Anyone able to advice about a 401K
Discussion
I have a question that maybe someone on here could answer or possible point me in a recommendation of someone who could help.
My fiancee used to work in America for a number of years and had a 401K there with her job. We now live in Australia and are unsure whats best to do with it. Should we try and withdraw the money and transfer it to Australia? or should we leave it there and somehow access it from America.
If theres any direction people can point us in or any advice it would be greatly appreciated.
My fiancee used to work in America for a number of years and had a 401K there with her job. We now live in Australia and are unsure whats best to do with it. Should we try and withdraw the money and transfer it to Australia? or should we leave it there and somehow access it from America.
If theres any direction people can point us in or any advice it would be greatly appreciated.
It will depend in part upon how any funds withdrawn would be treated when they arrive in Australia. i.e. would the Aussies let you transfer into some local tax advantaged pension arrangement on a preferential basis or would it just be like any other "new money", and does this matter?
IIRC a 401k cumulates tax free in USA and applies a tax penalty in the event of withdrawal before age 60, so there may be advantage in leaving it running. I don't know how people who leave the country are treated for tax.
Remember there's exchange rate risk in having a $US investment if you will eventually be spending in $A.
I suspect the only way you will obtain a clear answer to your question is to get on top of the rules and regulations in both countries, or to spend some cash on an international benefits consultant. Clearly whether this is worthwhile depends on how much money is involved.
IIRC a 401k cumulates tax free in USA and applies a tax penalty in the event of withdrawal before age 60, so there may be advantage in leaving it running. I don't know how people who leave the country are treated for tax.
Remember there's exchange rate risk in having a $US investment if you will eventually be spending in $A.
I suspect the only way you will obtain a clear answer to your question is to get on top of the rules and regulations in both countries, or to spend some cash on an international benefits consultant. Clearly whether this is worthwhile depends on how much money is involved.
O. O is correct a 401K will incur a penalty if withdrawn before age 59 1/2, it will also be taxed without benefit of any personal allowance if a non resident.
Many people who are resident of the USA will roll over an old 401K into an IRA, I would guess this might be possible as there would be no annual divs or CGs as there are with non tax deferred mutual funds. So no need to link to a tin
Call one of the big three, Vanguard, T.Rowe or Fidelity and ask if they will roll over a 401 for a non resident.
Even if it is rolled it will still ultimately be taxed at 60+ at income tax rates. It will grow unimpeded.
Personally I am not a big fan of 401Ks unless the employer makes a decent contribution because the gain is all taxed at income tax rates along with the deferred capital.
That becomes part of the AGI and can effect the rate for your other cap Gs and how ones Social Security is taxed.
ETA 401Ks have much higher expenses that IRAs, so even if you decide not to take the the cash leaving it in a 401K is usually not a good idea.
Less than 20 to 30K I would just pay the tax and penalty and put it to work in Assie where you have control. I don't think it will be taxed (again) in Australia as income. In fact you will probably get a foreign tax credit on your Aussie return.
Could work out OKk.
Check Australia has reciprocal tax agreements, I'm sure it does.
Many people who are resident of the USA will roll over an old 401K into an IRA, I would guess this might be possible as there would be no annual divs or CGs as there are with non tax deferred mutual funds. So no need to link to a tin
Call one of the big three, Vanguard, T.Rowe or Fidelity and ask if they will roll over a 401 for a non resident.
Even if it is rolled it will still ultimately be taxed at 60+ at income tax rates. It will grow unimpeded.
Personally I am not a big fan of 401Ks unless the employer makes a decent contribution because the gain is all taxed at income tax rates along with the deferred capital.
That becomes part of the AGI and can effect the rate for your other cap Gs and how ones Social Security is taxed.
ETA 401Ks have much higher expenses that IRAs, so even if you decide not to take the the cash leaving it in a 401K is usually not a good idea.
Less than 20 to 30K I would just pay the tax and penalty and put it to work in Assie where you have control. I don't think it will be taxed (again) in Australia as income. In fact you will probably get a foreign tax credit on your Aussie return.
Could work out OKk.
Check Australia has reciprocal tax agreements, I'm sure it does.
Edited by jeff m2 on Sunday 16th October 16:06
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