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Options for investments (IRA, 401k etc)

Options for investments (IRA, 401k etc)

Old May 20th 2020, 4:48 am
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Default Options for investments (IRA, 401k etc)

Hey all,
I've been in the US for nearly 2 and a half years and I'm pretty chuffed that my company has agreed to sponsor me for a green card, and we have already gotten past the first couple steps.
Now I'm in a somewhat difficult situation that I have still not fully considered this move to be permanent, and figuring out how best to invest my money has proven to be a bit tough.
By permanent, I mean, I can see myself being here for a few years but beyond that, I really don't know yet.

I currently have contributions (5%) being made to my 401k as my employer matches with those contributions being made available immediately (don't have to wait x years with employer etc).
My salary is around $100,000-$110,000 with minimal bonuses/commission etcs, so I have been considering an IRA account.
I have also been considering starting up some contributions to index funds (Vanguard etc).
I'm single, no debt, and not really planning on any big purchases any time soon... as honestly I'm not even sure if I want to stay in my current city, let alone even successfully get this green card.

I have a couple questions:
1) is there any consequence to me opening and contributing to an IRA account when I might leave the US in a couple years (maybe even within a year if I don't successfully get a green card?)
2) is there any consequence to me opening index funds and then moving back to the UK? I believe UK does not tax on global income, so I should be okay on any profits on my 401k/index fund contributions.
3) is... there anything else I should consider? I've honestly struggled finding information for this scenario - where an individual would like to invest but the certainty of remaining in the US is still somewhat... undetermined.

From my understanding, it seems that I would do best opening the index funds for now until my situation has become more stable, and then consider things like further 401k contributions or opening an IRA.

Any thoughts, research material etc would be great.
Please let me know if I've forgotten any useful info.
Thanks in advance!

Last edited by lylat; May 20th 2020 at 4:54 am.
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Old May 20th 2020, 11:45 am
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Default Re: Options for investments (IRA, 401k etc)

One thing to note is that you do pay capital gains tax on overseas assets when a UK resident.

You might also owe it in the US, especially if you take US Citizenship before returning to the UK.
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Old May 20th 2020, 2:59 pm
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Default Re: Options for investments (IRA, 401k etc)

Originally Posted by lylat View Post
..... 2) is there any consequence to me opening index funds and then moving back to the UK? I believe UK does not tax on global income, so I should be okay on any profits on my 401k/index fund contributions. .....
You're a bit confused here - the UK does tax on global income, but a 401K is analogous to a private pension, so income and gains within a 401K would not be taxed in the UK (if you returned there), at least not until you retire and start drawing from it.
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Old May 20th 2020, 4:35 pm
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Default Re: Options for investments (IRA, 401k etc)

Originally Posted by Pulaski View Post
You're a bit confused here - the UK does tax on global income, but a 401K is analogous to a private pension, so income and gains within a 401K would not be taxed in the UK (if you returned there), at least not until you retire and start drawing from it.
That's good to know, I did get confused a bit. It is dependent on tax residency, as opposed to the US, where if you are a citizen all income is taxed globally regardless of residency.

I guess I wanted to try and avoid having to complete 2 tax returns if I leave the US.
With the index fund investing I could just withdraw or move my money, with an IRA etc I would have penalties for withdrawing etc.
I'm leaning towards just investing some in these index funds and then look at the IRA contribution for 2020. I realised my income (due to a bunch of social security repayments being made by my company on my behalf and relocation expenses etc) that my income is above the limit for IRA in 2019.
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Old May 20th 2020, 4:36 pm
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Default Re: Options for investments (IRA, 401k etc)

Originally Posted by civilservant View Post
One thing to note is that you do pay capital gains tax on overseas assets when a UK resident.

You might also owe it in the US, especially if you take US Citizenship before returning to the UK.
Yes good point, for this reason alone I doubt I'll be getting US citizenship any time soon, if at all, even if I decide to stay for the duration of my green card.
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Old May 20th 2020, 5:28 pm
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Default Re: Options for investments (IRA, 401k etc)

Originally Posted by lylat View Post
Yes good point, for this reason alone I doubt I'll be getting US citizenship any time soon, if at all, even if I decide to stay for the duration of my green card.
If you plan to go back to the UK, or even if not, look at the next tread down about making NI contributions in the UK. If you get approved it is about GBP150 a year to get credit for a full year. Class 2 is much lower than the voluntary class 3. At present about GBP3 a week vs GBP15.

Last edited by tht; May 20th 2020 at 5:32 pm.
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Old May 26th 2020, 12:20 am
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Default Re: Options for investments (IRA, 401k etc)

Originally Posted by tht View Post
If you plan to go back to the UK, or even if not, look at the next tread down about making NI contributions in the UK. If you get approved it is about GBP150 a year to get credit for a full year. Class 2 is much lower than the voluntary class 3. At present about GBP3 a week vs GBP15.
Yup! Currently doing this to make sure I don't have any gaps whilst I decide on what to do in the future. Luckily my company was willing to cover these expenses for the first couple years.
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