Hi, I will be moving abroad and leaving my full time job in the US in a next month or so. I have a employer sponsored 401k through which I have contributed over the years (and also the employer matched a small amount). After I leave the employer I know no money is going to go into this 401k account, should I just leave the account as is or do I need to close it and roll over my balance to another account?
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What does your company allow? Some companies force you to transfer it to your new employer's 401K (if applicable), have it converted to an IRA, or take a distribution. Other companies allow you to keep it in the 401K account.
Are you a U.S. citizen? If you have been a U.S. resident for tax purposes, will you keep that status (for example, by having a green card)? Will you be out of the U.S. when you are retired?
If there is another country involved here, you need to understand how that country will tax your 401(k) or an IRA, and how that might be affected by a tax treaty.
This stuff is complicated enough without having competing national rules to deal with. Good luck OP.
I'm sure the expects here need more details to help out, but I would think if you're leaving the US for good and not subject to further US taxation, pull it out, take the 10% (hopefully yoru employer put in more then 10% to ofset this), take it home and deal with local taxes as you need to on the money.
This may not be the best stragety to keep as much money as possible, but it sure is the easiest. If its a lot of money, you're going to have to really watch for US income taxes as well.
scrouds said:This stuff is complicated enough without having competing national rules to deal with. Good luck OP.
I'm sure the expects here need more details to help out, but I would think if you're leaving the US for good and not subject to further US taxation, pull it out, take the 10% (hopefully yoru employer put in more then 10% to ofset this), take it home and deal with local taxes as you need to on the money.
This may not be the best stragety to keep as much money as possible, but it sure is the easiest. If its a lot of money, you're going to have to really watch for US income taxes as well.
If you take out whole of 401K now, then u will be charged 10% penalty + fed/state taxes. I think, why not take out only 20K per year (whatever amt is under zero tax bracket) and only pay 10% penalty.
Wow, I did not know it's this difficult. I am a US Citizen and am going to the UK to live and work for a couple of years. I am 29 so I have no interest in taking that money out and I will most likely be back in the US for work or whatever some time before I retire. I would like the money to stay there in some account gaining (or losing) value for the purposes of retirement way down the line.
I understand that I will have to continue to file taxes in the US for some time because of my assets any any foreign income over a certain amount (I think over 75K but need to double check). I am not sure why I have to worry about UK taxing my US 401k or my assets here, but I guess I will find out once I get there.
I think I should either: 1. Keep it in my current plan (if the administrator let's me) 2. Roll it into an IRA plan with a brokerage house (I have Schwab investor account open but don't really use it) 3. Roll it into a Roth IRA (someone advised me to this but I am not sure if it's worthwhile, i.e. pay taxes now versus when you retire)
What do you think? I'm ways off retirement I just don't want to do something stupid and pay hefty fees right now.
Message edited by: pred02 on 2009-11-02 11:45:37 CST
Since you're planning on coming back to the U.S. Roll it over to a Vanguard, Schwab, or Scottrade. Check to see if you can transfer in kind, so you can keep the funds you already own (you might have to do the fund selection all over again if your 401k plan forces you to liquidate and transfer out. Most company uses 3rd party 401k administration programs which charges a fee anywhere from 25-100 bps depending on assets, and that is on top of the management fees you're already paying to the funds. So the most efficient way will be to roll it over.
Yeah in that case, roll over, keep it in US, and enjoy.
2008 foreign income tax exclusion is $87,600. What you want to do is roll over to a regular IRA, then roll a certain $ amount over to Roth. The amount you roll over will equal whatever US income you can claim for free.
Assuming you are single, have no other deductions, would claim the standard deduction, would not exceed $87,600 in foreign income, and have no other source of US income, then you would want to pay as much tax on your roth rollover to make it equal to standard deduction, which for 2009 is $5700 (according to about.com, google yourself to verify). Therefore you can move up to $5700 tax free to roth to avoid future income tax.
You can also moe $8350 if you don't mind paying 10% income tax on that amount. Its a decent deal, depending on how much you plan to pay in taxes on retirement.
I'll be moving to the UK next year, so I've been gradually looking into this. I'm pretty sure that there is a treaty between the US/UK dealing with pensions/retirement accounts. If I understand it correctly (I am not an accountant), then untapped IRAs are not taxed. It looks as if you are only there for a couple of years, so I would just roll it over to an IRA and leave it in the US.
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