hfrix

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!

TexanScot

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.

durham_lad

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.

hfrix

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.

Cook_County

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.

untruth

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.

durham_lad

untruth

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?

durham_lad

untruth

Thanks, all excellent help.

Steerpike

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

Specifically, this part:

Steerpike

So Durham_Lad, can you trade MF's in your Vanguard account from the UK?

untruth

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.

durham_lad