes for early IRA withdrawals under the age of 60.
Undocumented immigrants can even open bank accounts. However, such a privilege would depend on the state laws of residency.
Now that we have answered the questions of, “can undocumented immigrants open an IRA?” let’s explain the required ID documentation.
ID Application Processes for Undocumented Immigrants
An undocumented immigrant wanting to open an IRA or bank account will need documentation including but not limited to:
- Valid passport
- Foreign-issued government IDs
- Birth certificate
- ITIN number
Required documents differ from bank to bank – but an ITIN will always be required. So never assume. Always ask when in doubt.
Undocumented immigrants can apply for an ITIN via the W-7 form through the IRS. An ITIN must be renewed every 5 years.
Keep in mind that it automatically expires if you don’t use an ITIN for 3 straight years.
It’s important to also keep in mind that ITINs don’t prove or authenticate immigration nor work authorization status.
Keep Good Records and Know the Rules
So, Can Undocumented Immigrants Open An IRA?
But the application processes required for undocumented immigrants to open an IRA can be complicated, overly bureaucratic, and time-consuming.
Don’t give up. Learn how the system works through your employer or immigrant work advocacy organizations.
And then learn how to make the system work for you. Even George Washington did it once when he decided he was no longer a product of English ancestry but an American.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
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