Go Back  British Expats > Living & Moving Abroad > USA
Reload this Page >

To 401k or not 401k

To 401k or not 401k

Old May 30th 2017, 11:46 pm
  #1  
BE Enthusiast
Thread Starter
 
Joined: Jan 2017
Posts: 669
LouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond repute
Default To 401k or not 401k

Hey so now things are settling down over here I'm wondering about this.

Work HR system reminds me about all the benefits including 401k which I've not enrolled in just yet.

Think it's a fairly standard scheme where they match contributions, to a point.

I've a reasonable UK pension pot also, now frozen of course.

Is it worth paying into a 401k? Even if at this stage I've no idea where I would retire? I know you can withdraw from 401k with 10% cost for early withdraw. Seems to me with a employer matching scheme unless I got taxed 50% or more I'd still be better off taking advantage of it. Especially while my UK pension is frozen.

Thoughts?
LouisB is offline  
Old May 30th 2017, 11:49 pm
  #2  
Lt Col (Retd)
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 47,736
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: To 401k or not 401k

Yes get yourself a 401K. I am not aware of any downside. Full stop.
Pulaski is offline  
Old May 30th 2017, 11:53 pm
  #3  
BE Enthusiast
Thread Starter
 
Joined: Jan 2017
Posts: 669
LouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by Pulaski View Post
Yes get yourself a 401K. I am not aware of any downside. Full stop.
Thank you, always the voice of reason

BTW there's a Pulaski bridge just around the corner 🤔

If I may hijack my own thread also about HSA (health care savings?) - I'm a bit lost on health care. I've enrolled in what seems to be a decent but basic plan.

I also have some sort of health savings pot, currently set to $0, is that something everyone also contributes too? If you don't use it, is it lost?

Last edited by LouisB; May 31st 2017 at 12:38 am.
LouisB is offline  
Old May 31st 2017, 12:26 am
  #4  
BE Forum Addict
 
tom169's Avatar
 
Joined: Mar 2015
Location: NC, USA (ex Yorkshire)
Posts: 4,021
tom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond repute
Default Re: To 401k or not 401k

401K:
Definitely get this and take full advantage of any level of employer match. If offered you may want to look into a Roth 401K as apposed to traditional.

HSA:
This is a triple tax advantaged account (if you pay for qualified medical expenses). Your money goes in tax free, it can be invested and gain tax free, it can be spent tax free (on qualified expenses).

I would recommend having enough money in a HSA to cover at least a year of healthcare (deductables, max oop etc).

Your employer may also match or fund this account too!
tom169 is offline  
Old May 31st 2017, 12:37 am
  #5  
BE Enthusiast
Thread Starter
 
Joined: Jan 2017
Posts: 669
LouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by tom169 View Post
401K:
Definitely get this and take full advantage of any level of employer match. If offered you may want to look into a Roth 401K as apposed to traditional.

HSA:
This is a triple tax advantaged account (if you pay for qualified medical expenses). Your money goes in tax free, it can be invested and gain tax free, it can be spent tax free (on qualified expenses).

I would recommend having enough money in a HSA to cover at least a year of healthcare (deductables, max oop etc).

Your employer may also match or fund this account too!
Great, thank you. I've literally no idea what a year of max deductibles is, how could I figure it out?

I've just signed up for tax free metro card offer too, seems all these benefits do add up, definitely worth while.
LouisB is offline  
Old May 31st 2017, 12:39 am
  #6  
Lt Col (Retd)
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 47,736
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by tom169 View Post
.... HSA:
This is a triple tax advantaged account (if you pay for qualified medical expenses). Your money goes in tax free, it can be invested and gain tax free, it can be spent tax free (on qualified expenses).
You can only get an HSA if you have high deductible medical insurance. I am a huge fan of HD medical insurance and makes sense under most circumstances so long as your health is average or better.
Pulaski is offline  
Old May 31st 2017, 12:41 am
  #7  
BE Enthusiast
Thread Starter
 
Joined: Jan 2017
Posts: 669
LouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by Pulaski View Post
You can only get an HSA if you have high deductible medical insurance. I am a huge fan of HD medical insurance and makes sense under most circumstances so long as your health is average or better.
I'm a bit lost as to what that means, guess I'd better get reading. HSA was one of the options on the benefits website as available, but to be honest I didn't know what I was looking at 🤦‍♂️😳
LouisB is offline  
Old May 31st 2017, 12:41 am
  #8  
BE Forum Addict
 
tom169's Avatar
 
Joined: Mar 2015
Location: NC, USA (ex Yorkshire)
Posts: 4,021
tom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by LouisB View Post
Great, thank you. I've literally no idea what a year of max deductibles is, how could I figure it out?

I've just signed up for tax free metro card offer too, seems all these benefits do add up, definitely worth while.
Consult your plan information (HR should provide this). As Pulaski says, to have a HSA you need to have a qualifying plan.

HSAs balances do not expire and you can keep them for life, other plans not so much.

Not sure what tax free metro card is.
tom169 is offline  
Old May 31st 2017, 12:46 am
  #9  
BE Enthusiast
Thread Starter
 
Joined: Jan 2017
Posts: 669
LouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond reputeLouisB has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by tom169 View Post
Consult your plan information (HR should provide this). As Pulaski says, to have a HSA you need to have a qualifying plan.

HSAs balances do not expire and you can keep them for life, other plans not so much.

Not sure what tax free metro card is.
Looks like I had choice of either, I picked non HSA think I can change it later. Didn't know the difference. Will try get some specifics on it.

Ah the metro card thing was just another little perk, pay for metro out of tax free gross earnings, useful.
LouisB is offline  
Old May 31st 2017, 1:14 am
  #10  
Lt Col (Retd)
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 47,736
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by LouisB View Post
Looks like I had choice of either, I picked non HSA think I can change it later. Didn't know the difference. Will try get some specifics on it.

Ah the metro card thing was just another little perk, pay for metro out of tax free gross earnings, useful.
You may find yourself locked in to your choice until the year end, unless you have a qualifying event such as marriage, divorce, birth of a child, spouse changing job, etc. Somewhere around November your employer will have "open enrollment" when you sign up of health insurance and various other benefit options for the following year. Anyhow, here is a primer on health insurance that I posted previously:

Health insurance is a massively complex issue, but fundamentally depends on what sort of insurance policies your employer subsidizes. .... Bear in mind that 94% of employers with shares on the stock exchange "self insure", meaning they determine the premiums, and pay out for treatment, and only use a health insurance company to manage the scheme. ..... I will guarantee that this is news to a large majority of people in the US covered through their employer's health insurance as they think they are being insured by whoever is managing the scheme!

For someone coming from the UK with health care provided by the NHS, what I am about to say may be shocking, and probably counter-intuitive: you will likely be better off choosing insurance with a relatively low premium and a high deductible (UK speak: "excess") - look for a "high deductible" plan, and then paying for your basic healthcare yourself. You can do this using a "health savings account" (HSA) which works a bit like a private pension - you can fund it using pretax income, and your employer will probably chip-in some money too, then draw funds at any time for legitimate healthcare expenses.

Preventive treatments, such as vaccinations, and screenings, including an annual physical are free, paid for by your insurance(that is required under US law), but the cost of occasional trips to the doctor and prescriptions such as antibiotics and other commonly prescribed drugs, will cost you less over all if YOU pay for them rather than if you pay a higher premium for insurance with a low deductible, which may still be $500-$1,000.

What pushed us over to HD insurance was realizing that we used so little medical services that we weren't even exceeding the LOW deductible! What we realized was that we were paying high premiums and receiving no benefit from them!

If you don't use the funds in your HSA they roll up year on year. The aggregate balances in the HSA's that my wife and I have are very substantial, and as we continue to fund them each year to the maximum allowed by the IRS, they will likely provide a very useful cushion for medical expenses in our retirement.
Here's another:

For cost effective and tax efficient health insurance more and more people are realizing that "high deductible" (HD) insurance combined with a "Health Savings Account" (HSA) is the best choice. The HSA works like a private pension - you put "before tax" money into it, and then you can use it for medical expenses and if you don't use it then you have it for future years. The thing is, with HD insurance you pay the first, typically, about $2,500-$3,000 per person of medical expenses, so if all three of your family members ALL got injured (broken bones), or need other expensive treatment IN THE SAME YEAR, then you could end up using all your $6,800 maximum contribution to your HSA.

But if you are generally low-moderate users of medical services, then after the first year you will have your brought forward HSA balance, and it can roll up remarkably quickly - after seven years my HSA balance is a long way into five figures, so given that in the worst case scenario when my wife, my daughter, and me ALL get seriously sick or injured the insurance picks up everything after about $8,500, I am unlikely to ever have to worry about medical expenses.

FWIW a colleague of mine switched to HD/HSA and swears it was the best decision for him and his family despite one of his four children breaking an arm in the first six months on HD insurance. Another colleague with three children thinks the same despite having three children, two of whom are boys who play sports and get their share of bumps and bruises.

Last edited by Pulaski; May 31st 2017 at 1:22 am.
Pulaski is offline  
Old May 31st 2017, 7:15 am
  #11  
Aoi
Forum Regular
 
Joined: Jun 2015
Posts: 42
Aoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond reputeAoi has a reputation beyond repute
Default Re: To 401k or not 401k

And open a Roth IRA so that you have the option of rollover from the 401k to the Roth IRA after leaving the US.
Aoi is offline  
Old May 31st 2017, 10:51 am
  #12  
BE Forum Addict
 
tom169's Avatar
 
Joined: Mar 2015
Location: NC, USA (ex Yorkshire)
Posts: 4,021
tom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond reputetom169 has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by Aoi View Post
And open a Roth IRA so that you have the option of rollover from the 401k to the Roth IRA after leaving the US.
Do check into the income limits before opening an IRA. Otherwise I agree.
tom169 is offline  
Old May 31st 2017, 2:19 pm
  #13  
BE Forum Addict
 
Owen778's Avatar
 
Joined: Jan 2014
Location: Anchorage, AK, USA
Posts: 1,292
Owen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by Pulaski View Post
Yes get yourself a 401K. I am not aware of any downside. Full stop.
I agree.

Though the possible downside is high fees and limited investment choices in some 401ks. But even then, it's probably worthwhile.
Owen778 is offline  
Old May 31st 2017, 2:21 pm
  #14  
BE Forum Addict
 
Owen778's Avatar
 
Joined: Jan 2014
Location: Anchorage, AK, USA
Posts: 1,292
Owen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond reputeOwen778 has a reputation beyond repute
Default Re: To 401k or not 401k

Originally Posted by Aoi View Post
And open a Roth IRA so that you have the option of rollover from the 401k to the Roth IRA after leaving the US.
While this is probably good advice in principle, doing so is not simple. I would not advise someone to do this unless they are willing to do the research to understand how to do the US tax reporting for the rollover. I also don't know if there are UK tax complications if you carry out the rollover while tax-resident in the UK.
Owen778 is offline  
Old May 31st 2017, 7:07 pm
  #15  
i hate cabbage
 
Jack8602's Avatar
 
Joined: Mar 2015
Location: Fort Worth, TX
Posts: 438
Jack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond reputeJack8602 has a reputation beyond repute
Default Re: To 401k or not 401k

Do a 401k, i was in same boat when i moved, and did so.

Also the healthcare confusion - i had the same until i needed to use it.

I have a $1,250 deductible, and my work contributes $500 per year to my HSA pot, i can contribute more to my HSA should i wish.

I recently had to have stitches after a superb landing whilst skydiving, gave my insurance information to the doctors, and they charged my insurance $1,150 - Cigna then 'discounted' this to $210 - that came out of my pot, and then went toward my deductible which i never expected.

Basically i can only spend another $1,040 toward my healthcare this year, after that it's free.

Bear in mind, It's only me on my healthcare plan, i don't have to worry about kids, and the wife has her own plan with her work.
Jack8602 is offline  

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.