Optimise Your US Pensions
Our dual-qualified advisors specialise in transatlantic retirement planning, helping you to ensure that your US retirement savings are optimised, tax compliant, and secure - whether you stay in the US or return to the UK.
Relocating to the United States from the UK as a British expat can redefine your financial landscape. Your tax residency, regulatory obligations, and often the suitability of your investment and pension structures can all change overnight.
At Forth Capital, we specialise in helping high-net-worth individuals navigate these challenges, offering tailored financial planning solutions that safeguard wealth across borders. From tax-efficient investment strategies to comprehensive retirement and succession planning, our goal is to make the complex simple - securing your financial future, wherever you are today.
Managing your US Retirement Accounts as a British Expat in the US
Maximise Control, Minimise Taxes
As a British expatriate living in the US, understanding what you have and what your options are once you have left an employment can be complex. If you've switched employers or plan to move back to the UK, rolling over your US employer-sponsored retirement plans into an IRA (Individual Retirement Account) could be the smart move to optimise your financial future.
What is an IRA Rollover?
An IRA rollover involves transferring funds from a retirement account, such as an employer-sponsored 401(k), into IRA. This process ensures that your assets maintain their tax-deferred status, allowing them to continue to grow without immediate tax implications.
Why Roll Over your 401(k) to an IRA?
You Want Control Over Your Money or Prefer Professional Management
Most 401(k) plans offer limited investment choices, whereas an IRA allows access to a wider range of investment options, including international funds. IRAs typically offer a broader selection of investment choices compared to a 401(k), allowing for greater diversification and customisation of your portfolio. After your employment ceases, the 401k relating to that employment may also not be subject to the same level of investment management on an ongoing basis.
You’re Paying High Fees on Your 401(k) and Have More Affordable Options
Many employer-sponsored 401(k) plans come with high administration fees, which can significantly reduce your investment growth over time. An IRA may offer lower-cost investment options, enabling your funds to grow unencumbered by high fees and charges. It's important to evaluate whether switching to an IRA could help you retain more of your savings by reducing fees that can otherwise offset the tax benefits and growth of your 401(k).
You Want More Control Over Your Investments
If a fund in your 401(k) is underperforming, it may be harder to switch to an alternative investment option -whereas an IRA may provide greater flexibility in terms of choice of funds and investments.
You Want to Take Advantage of Wealth Transfer Opportunities
IRAs offer greater flexibility with beneficiary designations, particularly if your beneficiaries are not US citizens. Unlike a 401(k), which is often paid as a lump sum to your beneficiary upon your death, an IRA allows you to name multiple beneficiaries or even designate a trust as the beneficiary, helping you to ensure that your loved ones receive what you intend them to have.
You Want More Currency Options for Your Investments
Traditional 401(k) plans are usually held in US dollars, which can expose your retirement assets to currency fluctuations if you move back to the UK or relocate elsewhere. IRAs, on the other hand, can offer investments in multiple currencies, which may help to reduce your exposure to exchange rate risks. At Forth Capital, we work with IRAs that provide greater flexibility, giving you more control over your currency options and helping you to safeguard your assets from currency volatility.
You Want to Keep Things Simple
By consolidating multiple 401(k) accounts from previous employers into a single IRA, you can streamline the management of your retirement savings, making it easier to monitor, track, and make adjustments as needed, all in one place.
Key Considerations
What it is: In a direct rollover, the funds are transferred directly from your 401(k) to the IRA without you ever touching the money.
Tax Liability: There are no immediate taxes or penalties. The money remains in a tax-deferred account, and you’ll pay taxes only when you start making withdrawals.
Forth Capital can assist you in facilitating a direct rollover of your 401(k) into an IRA to minimise the risk of unwanted tax bills, ensure compliance with US international tax treaties, and essentially make the complex simple for you.
What it is: In an indirect rollover, the 401(k)-plan administrator sends the funds to you, and you have 60 days to deposit the full amount into an IRA or another retirement account.
Tax Liability: The plan administrator is required to withhold 20% of the rollover amount for federal taxes, even if you plan to complete the rollover.
To avoid taxes, you must deposit the full amount of the rollover (including the 20% withheld) into the new account within 60 days. This means you’ll have to come up with the withheld 20% out of pocket. The withheld amount will be refunded when you file your tax return, as long as you complete the rollover properly.
If you don’t complete the rollover within 60 days, the distribution will be treated as a taxable withdrawal, and if you're under the age of 59½, you’ll also face a 10% early withdrawal penalty.
What it is: If you roll over funds from a traditional 401(k) into a Roth IRA, this is described as a ‘Roth conversion’, since you are moving money from a pre-tax account (401(k)) to a post-tax account (Roth IRA).
Tax Liability: The amount you convert will be treated as taxable income in the year of the rollover. You’ll owe ordinary income tax on the converted amount, but no early withdrawal penalty applies (even if you're under 59½). Future withdrawals from the Roth IRA (if you meet certain conditions) will be tax-free in both the UK and the US.
It is also important to speak to your tax advisor to
ensure that you have up to date tax information.
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Our UK and US dual-qualified financial advisors specialize in transatlantic retirement planning, helping you to ensure that your retirement savings remain secure, tax compliant, and optimised for cross-border life.
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