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Basic questions about returning

Basic questions about returning

Old Jun 25th 2020, 5:41 am
  #1  
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Default Basic questions about returning

Hi there,

I recently came across this forum and very much appreciate what I have read.

I am a UK citizen who has been working in the USA for 16 years. I have a greencard.

I would like to move back to the UK in the next 3 years, retiring from my work in the US.

My questions:

1. I will be drawing a pension plus retirement savings from the USA--this will be my main source of income. I’m hoping this isn’t complicated. I would presumably need to keep a bank in the USA.

2. I have a green card which doesn’t expire for another 8 years. I’m not particularly keen on taking citizenship, though I could. Can I let my greencard expire naturally once in the UK?

Would not having citizenship (or greencard) have any impact on collecting my US pension and retirement savings?

3. I’m 55 now and plan to take out social security when I reach my 60’s, probably holding on to 65+. Is this something I could arrange from abroad once the opportune moment comes?

5. The main reason I am not keen on holding on to a greencard or taking citizenship is that I would rather not file US taxes once back in the UK. However, if the tax issue is relatively straightforward then I wouldn’t mind holding on to the greencard. Any thoughts?

Would appreciate any advice as I am not particularly informed and there may be quite a few “don’t knows”.

Cheers!

Ed
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Old Jun 25th 2020, 2:06 pm
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Default Re: Basic questions about returning

1. I will be drawing a pension plus retirement savings from the USA--this will be my main source of income. I’m hoping this isn’t complicated. I would presumably need to keep a bank in the USA. My wife and I are in a similar situation and it is easy enough reporting our US pensions and IRA withdrawals each year on our HMRC self assessment return. We do keep a US bank to make things easy as I doubt if our ex companies will be able to pay our pensions into an overseas bank. Note that Roth IRAs are tax free in both countries so might be worth thinking about doing some Roth conversions to minimize taxes.

2.
I have a green card which doesn’t expire for another 8 years. I’m not particularly keen on taking citizenship, though I could. Can I let my greencard expire naturally once in the UK? I don't know about the mechanisms of giving up a Greencard, we are both dual US/UK citizens plus our existing bank did not support overseas customers so we switched banks well before we moved back

Would not having citizenship (or greencard) have any impact on collecting my US pension and retirement savings? It should not be a problem, however I would make sure that your US bank plus the brokerage that holds your retirement account has good support for overseas customers. We both rolled our 401ks to IRAs after we left our jobs to make that side of things much easier.

3. I’m 55 now and plan to take out social security when I reach my 60’s, probably holding on to 65+. Is this something I could arrange from abroad once the opportune moment comes? Yes, but I would first set up an online SS account now as that is near possible to do from abroad. When you come to apply for SS you do so through the Federal Benefits Unit (FBU) in the US Embassy in London. SS monthly payments can be paid direct into your UK bank account with no fees and excellent exchange rate.

5. The main reason I am not keen on holding on to a greencard or taking citizenship is that I would rather not file US taxes once back in the UK. However, if the tax issue is relatively straightforward then I wouldn’t mind holding on to the greencard. Any thoughts? Personal choice. We still visit the US quite often to visit our daughter. Filing US taxes and doing FBAR filings is a pain, that's for sure.

Would appreciate any advice as I am not particularly informed and there may be quite a few “don’t knows”. Stick around this site and get plenty of advice to get informed.

Last edited by durham_lad; Jun 25th 2020 at 2:10 pm.
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Old Jun 25th 2020, 11:53 pm
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Default Re: Basic questions about returning

Hi Durham Lad,

I very much appreciate your response. Thank so much! I have some follow-ups if you, or someone else, is able to answer them:

1. “My wife and I are in a similar situation and it is easy enough reporting our US pensions and IRA withdrawals each year on our HMRC self assessment return.”

I had believed that in the UK you don’t pay taxes on income from abroad (already taxed) and so I’m not sure why I would have to complete an HMRC return.



2. “Note that Roth IRAs are tax free in both countries so might be worth thinking about doing some Roth conversions to minimize taxes.”

So this is news to me. Is this a common things for folks to do? Why not just keep savings in the existing pension fund where it will continue to accrue interest?

Cheers,
Ed
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Old Jun 26th 2020, 8:35 am
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Default Re: Basic questions about returning

Streetlegal, just to say I replied to your question about retirement cost to "live a reasonable life" in the other thread started by UkBritExpat before I saw you had your own thread here.
Will repeat here so as not to sidetrack UKBritExpat's thread:
perhaps around £20,000 in the north and £25,000 in the south? But varies enormously depending on lifestyle, housing costs, car or not, eating out and travel, etc etc!
Others, eg the ever-helpful and informative Durham Lad, may have a better answer.
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Old Jun 26th 2020, 9:24 am
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Default Re: Basic questions about returning

Just to add, there's a lot of info about costs on this other thread:
https://britishexpats.com/forum/movi...ack-uk-932863/
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Old Jun 26th 2020, 11:08 am
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Default Re: Basic questions about returning

1. “My wife and I are in a similar situation and it is easy enough reporting our US pensions and IRA withdrawals each year on our HMRC self assessment return.”

I had believed that in the UK you don’t pay taxes on income from abroad (already taxed) and so I’m not sure why I would have to complete an HMRC return. No, the UK taxes its residents on their worldwide income regardless of whether that income is subject to foreign taxes. You level it up with foreign tax credits. In the case of the US and UK Double Taxation Agreement then the UK is the primary taxation authority so we (US Citizens) reduce our US taxes by claiming credits against the taxes we paid on that income in the UK. If you give up your Green card then I'm not certain what the situation is with the IRS but I am certain that you will have to pay UK taxes on your US income. If your brokerage withholds US taxes then you will have to file a US return to get that refunded to you. I believe there is a form you can file with your brokerage to tell them that you are not liable to US taxes and to not make withholdings.



2. “Note that Roth IRAs are tax free in both countries so might be worth thinking about doing some Roth conversions to minimize taxes.”

So this is news to me. Is this a common things for folks to do? Why not just keep savings in the existing pension fund where it will continue to accrue interest? It is very common, even among folks living in the USA, to make Roth conversions after they retire but before they receive SS and have to make mandatory IRA withdrawals that would push them into a higher tax bracket. The savings in the Roth continue to accrue interest but now it is tax free interest. If tax rates never changed then it wouldn't matter if you converted or not but if you think your tax rate will increase in future then it is better to do the conversion. e.g. $100k in an IRA grows by 50% to $150k over a number of years, then it is withdrawn and you pay 20% income tax - you have $120k left. You convert $100k in an IRA and pay 20% tax which leaves $80k and this grows by 50% by the time you withdraw it so you have $120k. I have moved to England and my tax rate is will be 40% once I start drawing SS and OAP (I know, I'm lucky) so with the above situation I would have $90k left if I'd stuck with IRA. (40% tax on $150k) With the Roth conversion I would have $120k since no tax is due on Roth withdrawals.
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Old Jun 26th 2020, 11:13 am
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Default Re: Basic questions about returning

I believe the form to stop withholdings once you are living in the UK and not subject to US taxes is W-8-BEN

https://www.irs.gov/forms-pubs/about-form-w-8-ben

[/QUOTE]Give Form W-8 BEN to the withholding agent or payer if you are a foreign person and you are the beneficial owner of an amount subject to withholding.
[QUOTE]
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Old Jun 26th 2020, 9:22 pm
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Default Re: Basic questions about returning

Thanks so much everyone for your help. I feel somewhat overwhelmed--Roth IRAs, BENs, WP somethings. Is there a site that lists recommended financial advisers for expats returning to the UK? I'm based in San Francisco and feel I need to talk to a financial adviser for basic priming in all this stuff.

Thanks
Ed
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Old Jun 26th 2020, 9:41 pm
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Default Re: Basic questions about returning

Originally Posted by Streetlegal View Post
Thanks so much everyone for your help. I feel somewhat overwhelmed--Roth IRAs, BENs, WP somethings. Is there a site that lists recommended financial advisers for expats returning to the UK? I'm based in San Francisco and feel I need to talk to a financial adviser for basic priming in all this stuff.

Thanks
Ed
I don’t know of any sites for financial advisors. I have picked up what knowledge I have by frequenting an early retirement site about 3 years before I retired and then sites like this one about 4 years before we moved back to England.
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Old Jun 26th 2020, 9:43 pm
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Default Re: Basic questions about returning

Thanks durham_lad!
I don't suppose there is a checklist anywhere of the kinds of things I should look into?

Ed
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Old Jun 26th 2020, 9:56 pm
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Default Re: Basic questions about returning

Originally Posted by Streetlegal View Post
Thanks durham_lad!
I don't suppose there is a checklist anywhere of the kinds of things I should look into?

Ed
I can’t think of anywhere there is a checklist as such. Just browse the threads on this forum and ask questions like this thread you started. The financial aspects were the most challenging for us.

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Old Jun 27th 2020, 11:52 pm
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Default Re: Basic questions about returning

I plan on retiring in, say, 3 years. I will have a California state pension which will be deposited into my USA bank and a Fidelity which I can access at age 59.5.



What is the advantage of a Roth IRA?

When I return to the UK, I could get work, including part-time.

Filing tax returns: it seems I will have to do returns both for the UK, based on my US pensions, and for the USA based on my UK earnings. At the moment, I file through Jackson Hewitt.

Filing tax returns for the UK and USA a process that makes me nervous, but I guess it is something people get used to doing?
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Old Jun 28th 2020, 9:16 am
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Default Re: Basic questions about returning

Originally Posted by Streetlegal View Post
I plan on retiring in, say, 3 years. I will have a California state pension which will be deposited into my USA bank and a Fidelity which I can access at age 59.5.



What is the advantage of a Roth IRA?

When I return to the UK, I could get work, including part-time.

Filing tax returns: it seems I will have to do returns both for the UK, based on my US pensions, and for the USA based on my UK earnings. At the moment, I file through Jackson Hewitt.

Filing tax returns for the UK and USA a process that makes me nervous, but I guess it is something people get used to doing?

Filing in both countries is a pain but not too bad.

Good news for you is that your California State pension is only taxed in the USA as per the DTA. If Roth withdrawals or conversions plus your California State pension is your only foreign income then you won’t even have to file a self assessment in the UK.

My son lives in the UK and only has a Roth IRA which he is not drawing from, no other income so he does not file a UK return, let’s PAYE take care of it. He uses TurboTax to file his US taxes and excludes his UK income entirely with form 2555, FEIE. He still has a US bank and unexpectedly received a $1,200 stimulus payment earlier this year.

You might look into Greenback Taxes or TaxesForExpats to do your taxes if you are used to having your taxes done by a firm.

Last edited by durham_lad; Jun 28th 2020 at 9:21 am.
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Old Jun 30th 2020, 4:59 pm
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Default Re: Basic questions about returning

2. I have a green card which doesn’t expire for another 8 years. I’m not particularly keen on taking citizenship, though I could. Can I let my greencard expire naturally once in the UK?



Your greencard would expire after living out of the States for 12 months.
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Old Jun 30th 2020, 7:29 pm
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Default Re: Basic questions about returning

Originally Posted by excpomea View Post
2. I have a green card which doesn’t expire for another 8 years. I’m not particularly keen on taking citizenship, though I could. Can I let my greencard expire naturally once in the UK?



Your greencard would expire after living out of the States for 12 months.
Good point. I didn't think of that!
Ed
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