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Left US what to do with my 401k

Left US what to do with my 401k

Old Oct 7th 2019, 2:44 pm
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Default Left US what to do with my 401k

I recently quit my job and have left the the US. I accumulated a small amount through work-based 401k plan, and now that i left I have the option to take the vested amount out in cash but this is subject to a 20% federal withholding as well as a 10% IRS early penalty withdrawal fee. As I currently do not plan to return to live in the US, it makes no sense for me to keep the funds there. However, i was wondering if anyone else a similar situation and can share their input on whether there are any alternative options to explore? Thank you!
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Old Oct 7th 2019, 2:51 pm
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Default Re: Left US what to do with my 401k

What's the harm in keeping it there until you are old enough to withdraw it without the penalty?

I have no plans to return to the UK and that's pretty much what I'm doing with my private pensions there.
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Old Oct 7th 2019, 3:08 pm
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Default Re: Left US what to do with my 401k

Originally Posted by TexanScot View Post
What's the harm in keeping it there until you are old enough to withdraw it without the penalty?

I have no plans to return to the UK and that's pretty much what I'm doing with my private pensions there.
I agree.

When we moved to Texas we left my pensions alone, and we retained a UK bank account. I was able to start drawing one of my 2 UK pensions while still living in the USA, no problem.

When we moved back to the UK after 29 years we kept our retirement accounts in the USA, although we did move both of our 401k's into IRAs, in a brokerage that is good at supporting overseas customers. I manage our IRA's just fine from England including penalty free withdrawals now that we are both in our 60's.
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Old Oct 7th 2019, 3:14 pm
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Default Re: Left US what to do with my 401k

Thanks for the response. I do not wish to deal with it and possibly have to make additional filings for a pot of less than $10k. Seems like quite a hassle if I would need to do so.
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Old Oct 7th 2019, 4:13 pm
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Default Re: Left US what to do with my 401k

Should you take a lump-sum it is taxable in the US, so you would report the payment on a US tax return. Tax withheld is not the final tax.
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Old Oct 8th 2019, 4:38 pm
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Default Re: Left US what to do with my 401k

I've been searching for something similar and this thread looks like just the ticket! I'm a UK citizen returning to the UK after 2.5 years in the US, and during that time have accumulated a 401K, as has my wife. We're going to move it over into an IRA. Everything I have read says this is the most sensible option rather than cashing it in. We are however, nowhere near retirement age.

Can anyone answer the following:
  • If you are a standard PAYE taxpayer, do you need to move to self assessment and somehow declare this IRA each year until withdrawl time?
  • What brokers are friendly? I've been using Fidelity for an IRA but they have changed their rules where those living abroad can't buy or sell mutual funds now!
Thanks.
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Old Oct 8th 2019, 7:40 pm
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Default Re: Left US what to do with my 401k

Originally Posted by untruth View Post
I've been searching for something similar and this thread looks like just the ticket! I'm a UK citizen returning to the UK after 2.5 years in the US, and during that time have accumulated a 401K, as has my wife. We're going to move it over into an IRA. Everything I have read says this is the most sensible option rather than cashing it in. We are however, nowhere near retirement age.

Can anyone answer the following:
  • If you are a standard PAYE taxpayer, do you need to move to self assessment and somehow declare this IRA each year until withdrawl time?
  • What brokers are friendly? I've been using Fidelity for an IRA but they have changed their rules where those living abroad can't buy or sell mutual funds now!
Thanks.
My wife and I rolled our 401k’s to IRA’s. My wife to Fidelity, me to Vanguard. Before moving back to England we decided that Vanguard deals with overseas customers better than Fidelity so my wife rolled her IRA to an IRA in Vanguard.

while the IRA’s are sitting and growing they do not need to be reported to HMRC. They only need to be reported to HMRC on a self assessment once distributions are made. Our son, in his 30’s, did the same with his 401k but converted it to a Roth IRA at the same time, paying US taxes on it. It will grow tax free until he can withdraw without penalty tax free and since it is also tax free in the UK he won’t need to do a self assessment even then.
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Old Oct 8th 2019, 7:49 pm
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Default Re: Left US what to do with my 401k

Originally Posted by durham_lad View Post


My wife and I rolled our 401k’s to IRA’s. My wife to Fidelity, me to Vanguard. Before moving back to England we decided that Vanguard deals with overseas customers better than Fidelity so my wife rolled her IRA to an IRA in Vanguard.

while the IRA’s are sitting and growing they do not need to be reported to HMRC. They only need to be reported to HMRC on a self assessment once distributions are made. Our son, in his 30’s, did the same with his 401k but converted it to a Roth IRA at the same time, paying US taxes on it. It will grow tax free until he can withdraw without penalty tax free and since it is also tax free in the UK he won’t need to do a self assessment even then.
Thank you, that could not be a more helpful reply. I have looked at the Roth IRA route and will consider it with my accountant, although my feelings are that the generous tax free allowance (on income, or on pensions) in the UK greatly benefits even an IRA on withdrawal as it is, unless you're planning to be very, very rich when you're older?

Why did you find Vanguard was OK vs Fidelity? I was under (maybe a misunderstanding) that both have similar restrictions on usage of mutual funds (aka you can't use them) for people who move overseas? I've found that we could use Fidelity with ETFs (but not Mutual funds), which seems an OK compromise, but I'd happily use something a bit more... flexible. Did you just set up a Vanguard account in the US as normal and then continue to trade within that account after you moved to the UK?
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Old Oct 8th 2019, 7:59 pm
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Default Re: Left US what to do with my 401k

Originally Posted by untruth View Post
Thank you, that could not be a more helpful reply. I have looked at the Roth IRA route and will consider it with my accountant, although my feelings are that the generous tax free allowance (on income, or on pensions) in the UK greatly benefits even an IRA on withdrawal as it is, unless you're planning to be very, very rich when you're older?

Why did you find Vanguard was OK vs Fidelity? I was under (maybe a misunderstanding) that both have similar restrictions on usage of mutual funds (aka you can't use them) for people who move overseas? I've found that we could use Fidelity with ETFs (but not Mutual funds), which seems an OK compromise, but I'd happily use something a bit more... flexible. Did you just set up a Vanguard account in the US as normal and then continue to trade within that account after you moved to the UK?
We had both held Fidelity and Vanguard accounts for many years. When we were preparing to move back to the UK Vanguard seemed much more amenable to serving overseas customers than Fidelity. I can’t remember the details as it was 4 years ago and things may have changed.

My US pensions and very favorable exchange rate plus with OAP and SS to come soon puts me in the 40% UK tax bracket. I did IRA to Roth conversions over a number of years paying around 16 - 17% US tax and now have only a Roth, which I have already started taking distributions from, tax free in both countries. My wife is in the 20% UK bracket and likely to stay there so her figures look quite different for Roth conversions.
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Old Oct 8th 2019, 8:01 pm
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Default Re: Left US what to do with my 401k

Thanks, all excellent help.
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Old Oct 10th 2019, 11:07 pm
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Default Re: Left US what to do with my 401k

It's probably a long shot but see this article: https://wtop.com/news/2018/11/11-way...rawal-penalty/

Specifically, this part:

Set up an annuity.
IRA withdrawals taken as a series of annuity payments are not subject to the early withdrawal penalty. The use of an IRS-approved distribution method and at least one withdrawal annually are required to avoid the penalty. The payments are calculated based on your life expectancy or the joint life expectancies of you and your beneficiary, and generally require professional assistance to calculate. If you don’t consistently withdraw the correct amount over the appropriate number of years, penalties could be applied.
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Old Oct 10th 2019, 11:11 pm
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Default Re: Left US what to do with my 401k

Originally Posted by untruth View Post
...

Why did you find Vanguard was OK vs Fidelity? I was under (maybe a misunderstanding) that both have similar restrictions on usage of mutual funds (aka you can't use them) for people who move overseas? I've found that we could use Fidelity with ETFs (but not Mutual funds), which seems an OK compromise, but I'd happily use something a bit more... flexible. Did you just set up a Vanguard account in the US as normal and then continue to trade within that account after you moved to the UK?
Originally Posted by durham_lad View Post

We had both held Fidelity and Vanguard accounts for many years. When we were preparing to move back to the UK Vanguard seemed much more amenable to serving overseas customers than Fidelity. I can’t remember the details as it was 4 years ago and things may have changed.
...
So Durham_Lad, can you trade MF's in your Vanguard account from the UK?
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Old Oct 10th 2019, 11:57 pm
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Default Re: Left US what to do with my 401k

I've just set up a Vanguard for both myself and my wife before we leave because I can find any terms prohibiting dealing with funds abroad, whereas Fidelity put an official notice about it [I can't link to a URL but it's a document called "Investors who reside outside the United States"]

Sure, I can keep my Fidelity too but I am limited to ETFs. I can't find anything in the terms for Vanguard saying you can't work with Mutuals.
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Old Oct 11th 2019, 7:49 am
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Default Re: Left US what to do with my 401k

Originally Posted by Steerpike View Post
So Durham_Lad, can you trade MF's in your Vanguard account from the UK?
My MF’s are in my IRA and I trade them at least once a year as I have an AA that I want to maintain so I rebalance annually.

My ETF’s are in my after tax account and I take distributions from the dividends every quarter plus sell shares as needed.
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