However, a treaty alone might not be enough, Cassidy warned, because without a corresponding "totalization agreement," the client is still responsible for paying into a country's social security system. For example, he said, Mexico has a tax treaty with the United States, meaning that while the client is protected from double taxation on the distributions, that person will still owe social security tax. However, he said, these taxes can be balanced with a U.S. tax credit in such cases, but not if there is a totalization agreement in place. 

He noted that, in most countries in Latin America, Asia and the Middle East, there are no totalization agreements, even though there might be tax treaties. 

However, if one wishes to avoid these rules entirely, Cassidy said that clients could theoretically decide to put their money not in a pension plan at all but in alternative investments. He said he has seen people use real estate and life insurance annuities for these purposes. 

Regardless, he also stressed the importance of reporting everything. He noted that while IRS audits are at an all-time low, the government has announced an initiative cracking down on foreign tax evasion. What's more, the IRS will be aware of the client's activities due to the Foreign Account Tax Compliance Act, which mandates that banks report to the government on customers with connections to the United States.

"I used to get questions like 'how is the IRS ever going to know?' They'll know because the banks will tell them," he said.