elifflower

Hi all,

I've read many threads here about IRA withdrawals for Brits returning to the UK for retirement after working in the US for a period of time, but not much about continuing contributions when they are in pre-retirement age.
Can you still make contributions into your IRA as usual up to the yearly limit if you move back to the UK before retirement age? With UK earned income?

I'm curious for myself as I'm in my early thirties and may be considering a move back to the UK in the next 1-2 years, and would like to contribute until retirement age!

Thank you.

(Ps, TY Durham Lad for your reply to my original post about this in the incorrect forum)

Glasgow Girl

You can only contribute to an IRA if you have earned income that is subject to IRS taxes. If you are a US citizen and therefore subject to IRS taxes on all of your worldwide income and have earned income left over after taking the Foreign Earned Income Exclusion or Foreign Tax Credit then you can continue to contribute. If you are not a US citizen and not residing in the US then you have no earned income subject to IRS taxes and you can no longer contribute. If you are not a US citizen I am not sure why you would want to do so since there are no tax advantages and some disadvantages (like you are subject to early withdrawal penalties if you access the funds before age 59 and 1/2). You would be better off saving in some other vehicle in the UK. As a non US citizen you can keep your IRA until you want to access it.

Whenever you access the funds you are subject to taxes on that income. I believe that if you take it all as a lump sum then the US taxes it, but if you take as a series of roughly equal payments (something that looks like an annuity) then the UK taxes it, but the point is that it is taxed by someone. There are others on this forum who are in that situation and can advise better than me on the taxes due on withdrawal.

durham_lad

The only thing I will add to GC’s post is that after my son, in his 30’s and a USC, returned to the UK to live and work he converted all his IRA money to a Roth IRA in a lump sum conversion. He only paid US taxes on the conversion and now it will grow for many years, ready to be taken completely tax free in both countries when he is over age 59.5.

cautiousjon

If you are / become a dual US and UK citizen and live in the UK, you should be aware that you might need to rearrange your IRA investments before you move to the UK, particularly if you've investmented in mutual funds or ETFs, for example.

durham_lad

I looked at the article you included and can not find the section you quoted.

https://partnerswealthmanagement.co....ing-in-the-uk/


From my experience living as a USC in England I have found the following.

1. IRAs are treated similarly in both countries. It does not matter the types of investment - mutual funds or ETFs as they inside a "pension wrapper" and are only taxed once distributions are made. Distributions are all taxed as regular income by the IRS and HMRC.

2. Investments outside of retirement accounts as taxable investments are tricky.
If you choose investment funds that are "HMRC Reporting" then HMRC will tax them favorably as regards dividends and capital gains.
Unless you buy individual stocks and bonds the IRS will treat all UK investment funds as PFIC's and tax them punitively.

3. Before leaving the USA make sure your US investments, including retirement accounts, are in a US Brokerage that supports overseas customers. For example my wife, son and I rolled our company pension plans (401ks in our case) into IRAs at a brokerage that supports overseas customers.