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Old Sep 22nd 2017, 9:21 pm   #1
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Default Managing US IRA from the UK

My wife and I are about to move back to the UK in a few months time. She has US IRA & 401K.

The US bank managing one of those say that she will not be able to withdraw anything from them when she gets to retirement age (in about 10 years) unless she physically comes to US to sign papers.

Vanguard Investment say they would not be able to disburse anything unless she has a US address.

The bank says if we cash it out now we would pay a $10,000 penalty (on a $30,000 investment) and have to pay all the back taxes on it.

We are looking to roll them all into something that can be managed from the UK BUT will any bank/money institution in the US allow a US citizen resident in the UK have an IRA with them??

This is starting to be a big problem that no-one seems to have the answer to. We tried HSBC International banking but they didn't appear to have a clue.

Surely we are not unique in this. Anybody with a success story around this issue? Or is it a time-bomb waiting to happen for you too?
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Old Sep 23rd 2017, 3:42 am   #2
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Default Re: Managing US IRA from the UK

Both my wife and I consolidated our retirement accounts at Vanguard and changed our address to a UK address. Apart from completing a W9 to avoid automatic 20% tax withholding when we make distributions we are allowed to buy, sell and exchange within them easily enough. We do still have a US bank account (HSBC) that also has our UK address and it is that bank account we use to make distributions from our Vanguard accounts.

We are both dual US and UK citizens.

We also have a US Skype phone number registered with both HSBC and Vanguard. For Vanguard that number is used from time to time with their 2 factor authentication.
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Old Sep 24th 2017, 9:03 pm   #3
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Default Re: Managing US IRA from the UK

When I start to withdraw from the Vanguard IRA. I will put monthly payments into an after-tax account. I have bank accounts in the US that I can transfer money into, and Transferwise to Sterling in the UK.
Vanguard is okay with us having a physical address outside the US. Though whether they can operate the managed account after we move(next week) is still an open question.
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Old Sep 25th 2017, 2:28 pm   #4
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Default Re: Managing US IRA from the UK

Well it is so frustrating that when we spoke to Vanguard they explicitly said we could not have a Vanguard account unless we had a US address. Did they change their policy and you got in under the wire before they noticed? Or did we just have an idiot on the phone at Vanguard support! More on that later.

I don't know how to get past this as if they say "no you can't do it" it's not much good me saying "but I have a friend on the internet that does."

But thank you for your replies it gives me hope that we may get this sorted out.

We spoke to HSBC and it seems that this may all stem from a Department of Labor ruling in July that said you cannot hold a self-managed IRA account as a foreign resident, it can only be a managed account. It also seems that there may be a grandfathered provision that if you are already a self-managed customer you can continue. As we are trying to roll things into a new account maybe that is why we are hitting the wall with Vanguard.

Richard.
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Old Sep 25th 2017, 2:58 pm   #5
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Default Re: Managing US IRA from the UK

I guess it probably helps that I have had the account with Vanguard for 25 years, and already had an overseas period from 1995-2006. The issue of the managed account seems ambiguous. My Vanguard advisor said I may not be able to have a managed account, as an overseas customer, so on return I would have to roll it all into self-managed. He didn't get back to me on that one yet.

I think I need to talk to him.
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Old Sep 25th 2017, 3:04 pm   #6
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Default Re: Managing US IRA from the UK

I've had an account with Vanguard since 1995 and before we moved I asked about having an overseas address and was told no problem, and so far it hasn't been an issue. I did need to send them a W9 so they don't automatically withhold 20% on distributions.
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Old Sep 25th 2017, 3:10 pm   #7
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Default Re: Managing US IRA from the UK

Yes, W9s. Maybe we need a whole other thread on the dual tax treaty. I believe we will be paying tax to the UK, but filling out the US tax forms and claiming the tax paid as a credit - which should more than cover the amount that would otherwise be due to the IRS.

For us, the 2017 taxes will be a bear, because of the part-year thing, transitioning from working in the US, to retired in the US, to retired in the UK.
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Old Sep 25th 2017, 3:42 pm   #8
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Default Re: Managing US IRA from the UK

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Originally Posted by PimRoad View Post
Yes, W9s. Maybe we need a whole other thread on the dual tax treaty. I believe we will be paying tax to the UK, but filling out the US tax forms and claiming the tax paid as a credit - which should more than cover the amount that would otherwise be due to the IRS.

For us, the 2017 taxes will be a bear, because of the part-year thing, transitioning from working in the US, to retired in the US, to retired in the UK.
Just going through this now. Hopefully future years will be much simpler although the 2017 US tax year will require form 8938 as we exceeded the foreign accounts reporting limit when we transferred a load of money to buy a house. Maybe US tax year 2018 will be easy....
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Old Sep 25th 2017, 4:17 pm   #9
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Default Re: Managing US IRA from the UK

Quote:
Originally Posted by CaptainPea View Post
Well it is so frustrating that when we spoke to Vanguard they explicitly said we could not have a Vanguard account unless we had a US address. Did they change their policy and you got in under the wire before they noticed? Or did we just have an idiot on the phone at Vanguard support! More on that later.

I don't know how to get past this as if they say "no you can't do it" it's not much good me saying "but I have a friend on the internet that does."

But thank you for your replies it gives me hope that we may get this sorted out.

We spoke to HSBC and it seems that this may all stem from a Department of Labor ruling in July that said you cannot hold a self-managed IRA account as a foreign resident, it can only be a managed account. It also seems that there may be a grandfathered provision that if you are already a self-managed customer you can continue. As we are trying to roll things into a new account maybe that is why we are hitting the wall with Vanguard.

Richard.
There may be a difference between "opening" an account and "holding" an account. It has been discussed fairly frequently here on BE over several years, that you can't open a new account from outside the US, even to roll over the balance from an existing 401k or IRA. So recent advice here on BE is that you should get your account open before leaving the US.
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Old Sep 25th 2017, 4:42 pm   #10
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Default Re: Managing US IRA from the UK

Quote:
Originally Posted by Pulaski View Post
There may be a difference between "opening" an account and "holding" an account. It has been discussed fairly frequently here on BE over several years, that you can't open a new account from outside the US, even to roll over the balance from an existing 401k or IRA. So recent advice here on BE is that you should get your account open before leaving the US.
Good point. He did say that he was wanting to roll into a "new" account, and Vanguard definitely don't allow that. My son is moving today and he has already set up his new IRA account at Vanguard to roll his 401k into.
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Old Sep 25th 2017, 8:33 pm   #11
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Default Re: Managing US IRA from the UK

To make it clear we are currently resident in the USA and are trying to open a new US IRA account before we leave. We would then immediately, i.e while we are still in the US, roll my wife's IRAs into that. All because the local bank that currently hold the IRAs will not allow us to have a UK address.

Vanguard said they will not allow us to open an account in the US while we are still here, move to the UK and then manage it from the UK. This seems contrary to the experience here - although I note the rules may have changed in July. However maybe we got a misinformed advisor.

After a few hours on the phone to HSBC USA:
We cannot set up a managed IRA account with HSBC.
HSBC are unsure if we can set up a new US checking account and then subsequently open a self-managed IRA account; and still manage it from the UK in the future. The problem there is that they know that someone with an existing account could have a self-managed account and be in the UK (as some of you maybe do). But they just don't know if the July ruling changes that for accounts set up now.They are looking into that.

It has been just another day on the phone to banks!

And still confused.

Thank you for your support.
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Old Sep 25th 2017, 8:40 pm   #12
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Default Re: Managing US IRA from the UK

There was a recent thread about someone else who had a similar problem

Frozen 401k/IRA
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Old Sep 27th 2017, 5:52 pm   #13
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Default Re: Managing US IRA from the UK

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Originally Posted by CaptainPea View Post
To make it clear we are currently resident in the USA and are trying to open a new US IRA account before we leave. We would then immediately, i.e while we are still in the US, roll my wife's IRAs into that. All because the local bank that currently hold the IRAs will not allow us to have a UK address.

Vanguard said they will not allow us to open an account in the US while we are still here, move to the UK and then manage it from the UK. This seems contrary to the experience here - although I note the rules may have changed in July. However maybe we got a misinformed advisor.
Unless there has been a policy change Vanguard will allow you to manage your accounts with them form overseas. They will not allow you to open a new account without a US address.
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Old Sep 27th 2017, 6:10 pm   #14
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Default Re: Managing US IRA from the UK

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Originally Posted by nun View Post
Unless there has been a policy change Vanguard will allow you to manage your accounts with them form overseas. They will not allow you to open a new account without a US address.
They may not allow partial draw downs on the account.
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Old Sep 27th 2017, 9:44 pm   #15
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Default Re: Managing US IRA from the UK

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They may not allow partial draw downs on the account.
While living in the UK I've been making partial withdrawals from my Roth and brokerage accounts plus doing IRA to Roth conversions from overseas. They certainly know I'm living overseas as they have my street address in England and have asked me to complete a W9 to avoid withholdings of 20% on distributions.

They certainly seem to have an inconsistent policy for overseas residents.
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