fatbrit

If you're under 40, don't be too conservative with your investments. The most important thing with mutual funds is the cost of investing in it. Thoroughly research how much they're going to be pulling out of your profits before signing up.

Elvira

Vanguard is probably one of the cheapest. I think Fidelity is not too bad eather.

Hugh Jaas

...Hmm, got me thinking. Sorry to hi-jack thread

So if I joined a 401k plan and then a few years later I went back home to England, what what would happen to the plan? Taking a wild guess I'm thinking it would freeze as you or the company wouldn't be paying into it.

But, could you collect without penalty (aside from the Tax)when it matured at the end of the term, while residing back in the UK?

Bob

depends on the plan....it's pretty easy to name a beneficiary who is abroad too.

Rodney you plonker

A 401K is a pension plan, that's all.

My 401K is with Fidelity. I have a Fidelity office that is local to me, I contacted them and they assigned a specialist to advise me of all the details and options. I would suggest contacting Merrill Lynch and seeing if they have an office you can go to, that way you can sit down with someone and get all your answers, they will probably have some great online tools that can help you plan as well. If you get a company match it is free money for your retirement. There are plenty of other investment engines out there, if you don't plan on staying in the USA until retirement it might be worth looking at other options.

Does your company have a stock purchase plan?
My company takes the price of their stock over a 6 month period, then whatever the lowest price within that 6 month period was, they knock another 15% off that and let us buy shares. The money comes out of my paycheck every 2 weeks and is held by Fidelity, when the trade window opens they buy the shares for me, I can also transfer the money to other programs during the trade window.

With a 401K, if you want to cash out early (before retirement) you can do that too, but you will get absolutely hammered in penalties, and I mean absolutely hammered.

angelman

I too am confused how it works if you return to england. I have put off getting one since it seems to me that the returns in the UK are probably better anway> i can get 5% in a savings account as it is over there. Can you get an ISA without being a resident? I guess it doesnt matter since its not taxed in the uk anyway.
I understand that the savings are made tax free in the us but then taxed when you retire. Would it still get taxed in the UK by the US? How would this work?

Bob

You can't, and if you ain't a resident, it can be taxed.

Elvira

You have to be resident in the UK in order to take out an ISA, or make additional contributions to an existing ISA. You can, however, hold on to any ISAs (or PEPs) you took out before taking up residence outside the UK.

401k contributions get tax relief, but the proceeds are taxed when you retire - AFAIK in whichever country you happen to live in for tax purposes at that time.

Now, what I am not sure about is the UK tax treatment of the proceeds of a Roth IRA. DAK?

Rodney you plonker

Good questions, but they beat the shit of me. Even the Fidelity guy couldn't answer them, he said he has never dealt with anyone overseas. You could bet a Spanish land grant that the yanks will tax you on it, not sure how it works with the UK though.

One thing I do know is that you can draw your Social Security from the UK. A buddy of mine works in the Social office in the city, you need to have payed in for 40 quarters, and 1 quarter is 6 months (don't ask me why), so 20 years in and you can draw your Social Security from anywhere in the world. He is dealing with an American expat in Norway now.

Bob

You have to be a USC to draw the money from abroad, otherwise you have to be resident in the US....but then you could use the contributions as credit for NIC in the UK...

fatbrit

You can earn up to 4 quarters in any year. Can't remember the exact figure but earnings of $2k to $3k are sufficient for one quarter, i.e. a minimum wage job is sufficient to make it. The quarters are totalled yearly, so if you made $15k the first month and then nothing else for the rest of the year, you still get the maximum 4 tally.

You need to have paid 40 quarters for any payout other than disability.

paddingtongreen

There are too many things getting mixed here.

UK and USA have a pact on Social Security pensions. If you come here, and then go back to the UK, but don't have enough time in here for a US Soc Sec pension, you tell UK Scoc Sec and they confirm your US earnings and include it in the calculation of your UK pension. If you have enough time in here, you get both pensions. The same works in reverse, I had enough time in in the UK and here, so I collect pensions from both.

If you leave a company, you can roll your 401k over into a Traditional IRA. The Traditional IRA is similar to the 401k but you have a bigger choice of funds and don't get messed up if your company changes the the 401k managers. You control the IRA. You must make it a direct rollover, otherwise they withhold taxes from the amount being transferred. Suppose you wanted to rollover $10,000, with direct rollover the whole amount goes from one institution to the other. If you have the money sent to you, they withhold $2,000 for taxes, and send you $8,000. To put $10,000 into the IRA, you have to add $2,000 from somewhere else to make it up to the full amount. you get the withheld money back when you file for your taxes. If you don't make up the $2000, you have to pay taxes on it plus a 10% penalty for early withdrawal

You can roll some of the Traditional IRA over into a Roth IRA if you pay the tax on the money transferred. This would be the thing to do if you go back to the UK when your American tax rate and earnings are minimal.

Elvira

Thanks a bunch, Michael - very informative! But could you qualify the above: does this apply only if one becomes a USC, or remains in the US as a LPR, OR could one still get both pensions if one does not naturalise and returns to the UK?

Bob

Either to get the pension, but they only send the money abroad if your a USC, otherwise you have to be residing in the US to collect it.

Giantaxe

A defined-contribution pension plan to be exact.