New Expat - Saving/Retirement Considerations
#1
Just Joined
Thread Starter
Joined: Sep 2019
Posts: 12
New Expat - Saving/Retirement Considerations
Hi all,
Am new to the expat community, having moved from the UK (London) to the US (NYC) 6 months ago.
As a single, relatively young (28) person, there were very few complications with moving over, however, now that i'm here, increasingly finding myself torn as to how to manage savings & retirement.
A bit of background:
- British Citizen, in the US on an E2 visa
- My employer has a fairly well established track record of sponsorship for Green Card, if that is something I want
- Own 2 properties in the UK, generating rental income (no intention to sell these in the next 5 years)
- Have a UK pension (no longer contributing, but may look to restart contributing)
- Have UK savings, currently earning next to nothing
The crux of my issue ultimately comes down to how to plan for savings/retirement with my USD earnings, given I do not yet know whether I intend to stay in the US long term, or do 3-5 years and then go back to the UK. Appreciate that the answer to this massively impacts the approach.
- If my long term plan is to stay in the US, the answer I imagine is to max out tax efficient savings (401k, IRA, HSA etc) contributions.
- If my plan is to go back to the UK in 3-5 years, take advantage of 401k employer match, but not utilise full 401k, IRA, HSA tax free contributions & take my post tax savings back to the UK and invest/purchase property (Brexit dependent)
Where I could do with some input from yourselves is based on your experiences, is there a middle ground option that gives me the best of both worlds?
For example, fully utilise all tax free savings/retirement contributions & then just let them ride until retirement. How practical an option is this? Assuming I don't need the money any time soon, and I can let it ride to retirement, is that a prudent diversification, or is it an administrative nightmare? Does the administrative reality make a post tax savings retirement plan more realistic?
Has anyone chosen this option, returned to the UK and regretted it?
Any other advice anyone can offer in terms of prudent savings/retirement planning?
Appreciate this reads as a bit of a rambling, brain dump, I guess I'm ultimately looking to hear people's experiences to help shape my thought process.
Thanks
Am new to the expat community, having moved from the UK (London) to the US (NYC) 6 months ago.
As a single, relatively young (28) person, there were very few complications with moving over, however, now that i'm here, increasingly finding myself torn as to how to manage savings & retirement.
A bit of background:
- British Citizen, in the US on an E2 visa
- My employer has a fairly well established track record of sponsorship for Green Card, if that is something I want
- Own 2 properties in the UK, generating rental income (no intention to sell these in the next 5 years)
- Have a UK pension (no longer contributing, but may look to restart contributing)
- Have UK savings, currently earning next to nothing
The crux of my issue ultimately comes down to how to plan for savings/retirement with my USD earnings, given I do not yet know whether I intend to stay in the US long term, or do 3-5 years and then go back to the UK. Appreciate that the answer to this massively impacts the approach.
- If my long term plan is to stay in the US, the answer I imagine is to max out tax efficient savings (401k, IRA, HSA etc) contributions.
- If my plan is to go back to the UK in 3-5 years, take advantage of 401k employer match, but not utilise full 401k, IRA, HSA tax free contributions & take my post tax savings back to the UK and invest/purchase property (Brexit dependent)
Where I could do with some input from yourselves is based on your experiences, is there a middle ground option that gives me the best of both worlds?
For example, fully utilise all tax free savings/retirement contributions & then just let them ride until retirement. How practical an option is this? Assuming I don't need the money any time soon, and I can let it ride to retirement, is that a prudent diversification, or is it an administrative nightmare? Does the administrative reality make a post tax savings retirement plan more realistic?
Has anyone chosen this option, returned to the UK and regretted it?
Any other advice anyone can offer in terms of prudent savings/retirement planning?
Appreciate this reads as a bit of a rambling, brain dump, I guess I'm ultimately looking to hear people's experiences to help shape my thought process.
Thanks
#2
BE Enthusiast
Joined: Mar 2017
Location: Austin, TX
Posts: 455
Re: New Expat - Saving/Retirement Considerations
Once thing to bear in mind is that in most cases, you generally can't access your 401k money without penalty until you hit 59 1/2. I believe this differs from the UK, where you can access your private pension earlier at 55. I no longer pay into my UK pension since there's no advantage to me in doing so, and I plan to liquidate it at 55 or whenever I retire.
Depending on your income you might be hit by the Roth IRA phaseout, so you'll need to look into what's called a "Backdoor Roth IRA" if you want to be particularly aggressive with your retirement planning.
#3
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: New Expat - Saving/Retirement Considerations
That's exactly what I'm doing - there's significant tax advantages in contributing to a 401k, and the money will always be there for me when I retire, wherever that is.
Once thing to bear in mind is that in most cases, you generally can't access your 401k money without penalty until you hit 59 1/2. I believe this differs from the UK, where you can access your private pension earlier at 55. I no longer pay into my UK pension since there's no advantage to me in doing so, and I plan to liquidate it at 55 or whenever I retire.
Depending on your income you might be hit by the Roth IRA phaseout, so you'll need to look into what's called a "Backdoor Roth IRA" if you want to be particularly aggressive with your retirement planning.
Once thing to bear in mind is that in most cases, you generally can't access your 401k money without penalty until you hit 59 1/2. I believe this differs from the UK, where you can access your private pension earlier at 55. I no longer pay into my UK pension since there's no advantage to me in doing so, and I plan to liquidate it at 55 or whenever I retire.
Depending on your income you might be hit by the Roth IRA phaseout, so you'll need to look into what's called a "Backdoor Roth IRA" if you want to be particularly aggressive with your retirement planning.
I came over on an E2 visa at age 32 expecting to stay 3 to 5 years but ended up staying with that company until I retired at 55.
There have been few, if any, downsides to saving in a 401k, I would say it is a must to contribute at least up to the company match otherwise you are just leaving money on the table.
401k’s can be difficult if not impossible to manage once a move back to the UK has happened so when we decided to move back we rolled our 401ks over to IRAs (a tax free event) with a brokerage that allows overseas customers. (My wife also had a 401k).
The UK recognizes US retirement accounts including Roth IRAs which are also tax free when making withdrawals.
#4
Just Joined
Joined: Jul 2019
Posts: 2
Re: New Expat - Saving/Retirement Considerations
I agree with this advice.
I came over on an E2 visa at age 32 expecting to stay 3 to 5 years but ended up staying with that company until I retired at 55.
There have been few, if any, downsides to saving in a 401k, I would say it is a must to contribute at least up to the company match otherwise you are just leaving money on the table.
401k’s can be difficult if not impossible to manage once a move back to the UK has happened so when we decided to move back we rolled our 401ks over to IRAs (a tax free event) with a brokerage that allows overseas customers. (My wife also had a 401k).
The UK recognizes US retirement accounts including Roth IRAs which are also tax free when making withdrawals.
Hi Durham Lad,
Tagging onto the post above, I moved over the pond to Texas from UK (Co.Durham) last year and have been contemplating a pension in the USA or the like.
Right now I'm unsure as you were back then on duration of my stay in the states. The company I work for do not contribute to my 401k and I have been weighing up a 401k vs an IRA recently. I'm going to do some more reading into this and the implications of converting a 401k over to a IRAs as you did.
Any pointers on this would be very helpful!
Cheers,
Callum
#5
Re: New Expat - Saving/Retirement Considerations
It's generally prudent to do a direct 401k to IRA transfer whenever you leave an employer. Often there is more selection and likely lower fees.
#6
Re: New Expat - Saving/Retirement Considerations
Funds in a 401K are also semi-accessible through a loan, which most employers allow. While I don't recommend that a loan from your 401K is a good idea, it is a possibility (subject to restrictions and a capped amount - I believe that 50% of the value or $50k, whichever is less and a maximum term of 5 years is typical, or 30 years if used to purchase a home) and can make sense under some circumstances.
#7
BE Enthusiast
Joined: Mar 2017
Location: Austin, TX
Posts: 455
Re: New Expat - Saving/Retirement Considerations
I did debate tapping my 401k to help with my house downpayment, although after the way the markets have performed over the last 12 months I'm extremely glad that I decided against it in the end.
#8
Re: New Expat - Saving/Retirement Considerations
Good. It's one of the worst financial decisions in my opinion - unless you're avoiding something like a foreclosure. You're tied to your employer once you take it, as if you leave your job (through your own decision or not) you have to repay it in full fairly quickly or take it as an early distribution (with penalties / tax implications).
#9
Re: New Expat - Saving/Retirement Considerations
#10
Re: New Expat - Saving/Retirement Considerations
While you're an employee, yes, but that can change when you leave your employer, leaving you locked into a very limited range of investments and potentially getting charged management fees that you could otherwise avoid. Hence the general advice to take your 401k with you when you leave an employer.
#11
Re: New Expat - Saving/Retirement Considerations
While you're an employee, yes, but that can change when you leave your employer, leaving you locked into a very limited range of investments and potentially getting charged management fees that you could otherwise avoid. Hence the general advice to take your 401k with you when you leave an employer.
I tried to find out what proportion of 401ks charge additional employee fees, but all I could find was a statement from a survey funded by TD Ameritrade, that "95% of 401k participants pay fees". Since this includes any mutual fund or ETF expense ratios, this is not a helpful statement. I'm guessing most of the remaining 5% misunderstood the the question.
#12
Re: New Expat - Saving/Retirement Considerations
Similarly, you will likely have access to funds with lower management fees than the restricted number of funds you can choose from within a 401K, not that your ex-employer will charge higher fees after you leave.
... I'm guessing most of the remaining 5% misunderstood the the question.
#13
Re: New Expat - Saving/Retirement Considerations
You have inverted what I said, or at least inverted what I think I said - you will have considerably more choices of funds if you pull your investments out of a 401K when you leave your employer, not that that the employer will (further) restrict your choices after you leave.
Similarly, you will likely have access to funds with lower management fees than the restricted number of funds you can choose from within a 401K, not that your ex-employer will charge higher fees after you leave.
Similarly, you will likely have access to funds with lower management fees than the restricted number of funds you can choose from within a 401K, not that your ex-employer will charge higher fees after you leave.
That is ironic.
#14
Re: New Expat - Saving/Retirement Considerations
You have that choice in IRAs too. And there are rather more choices of low cost index funds "out there" than an employer's 401K offers - I only have seven equity index funds to choose from, five of which are US domestic, and two of which are "global".
#15
Re: New Expat - Saving/Retirement Considerations