Returning to UK from US 401k Tax
 

I am planning to move back home in 2019 and starting to get the ball rolling. I will have been in the US for 5 years at that point and have a 401k that I do not want to leave in the US.

I am aware that the 401k will take a 10% penalty for early withdrawl and then be taxed on your earnings. I plan on taking some time to travel and relax and my assumption is that If I have 0 earnings in 2019 then my tax implications on the 401k would be much lower than my current prevailing rate?

What have people generally done with 401ks when returning to UK, is it possible to roll into a private UK pension to avoid penalties?

Re: Returning to UK from US 401k Tax
 

My son is in a similar situation, having worked in the US for just over 10 years before he came back to England last year. He had a Roth and also a 401k and wanted to withdraw it all before moving back, and take the 10% penalty.

Since he didn't really need the money immediately I persuaded him to take a different route. He arrived back end of September 2017 and if he had cashed out his 401k he would have had a 10% penalty but also a significant regular income tax hit as it would add onto his 9 months of salary, plus 6 weeks of UK salary as he got a job here very quickly. He rolled his 401k to an IRA with Vanguard, where his Roth is, and that had no tax hit at all. He is working here in England and can decide to either withdraw from his IRA and pay the 10% penalty plus income tax, or convert it as a lump sum into his Roth IRA and pay much less US tax on it than if he had cashed it out in 2017. (A lump sum conversion like this is not taxed by HMRC as per the tax treaty so he only has US taxes to pay).

He has good records on his Roth which he has contributed to for well over 5 years so he could choose to withdraw the contributions that are older than 5 years tax free, and I believe that the converted 401k will also be available after 5 years. (Only the gains of a Roth are taxable if held for over 5 years and withdrawn before age 59.5)

Or he could keep his Roth and IRA invested in the USA as a nice little retirement pot (it is just about a 6 figure sum now).

Re: Returning to UK from US 401k Tax
 

Thank you, I also read that rolling it and keep it open allows you access to make investments in the US stock market which is much broader than the UK.

Re: Returning to UK from US 401k Tax
 

It is important that you have it rolled over before leaving the USA, some (many?) brokerages do not allow new accounts, including Rollover IRA accounts, to be opened while residing overseas.