Any US Pension/401K/Tax experts?
Discussion
I spent a couple of years in the US back in 2008 and put some money into my company 401K. I came back to the UK in 2010 and stopped putting anything more into the 401K fund.
I'm finally sorting out the rest of my retirement planning and was planning on just forgetting about the 401K until I was 59.5 yrs old and then treat it as a nice bonus. My understanding is that if I want to do anything with it before that age it will be subject to 20% witholding tax and 10% early redemption tax - making it not worthwhile.
However, I'm no reading that because I am purely a UK national and resident in the UK with no other ties to the US, under the US/UK Tax treaty there may be a way of avoiding the US deductions and getting the fund back to the UK and allowing me to put it into my UK pension?
Does any of this make any sense? I'm getting confused just typing it....
I'm finally sorting out the rest of my retirement planning and was planning on just forgetting about the 401K until I was 59.5 yrs old and then treat it as a nice bonus. My understanding is that if I want to do anything with it before that age it will be subject to 20% witholding tax and 10% early redemption tax - making it not worthwhile.
However, I'm no reading that because I am purely a UK national and resident in the UK with no other ties to the US, under the US/UK Tax treaty there may be a way of avoiding the US deductions and getting the fund back to the UK and allowing me to put it into my UK pension?
Does any of this make any sense? I'm getting confused just typing it....
A 401K is a tax deferred instrument so tax will be due at some point.
In the US we would roll it over into a roll over IRA. This would defer taxation and mandatory withdrawals until your 70s. (available w/o penalty from 59)
Roll over IRAs have much lower fees than 401Ks and usually far better investment options.
Careful what you do as any withdrawal before 59 will cause instant tax witholding plus a 10% penalty.
Ultimately, you will pay tax on this but the US and UK do have reciprocity. So tax on one side of the pond becomes a tax credit on the other.
It's possible you might gain a little by shifting it gross to UK as the UK has/had a 20% tax free concession....but investment growth in a US Fund Family will almost certainly be much better due to much lower expenses.
In the US we would roll it over into a roll over IRA. This would defer taxation and mandatory withdrawals until your 70s. (available w/o penalty from 59)
Roll over IRAs have much lower fees than 401Ks and usually far better investment options.
Careful what you do as any withdrawal before 59 will cause instant tax witholding plus a 10% penalty.
Ultimately, you will pay tax on this but the US and UK do have reciprocity. So tax on one side of the pond becomes a tax credit on the other.
It's possible you might gain a little by shifting it gross to UK as the UK has/had a 20% tax free concession....but investment growth in a US Fund Family will almost certainly be much better due to much lower expenses.
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