[benrbray]

One side effect of this inane policy is that it is becomes very difficult for US citizens living abroad to invest their money, due to the tax consequences of holding foreign stocks, as well as the fact that very few US exchanges are willing to open accounts for expats.

I live in Japan, and holding Japanese stocks will get me in trouble with the US government, while holding US stocks can dramatically complicate my Japanese taxes. Because I reside outside the US, I cannot have a 401k or Roth IRA, but it is also impractical for me to take advantage of the Japanese equivalent (NISA) due to the prohibitive cost of correctly reporting my holdings to the US. In some cases there is also double taxation.

[refurb]

Why can’t you have a Roth IRA? Japanese taxes?

[Question50]

Post-tax US retirement accounts (e.g., Roth-IRA/401K, etc.) are generally seen as normal investment accounts by the tax authorities in the US expat's country of residence. Therefore they offer no retirement tax benefits.

[compsciphd]

its not a huge problem to hold stocks. it's a problem to hold funds as I understand due to PFIC issues. But one could buy individual stocks without a problem (heck, while living in the USA I owned foreign stocks as my company's stock was a canadian company and I took advantage of their ESPP and it wasn't a real problem)

[Question50]

Yes, non-US pooled funds (e.g., ETFs, mutual funds, etc.) as well as most non-US pensions fall afoul of PFIC rules and their complex & expensive reporting requirements. This usually bites people with mandatory contributions, such as Australia's Superannuation.