That all makes sense.
I was thinking about the people who are doing these Mega Back Door Roth Conversions to get their IRA's down so they don't get hit with taxes on large minimum distributions, and how instead you could just leave it all in your 401K and then renounce once you hit 70 and get citizenship in the Caymans or the Bahamas...
You get the benefit of a lifetime of immediate tax deductions while you work, then once you hit retirement a relatively tax free withdrawal depending on what country you gain citizenship in.
So many countries only tax you on the money you make in that country, you could get citizenship in one country, then live in another on a "pensioner" visa.
I see what you're talking about, and it is a good concept. I think you'll find that in practice it is a little more difficult and a lot more expensive than you might expect. There are real tax benefits, but the costs usually only make it worthwhile for people who are extremely wealthy.
Most countries with a high standard of living and low taxes offer residency/citizenship with a very high up front cost. In a place like the Cayman Islands, that means investing millions of dollars up front, buying property, and holding a lot of money in local banks. Having to invest a couple of million is a fair price if it saves you capital gains taxes on a $100 million portfolio, but might not work for someone with a net worth of "only" $10 million. The other catch is that most countries don't give instant citizenship. You usually have to have five or more years of residency before you can apply, and there might be some requirements for physical presence. And just "qualifying" for citizenship might not mean they'd actually give you a passport. So you'd have to take a couple of million dollars while you're still a US citizen, invest in the Caymans, and wait 5 or more years to apply for citizenship before you (maybe) could escape from US taxes.
It sounds like you're still in the early stages of planning, but if you are making decisions right now about things like paying taxes up front to be able to do a backdoor Roth, you should start looking into the requirements of some specific countries you think might be good candidates for citizenship and doing the math.
Retirement visas are easier to get than citizenship, and choosing to reside overseas for a lower cost of living is more likely to make financial sense than renouncing citizenship for tax purposes (at least for people like me who aren't traveling by yacht or private jet).
One other thing to consider would be your interest in spending time in the US in retirement. If you renounced your citizenship, you'd have to apply for a visa unless your new citizenship is from a visa waiver country. Visa waiver visits are for up to 90 days, and tourist visa visits are up to 180 days. If you only visit the US for a few weeks a year, it wouldn't be an issue. If circumstances caused you to have a 6-month visit to help with a new grandchild followed a couple of months later by a few months at Christmas and a few months later by a three month visit to help with a family emergency and some medical care of your own, you might risk being refused visas in the future as an "intending immigrant." It might seem strange, but remember that non-citizens have no "right" to visit the US, and as a former citizen you might actually find it harder to prove that you don't intend to stay in the US (while enjoying the tax benefits of being a citizen of another country).
Good luck with whatever path you take!
