401(k) and first time home purchase
Jun 25th 2011, 11:20 am
#1
Just Joined
Thread Starter
Joined: Jun 2011
Posts: 1
401(k) and first time home purchase
Hi,
I have just returned to the UK after 4 years of living and working in California to live permanently in London. I contributed about $20k to a 401(k) account and am wondering about what to do with the money, particularly as I am keen to buy a house in the UK.
Part of the $20k was committed post tax as a Roth 401(k) and part was standard 401(k) - pre tax.
I would like to know the following:
1. Would I be able to commute the 401(k) to a UK retirement plan?
2. Would I be able to borrow against the 401(k) for a UK first time purchase?
3. Is it worth withdrawing the 401(k) and paying taxes and penalties? This is quite a complex question and probably involves a lot of variables so:
4. Can you recommend a tax or financial adviser to help with answering 3 above?
I am leaning toward removing the money and paying the appropriate penalties just to simplify my future and not have to have the headache of managing the investment and worrying about what exchange rates will do in 40 years time when I retire.
I also think the capital would be well spent on a property. Unlike many parts of the US, the UK housing market has been relatively more buoyant and in many ways (rightly or wrongly) 'getting on the property ladder' is considered an important way of saving for retirement. I think this is partly recognized in the US as the IRS (apparently) permits borrowing against the value of the 401(k) in order to put down a deposit on a first time home purchase. I imagine that adding an additional GBP10k will reduce my mortgage interest rate by 0.5% which could be a considerable sum over a typical 25 year mortgage.
Hoping you can help!
Rich
I have just returned to the UK after 4 years of living and working in California to live permanently in London. I contributed about $20k to a 401(k) account and am wondering about what to do with the money, particularly as I am keen to buy a house in the UK.
Part of the $20k was committed post tax as a Roth 401(k) and part was standard 401(k) - pre tax.
I would like to know the following:
1. Would I be able to commute the 401(k) to a UK retirement plan?
2. Would I be able to borrow against the 401(k) for a UK first time purchase?
3. Is it worth withdrawing the 401(k) and paying taxes and penalties? This is quite a complex question and probably involves a lot of variables so:
4. Can you recommend a tax or financial adviser to help with answering 3 above?
I am leaning toward removing the money and paying the appropriate penalties just to simplify my future and not have to have the headache of managing the investment and worrying about what exchange rates will do in 40 years time when I retire.
I also think the capital would be well spent on a property. Unlike many parts of the US, the UK housing market has been relatively more buoyant and in many ways (rightly or wrongly) 'getting on the property ladder' is considered an important way of saving for retirement. I think this is partly recognized in the US as the IRS (apparently) permits borrowing against the value of the 401(k) in order to put down a deposit on a first time home purchase. I imagine that adding an additional GBP10k will reduce my mortgage interest rate by 0.5% which could be a considerable sum over a typical 25 year mortgage.
Hoping you can help!
Rich
Jun 25th 2011, 11:55 am
#2
Ping-ponger
Joined: Jul 2002
Location: Dreich Alba
Posts: 12,010
Re: 401(k) and first time home purchase
Hi,
I have just returned to the UK after 4 years of living and working in California to live permanently in London. I contributed about $20k to a 401(k) account and am wondering about what to do with the money, particularly as I am keen to buy a house in the UK.
Part of the $20k was committed post tax as a Roth 401(k) and part was standard 401(k) - pre tax.
I would like to know the following:
1. Would I be able to commute the 401(k) to a UK retirement plan?
2. Would I be able to borrow against the 401(k) for a UK first time purchase?
3. Is it worth withdrawing the 401(k) and paying taxes and penalties? This is quite a complex question and probably involves a lot of variables so:
4. Can you recommend a tax or financial adviser to help with answering 3 above?
I am leaning toward removing the money and paying the appropriate penalties just to simplify my future and not have to have the headache of managing the investment and worrying about what exchange rates will do in 40 years time when I retire.
I also think the capital would be well spent on a property. Unlike many parts of the US, the UK housing market has been relatively more buoyant and in many ways (rightly or wrongly) 'getting on the property ladder' is considered an important way of saving for retirement. I think this is partly recognized in the US as the IRS (apparently) permits borrowing against the value of the 401(k) in order to put down a deposit on a first time home purchase. I imagine that adding an additional GBP10k will reduce my mortgage interest rate by 0.5% which could be a considerable sum over a typical 25 year mortgage.
Hoping you can help!
Rich
I have just returned to the UK after 4 years of living and working in California to live permanently in London. I contributed about $20k to a 401(k) account and am wondering about what to do with the money, particularly as I am keen to buy a house in the UK.
Part of the $20k was committed post tax as a Roth 401(k) and part was standard 401(k) - pre tax.
I would like to know the following:
1. Would I be able to commute the 401(k) to a UK retirement plan?
2. Would I be able to borrow against the 401(k) for a UK first time purchase?
3. Is it worth withdrawing the 401(k) and paying taxes and penalties? This is quite a complex question and probably involves a lot of variables so:
4. Can you recommend a tax or financial adviser to help with answering 3 above?
I am leaning toward removing the money and paying the appropriate penalties just to simplify my future and not have to have the headache of managing the investment and worrying about what exchange rates will do in 40 years time when I retire.
I also think the capital would be well spent on a property. Unlike many parts of the US, the UK housing market has been relatively more buoyant and in many ways (rightly or wrongly) 'getting on the property ladder' is considered an important way of saving for retirement. I think this is partly recognized in the US as the IRS (apparently) permits borrowing against the value of the 401(k) in order to put down a deposit on a first time home purchase. I imagine that adding an additional GBP10k will reduce my mortgage interest rate by 0.5% which could be a considerable sum over a typical 25 year mortgage.
Hoping you can help!
Rich
Personally, I doubt a UK bank would lend you money against a US 401k of that size.
Jun 26th 2011, 11:23 am
#3
BE Forum Addict
Joined: Aug 2004
Posts: 4,754
Re: 401(k) and first time home purchase
There's no way to convert (rollover) a US 401k to a UK retirement account without incurring taxes at at the US end.
If you wait 5 years you'll be able to gat at your ROTH principal without tax or penalties. For the regular 401k and ROTH gains you'll have to pay tax and penalties. Also if you roll over the 401k to an IRA you can then withdraw $10k without penalty for 1st time home purchase expenses. I don't know if this applies to a house in the UK though.
Alternatively you could let it sit until you are 59.5 and just pay the tax on withdrawals.
Which you choose really depends on how much you need that cash.
If you wait 5 years you'll be able to gat at your ROTH principal without tax or penalties. For the regular 401k and ROTH gains you'll have to pay tax and penalties. Also if you roll over the 401k to an IRA you can then withdraw $10k without penalty for 1st time home purchase expenses. I don't know if this applies to a house in the UK though.
Alternatively you could let it sit until you are 59.5 and just pay the tax on withdrawals.
Which you choose really depends on how much you need that cash.
