Managing a US-based 401(k) or IRA pension plan as a non-resident is not always straightforward, especially when nearing retirement or wanting an optimal plan to fund it. If you previously worked in America, moved from the USA to work overseas and settled in the UK, you’ve probably built up pensions in the USA and UK. These pensions cannot be moved outside the jurisdiction they are based in. Few UK financial advisers have the competency and setup to support advice on US retirement accounts as well as those in the UK. Additional US pension platforms are increasingly putting rules in place to make managing US pensions as a non-resident alien (to use the official phraseology), or more commonly NRA, complicated with rules on dealing and whether they will allow you to be NRA.
Professional financial advice when you are a non-resident from a UK FCA-regulated investment adviser and financial planner can provide the professional advice you are searching for. Guidance to deal with cross-border taxation, make the best investments, and retire on the right foot are all areas a financial adviser can assist. Read how and why it makes sense as a Non-Resident to have a financial advisor to advise your 401(k) or IRA.
Structure Your Retirement Savings Wisely
Professional guidance can help you navigate tax and investment complexities. It’s important to share your financial plans to reflect your living circumstances. Avoiding costly mistakes and securing your retirement future often means that assets spread around the world and not combined into an overall plan is silly.
Why Use a Financial Adviser for your IRA or 401(k) Plan?
When you are a non-resident investor with a 401(k), IRA or both, you are in a different position to Brits who may only have UK workplace pensions. Non-US residents have to navigate the cross-border taxation regulations, domestic tax vs treaty taxation approach, choice of investment and exchange risk that may not apply to UK pensioners as much. Additionally, if you have US and UK accounts, integrating these assets into a unified global retirement plan will usually require an expert advisor. Having an adviser who can provide you with the following expert knowledge can assist you with meeting these challenges:
- Tax Compliance Across Borders: Non-residents risk double-taxation on US pension withdrawals. An adviser can ensure you’re fully compliant in the US and the UK and use treaties to avoid tax burdens.
- Withdrawal Strategies Tailored to Non-Residents: Experts can advise you on how to withhold your money tax-free so you don’t pay excessive fees and maximise your retirement earnings.
- Cross-Border Investment Management: Our advisors understand how to handle portfolios globally, so your 401(k) / IRA is spread and in line with your status as a non-resident. It can be managed to accept there will be no further contributions as a UK workplace may be where you make tax optical contributions.
- Unable to purchase US-registered mutual funds: Non-U.S. residents are increasingly prevented from purchasing US mutual funds due to US laws. Therefore, clients with US Pensions but living outside America can own or redeem existing positions in US mutual funds only but cannot make any initial or subsequent purchases. Some providers introduced offshore mutual funds as another option for international customers to diversify their portfolios.
Benefits of a Financial Consultant for NRAs
- Knowledge of US / UK Dual Citizen Taxation
- Knowing the fine print of US tax on non-resident 401(k) distributions.
- Conformity to UK regulations for worldwide income-taxed residents.
- Optimised Investment Strategy
- Investments are managed by advisors familiar with advising global workers and expatriates.
- Streamlining your portfolio to be effectively invested in risk-profiled and matched assets.
- Making sure your US Pensions fit into your bigger financial aspirations and other savings i.e., UK pensions or ISAs.
- Fiduciary Support
- Ensuring that you are suitably invested in the right plan and in the right places. Advice to grow and access US Retirement assets when optimal.
- Assistance with Rollovers or Transfers
- Experts recommend holding onto your 401(k), transferring to an IRA, and top-ups or suggesting contributions to UK pensions.
- Avoiding Common Pitfalls for Non-Residents
- Saving yourself the expense of errors like early withdrawal penalties.
- Learn about new tax provisions that apply to non-residents.
What Non-US Residents Can Expect From a UK-Based Adviser?
- Personalized 401(k) / IRA Advice for Non-Residents
- Creating an investment policy based on your dual-tax status and assets in multiple countries.
- Monitor fund performance regularly to suit your financial goals.
- Tax-Efficient Withdrawal Planning
- Understanding technical differences between lump sum and regular withdrawals to make clear plans.
- Tapping into tax treaties to claim benefits like lower withholding on retirement income.
- Cross-Border Financial Integration
- Coordinating your 401(k) / IRA with other pensions such as UK pensions or ISAs.
- Building you a global diversified investment portfolio.
- Ongoing Plan Support and Compliance
- Support keeping your plan US and UK compliant.
- Periodic news on wealth matters and what that means for your pension.
Lack of UK Financial Advisers to assist US UK Citizens
It’s uncommon to find UK financial planners who specialise in US pensions such as 401(k)s and IRAs, as understanding the US and UK financial system, taxation, and regulatory environment requires skill and knowledge. The US retirement system has its own regulations, such as those under the Employee Retirement Income Security Act (ERISA), IRS tax laws and state laws. UK advisors are rarely prepared to work through such complexities, because they’re qualified and trained in the realm of UK pensions, tax credits and investment law.
The regulatory hurdle or advice challenge can be expensive and difficult to comply with, and most UK-based advisers don’t want, or can’t meet, them.
US clients with cross-border tax issues, double reporting, and complicated US and UK taxation issues arising out of estate planning and pension planning need solid advice. Such problems require the financial adviser to have a level of expertise and cooperation with US tax specialists and lawyers. This means that UK IFAs tend not to take on US clients unless they’re cross-border financial planners.
Edale advises US-UK People on their US-based pension plans
US Retirement Savings must be effectively managed with an eye to the future. It can be challenging to manage US pension assets yourself and they should not be left unchecked. With the right financial advisor, you can invest optimally, and they will consider all your assets in various countries to plan effectively and secure your financial future.
Example Situations
- Mary, a Retired Nurse in the UK: Mary is a retired US nurse with 25 years of experience who has built up a large 401(k) but has no idea how to withdraw without getting taxed too heavily. She wants help bringing her US pension funds as income to the UK.
- John, a Mid-Career Professional in the UK: John worked in Silicon Valley and later moved to the UK for work. He’s got an IRA in the US and a workplace pension in the UK but needs someone to help put together a consistent investment plan that marries both investment plans and financial journey and optimises access based on pension tax access rules and benefits.
- Sarah – a Dual Citizen On Her Way to Retirement: Sarah is a US-UK dual citizen with US and UK pensions. She needs assistance with cross-border tax treaties so her retirement cash withdrawals are tax-efficient in both countries.
- Raj, Non-Resident Investor from the US: Raj is an IT Consultant living in Europe, he cannot make new investments in his US mutual funds as the rules have changed. He would like to get exposure to suitable investment linked to his green views and diversify his portfolio without violating US regulations.
- Emma and David, Married Dual Citizens: A couple with a combination of 401(k), IRA and UK pensions looking to get as much retirement income as possible, including US Social Security and UK State Pension, while remaining tax efficient and meeting their estate objectives.
- Carlos an Expat Wanting Rollover Choices: Carlos moved to the UK recently after 10 years of living in the US. He’s going to transfer his 401k to an IRA, but doesn’t know how to maximise his investment and build a plan alongside his growing UK Pension.
- Lisa, Self-Employed Freelancer: Lisa lived in the US and saved into an IRA until she came to the UK to open her own company. She wants advice about how to use her existing IRA, put money into a UK pension and stay on track.
- Mike, Double-Taxation Concerns: Mike has been making 401(k) contributions since moving to the UK with income from the US and UK. He wants expert guidance on using tax treaties to reduce his taxes, whilst ensuring the contributions are directed suitably to maximise pension accumulation.
- Anna, Getting Ready for Retirement in Spain: Anna has a US 401(k) and a UK pension. Now retired and spending time between the UK and an overseas holiday home, she needs a strategy for income access and expenses in multiple countries.
- Tom, Just Married to a UK Citizen: Tom is a US citizen who recently married a UK citizen and moved to the UK. He doesn’t know what to do with his US 401(k) and developing a UK pension and discretionary savings plan.
Book a free chat with a cross-border financial adviser if you want to chat about your situation and needs.
Changing the landscape on leaving US Pension without sharing your expat now
US-based financial institutions are implemented stricter account controls for expatriates because of regulatory and compliance risks. US citizens who live outside the US are experiencing sudden access restrictions to brokerage and pension (401k and IRA) accounts which changes the way they are able to be accessed, invested and supported by customer services. Here’s why:
- SEC and FINRA Regulations
Rules from the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) lead many US investment firms to mandate US residency for their clients. When you change your address to a UK location your pension or brokerage firm could determine that your account is no longer eligible for their services. - Financial institutions need to follow strict Know Your Customer (KYC) and Anti-Money Laundering (AML) rules.
The necessity for financial firms to follow rigorous KYC and AML regulations renders account management for non-resident clients both expensive and complicated. Certain firms choose to close accounts or impose restrictions as opposed to meeting compliance requirements. - ETF and Mutual Fund Restrictions
American investment accounts holding US mutual funds or ETFs are prevented from dealing into new investments because they see that a US investment vehicle is bring promoted on an overseas jurisdiction that brings the resident’s countries regulator into the equation. To avoid compliance complications firms prohibit expatriates from acquiring new US mutual funds or ETF assets.