401k options now retired
Feb 4th 2019, 12:41 pm
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Joined: Feb 2019
Location: London
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401k options now retired
Hi
Another exPat trying to get to grips with 401K and seeking help.
I am 66, UK citizen just retired (hurrah). Worked in US for 6 years in 80s/90s, have defined contribution 401k plan from that time, circa $60k. Have had no need to file US tax return since returning to UK etc (no green card). I have no requirement to cash 401k all out now, quite happy to take it gradually, or cash out later etc. Basic question is what is my best approach that is both tax beneficial (i.e. I pay no more tax than necessary) and is "reasonably" straightforward.
I think from what I have read etc, that:
- moving 401k to IRA is good, and moving to Roth IRA is best, but impossible as I'm not US resident with US address
- if I withdraw all of the 401k as lump sum then there I will be taxed in the US (30%) but no UK tax to pay. I would have to file 1040NR, as getting income in US, so overall tax position would be dependent on total worldwide income for the tax year, which given retired is now pretty low
- if I simply withdraw from 401k gradually then my US tax will be zero (albeit that I will be taxed in the US (30%) and have to claim back by filing 1040NR), but I will be taxed in UK (at higher rate that would be 40%). And that assumes my 401k plan will allow partial withdrawal etc.
This seems to suggest (at its most basic) that my options are to pay 30% to the IRS or pay 40% to the HRMC, and that if I assume that any UK tax will be higher than 30% I might as well just cash it in in one go.
Thoughts / observations / guidance / hints all gratefully received.
Another exPat trying to get to grips with 401K and seeking help.
I am 66, UK citizen just retired (hurrah). Worked in US for 6 years in 80s/90s, have defined contribution 401k plan from that time, circa $60k. Have had no need to file US tax return since returning to UK etc (no green card). I have no requirement to cash 401k all out now, quite happy to take it gradually, or cash out later etc. Basic question is what is my best approach that is both tax beneficial (i.e. I pay no more tax than necessary) and is "reasonably" straightforward.
I think from what I have read etc, that:
- moving 401k to IRA is good, and moving to Roth IRA is best, but impossible as I'm not US resident with US address
- if I withdraw all of the 401k as lump sum then there I will be taxed in the US (30%) but no UK tax to pay. I would have to file 1040NR, as getting income in US, so overall tax position would be dependent on total worldwide income for the tax year, which given retired is now pretty low
- if I simply withdraw from 401k gradually then my US tax will be zero (albeit that I will be taxed in the US (30%) and have to claim back by filing 1040NR), but I will be taxed in UK (at higher rate that would be 40%). And that assumes my 401k plan will allow partial withdrawal etc.
This seems to suggest (at its most basic) that my options are to pay 30% to the IRS or pay 40% to the HRMC, and that if I assume that any UK tax will be higher than 30% I might as well just cash it in in one go.
Thoughts / observations / guidance / hints all gratefully received.
