US -> UK Move - US Retirement Accounts Strategy

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asteroidnix
Posts: 10
Joined: Wed Apr 21, 2021 1:06 pm

US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

Hello. First time poster, long time reader :)

I am a UK Citizen who has been living in the US for last several years on green card. I have built up a nice 401K and Roth IRA over the years. I plan to relocate back to the UK this year. I will be renouncing my Green Card. I am not a Long Term Permanent Resident, so no pesky expatriation tax :)

I am aware of the difficulties of maintaining US Retirement Accounts while abroad. I've done some research into this and looking for feedback / compare notes. I plan to liquidate and close all my taxable brokerage accounts so my focus is on the 401K and IRAs.

As a guiding rule, I don't want to try and deceive any brokerage by using a fake US address and/or VPN.

My 401K and Traditional/Roth IRAs are with Fidelity. I plan on using Fidelity as my primary custodian. I talked to Fidelity last year and they said I can maintain both my 401K + IRAs with them given I am moving to a country they still do business with (UK). With the IRA, I won't be able to invest in new mutual funds, but I will be able to keep my existing mutual funds and reinvest dividends in the existing funds I hold. For the 401K, they interestingly said there's no mutual fund limitations and I can trade freely. This was a little surprising. Not sure if this is true. No restrictions on ETFs in the IRA. Does this align with other folks? Do folks know if Fidelity is enforcing the PRIIP restrictions for new US Domiciled ETFs from UK/EU investors if held in an existing retirement account? I am happy with my current mutual fund selection (FFNOX and Life Path) so will probably just leave that on autopilot.

Now, I am aware that Fidelity's position can change in the future. There's a worrying trend towards zero here. As a hedge, I plan to shortly open (while still US resident) Traditional IRA/Roth IRA accounts with Vanguard, Interactive Brokers and Charles Schwab. IB and Charles Schwab are known to be more expat friendly. I am doing this now as I know that all brokerages don't allow new IRAs to be opened while living abroad unless the person is a US Citizen. Even then, I believe only Interactive Brokers permits that. Existing accounts opened while US resident should be OK for these companies assuming I will be moving to a country they operate in (UK). Though like with Fidelity, this position could change in the future.

To put some "skin in the game" for these new IRA accounts, I plan to make a non-deductible ~$50 USD Traditional IRA contribution at each custodian. Then, do a Backdoor Roth to roll-over ~$25 USD from each Traditional IRA to the Roth IRA held at the institution. Hence, will have ~25 USD in each account at each institution. ~$25 is a token amount. Aim is to keep the account solvent and (hopefully) less likely for them to ever close compared to accounts with a zero balance which they may treat as de-minimis (speculation). If Fidelity ever tries to kick me out, I could do an ACATS to one of the other hedge accounts at another institution.

As these accounts are mainly a hedge / insurance and not meant to be seen as part of my overall investment portofolio. I may just hold in money market. I won't be making any other non-deductible IRA contribution this year, so ensuring I stay under the $6k limit. As IRAs are treated as a whole, it doesn't matter by how many IRAs I open, just that it's within the non deductible funding limit. Given I will hold in money market, I don't expect for there to be any Pro Rata issues given Traditional IRA aggregate balance will not be zero by 31st December. My existing Traditional IRA at Fidelity has 0 as the balance.

Question) I believe a Rollover IRA is effectively just a Traditional IRA with different fund source. As a result, I think I could treat any of the Traditional IRAs as a Roll-Over IRA in the future, I would just direct ACATs from my 401K to it as the receiving destination.

Once back and settled in the UK, I will then flip the address at each brokerage to my new UK address. I plan to renounce Green Card promptly on arrival in the UK. I am not clear yet whether I will file US dual status this year, or file as 1040 for the entire year. I will get guidance on that. As a result, I won't be submitting my NRA status to the institutions until January 1st 2022 when I can no way be a US Person anymore.

Any thoughts here?
TedSwippet
Posts: 3626
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Location: UK

Re: US -> UK Move - US Retirement Accounts Strategy

Post by TedSwippet »

Welcome. Based on your post, I'd say you've done a good job of researching the potential issues ahead of moving. Not much to add, but (of course) that won't stop me!
asteroidnix wrote: Wed Apr 21, 2021 1:46 pm My 401K and Traditional/Roth IRAs are with Fidelity. I plan on using Fidelity as my primary custodian. I talked to Fidelity last year and they said I can maintain both my 401K + IRAs with them given I am moving to a country they still do business with (UK). With the IRA, I won't be able to invest in new mutual funds, but I will be able to keep my existing mutual funds and reinvest dividends in the existing funds I hold. For the 401K, they interestingly said there's no mutual fund limitations and I can trade freely. This was a little surprising. Not sure if this is true. No restrictions on ETFs in the IRA. Does this align with other folks? Do folks know if Fidelity is enforcing the PRIIP restrictions for new US Domiciled ETFs from UK/EU investors if held in an existing retirement account? I am happy with my current mutual fund selection (FFNOX and Life Path) so will probably just leave that on autopilot.
From my own experience and from reading around anecdotes from others in a similar situation, it seems that things vary not just by brokerage, but even from customer to customer. Now, it may be somehow connected with the non-US country in question; perhaps a tax-treaty thing. But discerning any pattern appears impossible.

There are broadly no real US tax or regulatory restrictions on what a brokerage may or may not allow an NRA to do -- the only control is over any US tax withholding -- yet different brokerages apply different limitations to different customers on (it seems) different days of the week.
asteroidnix wrote: Wed Apr 21, 2021 1:46 pm Now, I am aware that Fidelity's position can change in the future. There's a worrying trend towards zero here. As a hedge, I plan to shortly open (while still US resident) Traditional IRA/Roth IRA accounts with Vanguard, Interactive Brokers and Charles Schwab. IB and Charles Schwab are known to be more expat friendly. I am doing this now as I know that all brokerages don't allow new IRAs to be opened while living abroad unless the person is a US Citizen. Even then, I believe only Interactive Brokers permits that. Existing accounts opened while US resident should be OK for these companies assuming I will be moving to a country they operate in (UK). Though like with Fidelity, this position could change in the future.
Check IB carefully. Last time I looked they would only offer IRAs to US citizens living abroad. Whether that means that they would refuse to 'grandfather in' anything you open as a US resident if/when you later become an nonresident alien isn't clear.

As a counter-example to your no-new-IRAs belief, I successfully opened a new Roth IRA with Vanguard as an US nonresident alien. It required real paper forms and snail-mail, but other than that it was relatively straightforward. But, that's Vanguard, and me, and may only have been allowed because Mercury was in retrograde at the time of my application ...

Creating as many IRA and other accounts as you can before you leave the US is however certainly a good plan. Some may well find ways to close your account over time, or perhaps make life so hard that you choose to close it, but it's impossible to tell which will do this ahead of time. I set up four US bank accounts before leaving, but over time three of the four have become unusable. Fortunately, (Transfer)Wise now fills the gap.
asteroidnix wrote: Wed Apr 21, 2021 1:46 pm Question) I believe a Rollover IRA is effectively just a Traditional IRA with different fund source. As a result, I think I could treat any of the Traditional IRAs as a Roll-Over IRA in the future, I would just direct ACATs from my 401K to it as the receiving destination.
I'm not clear what you're asking here. If it is, can you use an existing IRA as a receptacle for rolling over another IRA or 401k, I think the answer is yes. That is, nothing I've ever encountered suggests no. Best to confirm this, of course.
asteroidnix wrote: Wed Apr 21, 2021 1:46 pm Once back and settled in the UK, I will then flip the address at each brokerage to my new UK address. I plan to renounce Green Card promptly on arrival in the UK. I am not clear yet whether I will file US dual status this year, or file as 1040 for the entire year. I will get guidance on that. As a result, I won't be submitting my NRA status to the institutions until January 1st 2022 when I can no way be a US Person anymore.
Make sure you file a W-8BEN form with each and every US bank and broker you hold accounts with, and promptly. Without, they will tend to overwithhold US tax on dividends and so on, forcing you to file a 1040-NR at the end of the year to reclaim the excess. Only really a problem with taxable accounts, not IRAs if not yet withdrawing.

There is the option to file the I-407 green card surrender at the port of exit. That might or might not be convenient. Otherwise, you have to send this form to the US for processing. It used to be blisteringly efficiently handled by the US embassy, but no longer. Your official date of surrender is the date you send this form, but mail to/within the US has become somewhat unreliable, so ideally use recorded delivery (or at least, recorded dispatch).

When filing your final return, you'll probably need to fill out a form 8854, even though not a 'covered expat'. Pay close attention to the instructions. This form is part of your final 1040, but because with the IRS doing something once is rarely enough, you also have to file a separate copy with Philadelphia.

Finally, a pointer to a small section of the wiki that contains a bit of information relevant to leaving the US and reverting to being a nonresident alien:

US tax pitfalls for a non-US person moving to the US - Permanently leaving the US
Topic Author
asteroidnix
Posts: 10
Joined: Wed Apr 21, 2021 1:06 pm

Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

Thanks for the reply!
TedSwippet wrote: Thu Apr 22, 2021 1:31 pm From my own experience and from reading around anecdotes from others in a similar situation, it seems that things vary not just by brokerage, but even from customer to customer. Now, it may be somehow connected with the non-US country in question; perhaps a tax-treaty thing. But discerning any pattern appears impossible.
I've read that too. I have a long and good relationship with Fidelity so hopefully that will help too.
TedSwippet wrote: Thu Apr 22, 2021 1:31 pm As a counter-example to your no-new-IRAs belief, I successfully opened a new Roth IRA with Vanguard as an US nonresident alien. It required real paper forms and snail-mail, but other than that it was relatively straightforward.
That's good to know. Thanks for the data point.
TedSwippet wrote: Thu Apr 22, 2021 1:31 pmCreating as many IRA and other accounts as you can before you leave the US is however certainly a good plan. Some may well find ways to close your account over time, or perhaps make life so hard that you choose to close it, but it's impossible to tell which will do this ahead of time. I set up four US bank accounts before leaving, but over time three of the four have become unusable. Fortunately, (Transfer)Wise now fills the gap.
Downside of Wise is that they seem to open the account in like ~10 different countries creating a FBAR compliance pain. I will have FBAR filing requirement this year. Could always open next year.
TedSwippet wrote: Thu Apr 22, 2021 1:31 pmI'm not clear what you're asking here. If it is, can you use an existing IRA as a receptacle for rolling over another IRA or 401k, I think the answer is yes. That is, nothing I've ever encountered suggests no. Best to confirm this, of course.
Yeah, the question is basically do I need a "Roll Over IRA" for a 401K or can I re-use any existing Traditional IRA. My understanding is that I can.
TedSwippet wrote: Thu Apr 22, 2021 1:31 pmMake sure you file a W-8BEN form with each and every US bank and broker you hold accounts with, and promptly. Without, they will tend to overwithhold US tax on dividends and so on, forcing you to file a 1040-NR at the end of the year to reclaim the excess. Only really a problem with taxable accounts, not IRAs if not yet withdrawing.
I would do that on January 1st when it's clear I can no longer be a US Person for Tax Purposes for 2021. As you say, it's not really an issue as I will be closing all my taxable brokerage, leaving only a small amount of money (~25 USD) in one or two checking accounts. Many years before I can retire just yet and withdraw!.
TedSwippet wrote: Thu Apr 22, 2021 1:31 pmThere is the option to file the I-407 green card surrender at the port of exit. That might or might not be convenient. Otherwise, you have to send this form to the US for processing. It used to be blisteringly efficiently handled by the US embassy, but no longer. Your official date of surrender is the date you send this form, but mail to/within the US has become somewhat unreliable, so ideally use recorded delivery (or at least, recorded dispatch).
For this reason, I wanted to go in person at US Embassy in London until I realized they've closed down accepting the form at the outposts. Will be recorded delivery for sure with a cover letter asking for a reply + with a stamped envelope included.
TedSwippet wrote: Thu Apr 22, 2021 1:31 pmWhen filing your final return, you'll probably need to fill out a form 8854, even though not a 'covered expat'. Pay close attention to the instructions. This form is part of your final 1040, but because with the IRS doing something once is rarely enough, you also have to file a separate copy with Philadelphia.
Now this is interesting. This wasn't the advice I received and my understanding. I thought the 8854 form is only for citizens and long term permanent residents (held for 8 years). There's a checkbox which asks you to select your category.
TedSwippet wrote: Thu Apr 22, 2021 1:31 pmFinally, a pointer to a small section of the wiki that contains a bit of information relevant to leaving the US and reverting to being a nonresident alien:

US tax pitfalls for a non-US person moving to the US - Permanently leaving the US
Cheers!

Did you have any issue with buying US Domiciled ETFs in your Vanguard IRA? i.e. the dreaded PRIIP regulations. I heard some conflicting advice which said this doesn't apply to the individual, but to the brokerage. As a US company, Vanguard isn't subject to this. Vanguard UK would however.
TedSwippet
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by TedSwippet »

asteroidnix wrote: Thu Apr 22, 2021 5:12 pm Downside of Wise is that they seem to open the account in like ~10 different countries creating a FBAR compliance pain. I will have FBAR filing requirement this year. Could always open next year.
I don't think Wise creates a mass of FBAR complexity. At least, not if you don't over-use it. Their multi-currency ('borderless') account only has accounts in the countries that you activate. Mine has a UK sort code and account number, and a US ACH routing number and account code, but nothing else, because I didn't turn on any other countries. (I suppose there might be account numbers lurking unused in the background in these countries that I cannot yet see, but that doesn't seem to pose any FBAR issue.)

The UK facet of such account would be FBAR reportable. I suppose that the US facet would not be. Never thought about it.
asteroidnix wrote: Thu Apr 22, 2021 5:12 pm Now this is interesting. This wasn't the advice I received and my understanding. I thought the 8854 form is only for citizens and long term permanent residents (held for 8 years). There's a checkbox which asks you to select your category.
You're right. If you duck under the "in eight years" barrier you're clear of it. Be clear on year counting; the IRS counts years in a perverse way. Even one day of green card status counts as "in" a year. So it is possible to pass this time limit in just six years and two days.
asteroidnix wrote: Thu Apr 22, 2021 5:12 pm Did you have any issue with buying US Domiciled ETFs in your Vanguard IRA? i.e. the dreaded PRIIP regulations. I heard some conflicting advice which said this doesn't apply to the individual, but to the brokerage. As a US company, Vanguard isn't subject to this. Vanguard UK would however.
I cannot use Vanguard's ETFs in my IRA because Vanguard will not allow me to activate the brokerage option. Whenever I query this with them, they are clear that this is because I am a nonresident alien, and therefore must stick to a Vanguard account that is mutual fund only. They are never clear on why this is -- mostly they just mutter vague phrases that include the word "policy". (And I worry what will happen if this policy ever collides with Vanguard's other long-term apparent policy of making every account a brokerage account.)

It is tempting to think this might be related to PRIIPs. However, I recall asking about some years back and well before PRIIPs was a thing, and getting the same refusal from them then. A few others have anecdotally reported that they have been able to retain brokerage option in their accounts when leaving the US, but also some have indicated that Vanguard would restrict their accounts to mutual fund only. Not really enough reports to gauge a pattern then, but from the few we have, it again looks random.

It's weird and potentially annoying. A lot of Vanguard US domiciled ETFs hold UK 'reporting status', making them fine for UK residents to hold. However, no Vanguard US domiciled mutual fund does, so these are a UK tax trap (income tax rates on capital gains). Yet for UK residents, Vanguard forces mutual funds and puts ETFs off limits. Fortunately, the UK's fund 'reporting status' regime doesn't apply inside 401ks and IRAs, only taxable accounts. The result though is that for me at least, my Vanguard US taxable account is virtually useless. I keep the minimum $3k money market fund in it purely so as not to lose it.

That taxable account used to be handy to write the occasional USD check on that, but Vanguard effectively closed that off too last year. I had checkwriting from when I was in the US, and managed to carry it over after leaving. However, Vanguard reorganised the money market fund I was in, requiring me to reapply for checkwriting. After being assured twice that I could have this again, there was a bunch of to-and-fro and conflicting responses, the upshot of which is that no, actually I cannot have it. Vanguard will not allow checkwriting to nonresident aliens. Or perhaps just US non-residents; again, their answer varies depending on who you ask.

As you'll have observed then, the pattern of dealing with these organisations as a nonresident alien is characterised by an unstable and often inexplicable set of restrictions, following little discernible pattern, invisible until you run into them, and poorly understood (if at all) by customer services.
rjm_cali
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by rjm_cali »

Just a quick thank you for posting this. I'm a GC/LTR and spouse of joint US/UK. We're planning a move back to Europe from the US late 2022. To the UK for a tax year before moving onto France. Can't add much to TedSwippets excellent comments - or indeed your research as you are a bit ahead of me. Just wondered what your thoughts were about Estate Tax and had that any impact on your planning especially wrt retirement funds.

My wife has a company pension scheme here in the US and we're trying to understand the ramifications of that and indeed a decision about retaining her US citizenship. I know I'll have to give up the GC but we're umming and ahhing about her citizenship. We're aware of the tax implications of that wrt to need to keep filing US taxes.

At the moment the challenge is finding advisors who understand all sides of the triangle - US / UK and EU *and* immigration issues. Managing money was so much easier when it was just a 3 fund Vanguard plan :-) I know there are worse problems to have. It's not helped by advisors assuming that as you live in the SF Bay area and have assets in three countries you're somehow a tech gazillionaire.
Topic Author
asteroidnix
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

TedSwippet wrote: Fri Apr 23, 2021 3:37 am I don't think Wise creates a mass of FBAR complexity. At least, not if you don't over-use it. Their multi-currency ('borderless') account only has accounts in the countries that you activate.)
Fair. I wasn't aware you could choose which countries to activate.
TedSwippet wrote: Fri Apr 23, 2021 3:37 amBe clear on year counting; the IRS counts years in a perverse way. Even one day of green card status counts as "in" a year. So it is possible to pass this time limit in just six years and two days.
Indeedy! I was already aware of this. I bet this catches out a lot of folks. If you don't file 8854 and you *are* an expatriate (citizen/LPR), my understanding is that you will still be considered perpetually Resident for Tax Purposes but without the immigration benefits. Not a great situation to be in! Throw in FBAR et al - nightmare if you carry on for years without the knowledge. Honestly one benefit of becoming NRA and leaving will be not having to deal with the stress/anxiety of the US regime for overseas reporting.
TedSwippet wrote: Fri Apr 23, 2021 3:37 amI cannot use Vanguard's ETFs in my IRA because Vanguard will not allow me to activate the brokerage option. Whenever I query this with them, they are clear that this is because I am a nonresident alien, and therefore must stick to a Vanguard account that is mutual fund only.
Good data points on Vanguard. Any issues with buying new US mutual funds in the IRA? I know Fidelity at least locks down buying new funds.
rjm_cali wrote: Fri Apr 23, 2021 10:39 am Just wondered what your thoughts were about Estate Tax and had that any impact on your planning especially wrt retirement funds.
Ah, I haven't truth to be said. I don't intend on leaving an empire, but I should probably do some research here to understand at least.

It's a total minefield! I am not sure there is someone who can do Tax and Immigration. If there is, I can imagine their fees would be eye watering to the point they are likely a billionaire themselves :) You may be best separating Tax vs Immigration and becoming an expert yourself to validate the advice and to fill in the gaps.

Re filing US taxes for your wife following a potential expatriation. Are you sure that's the case? I believe this was the case in the early 90s, but I believe the expatriation process changed with 8854 in mid noughties. I think it's possible to now make a clean break and only file NRA 1040NR returns for income which arises in the US. If you play your cards right, that could mean none and hence no filing requirement. In practice, may need to file 1040NR for first year or two while stuff is closing out. Should naturally verify this.
TedSwippet
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by TedSwippet »

rjm_cali wrote: Fri Apr 23, 2021 10:39 am ... Just wondered what your thoughts were about Estate Tax and had that any impact on your planning especially wrt retirement funds.
On this, you should be fine. The US/UK estate tax treaty works well for retirement accounts. In fact, fairly well for all types of accounts. If you're covered by it, most things that would normally fall inside the US estate tax regime fall outside of it, and for anything else, you get a pro-rated chunk of the standard US citizen allowance, so unless your total assets top (currently) $11mm you should be safe.

In fact, a careful reading of the US/UK tax treaty suggests that it covers UK 'nationals', which may well mean you can use it even if not living and domiciled in the UK. That's anomalous within the general universe of US estate tax treaties though, so if you're planning to rely on this it'd be worth getting some good advice.
rjm_cali wrote: Fri Apr 23, 2021 10:39 am My wife has a company pension scheme here in the US and we're trying to understand the ramifications of that and indeed a decision about retaining her US citizenship. I know I'll have to give up the GC but we're umming and ahhing about her citizenship. We're aware of the tax implications of that wrt to need to keep filing US taxes.
The US/UK income tax treaty (DTAA) also works well with retirement accounts. The default for a nonresident alien is UK tax only, taxable on withdrawal only, and fully respects Roths. For a US citizen, a bit more complex since the US overrides the 'UK tax only' part with its 'saving clause', leaving one leaning on foreign tax credits. In practice though, most folk come out with a zero US tax liability.

Once free of the kryptonite green card, one interesting possibility for you as a couple is to let your wife do all the US investing, and you do all the non-US investing. That way, she can leverage her US citizenship to avoid the otherwise irreducible nonresident alien 15% US tax on dividends, while you are free to invest in things that would be US PFICs if she held them.

If your wife renounces, she will of course then be unencumbered by US tax restrictions, and so free to also use ISAs, non-US domiciled funds and ETFs, accounts at UK banks that currently reject US citizens, all the clauses in the US/UK tax treaty, and generally operate financially as any other UK resident. Worth making the comparison, anyway.

For me, I'd be eyeing all the ways the US has made it increasingly hard over the past decade or two for folk to escape its tax net, and then wondering what might come next. The recent past has seen vastly increased renunciation costs, limited consular appointments (actually, absolutely none at all in London for around a year now), FATCA, and the introduction of Soviet-style exit taxes. Taken together, the picture is pretty ugly.
TedSwippet
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by TedSwippet »

asteroidnix wrote: Fri Apr 23, 2021 11:23 am If you don't file 8854 and you *are* an expatriate (citizen/LPR), my understanding is that you will still be considered perpetually Resident for Tax Purposes but without the immigration benefits.
That used to be the case. Between 2004 and mid-2008, the law was indeed that if you handed in your green card, I-407, but did not file form 8854, you were no longer eligible to live in the US but still fully US taxable on your worldwide earnings. Clearly problematic, if not constitutionally then at least under customary international law (and commonsense, for that matter).

In 2008, the exit tax replaced this. Now, filing an I-407 terminates both residency and tax status. You can find this outlined in the form 8854 instructions. Older web articles will however still talk about the old rules, including the now-defunct ten-years-after-leaving shadow period (enshrined in many US tax treaties, FWIW).

What persists though is that if you do not file an I-407, you remain a US taxable person. Even if the card itself has expired, and even if the US probably would not let you return because you've been away and living outside the US for so long (no 'reentry permit', say). I'm willing to bet that there are thousands of people out there who had a green card, left the US, and just tossed the expired card into a drawer and forgot about it.
asteroidnix wrote: Fri Apr 23, 2021 11:23 am Any issues with buying new US mutual funds in the IRA?
No issues, in either the IRA or 401k. Also, none in the taxable account, at least as far as I've gone (which is not far, because of the aforementioned limitations around UK reporting status).
Topic Author
asteroidnix
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

TedSwippet wrote: Fri Apr 23, 2021 12:23 pm In 2008, the exit tax replaced this. Now, filing an I-407 terminates both residency and tax status. You can find this outlined in the form 8854 instructions. Older web articles will however still talk about the old rules, including the now-defunct ten-years-after-leaving shadow period (enshrined in many US tax treaties, FWIW).

What persists though is that if you do not file an I-407, you remain a US taxable person. Even if the card itself has expired, and even if the US probably would not let you return because you've been away and living outside the US for so long (no 'reentry permit', say). I'm willing to bet that there are thousands of people out there who had a green card, left the US, and just tossed the expired card into a drawer and forgot about it.
Ah, you are well read! Appears you are right. Looks like there is confusion in professional circles on this.

The following article is of the view you will have perpetual US tax obligations:
https://www.taxesforexpats.com/articles ... -what.html

While the following supports your view:
https://us-tax.org/2019/09/19/false-fai ... de-income/
Topic Author
asteroidnix
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

Just some data points, I phoned Fidelity US today to reaffirm the previous guidance I received from them last year.

401K - Can keep open if moving to the UK. No restrictions on trading within the 401k including mutual funds.

IRA and Taxable Brokerage - Can also keep open if moving to the UK. No new mutual funds. ETFs are fine. I imagine that includes US Domiciled ETFs? So maybe no PRIIP restrictions as dealing with US company?

They were a little hazy on whether I could reinvest mutual fund dividends in new shares of the existing mutual fund positions. They said it probably /shouldn't/ be an issue. Guidance last year was dividends are not an issue. This seems to be supported by: http://personal.fidelity.com/accounts/s ... the_US.pdf
mrploppy
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by mrploppy »

Welcome to the mysterious world of NRA 401(k)/IRA holders! You've certainly come to the right place for advice - especially from @TedSwippet - although you seem very clued up already. I'm a Fidelity-expat and I'd kept my leftover 401(k) for a while having moved back to the UK - but read on!

I can only add a few points from my own experience.

1. Be prepared for Fidelity to withhold 30% from any withdrawals you make from your 401(k)/IRA, regardless of the presence of W-8BEN, or any rational arguments around the tax treaty. There appear to be very limited and specific circumstances when they won't withhold 30%. I managed it eventually - documented here. If they withhold tax, it forces you to file a US tax return to get your refund, for which ...
2. Keep your US bank account(s) open - to receive your refund electronically and for any withdrawals you want to make from retirement accounts - Fidelity wont send money electronically overseas (although I'm in the process of exploring that with regards to my new IRA). They will send a USD cheque - but that's a nightmare.
3. Beware the 401(k) (although you're much better placed than I was in that you have an IRA). The 401(k) is never truly 100% under your control. For one thing, I had to go through my ex-company (the plan sponsor) in order to set up periodic withdrawals. Worse than that - as happened to me - your ex-company may choose to move their 401(k)s - including yours - to a different provider. They might move it to a company (a) you've never heard of and are not happy about, and/or (b) one who doesn't treat NRAs as well as Fidelity (although, in fairness, they could be better). In your situation, you could just roll it over to your IRA - easy. I've spent the last month or so opening an IRA with Fidelity in order to roll over my 401(k) before it got moved - documented here

Whatever you do, good luck! And let us know how you get on.
Topic Author
asteroidnix
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

Just had my first real experience of contradictory advice. This is rest of my life dealing with this situation now no doubt. Earlier this week, I was told by Fidelity rep on the phone (who called their back office) that purchasing new ETFs was fine in IRA. Restriction only on new mutual funds. I tried getting this in writing from them, using the send secure email feature, only to get the response that ETFs are not OK. Stock is however OK. Not sure if they mean US ETFs only. I've asked them to go back (and think about their actions ???) and look again with their back office team. Waiting on the response from that. Will circle back here with the data point.

@mrploppy - what's your experience of ETFs in Rollover IRA? If I knew about this, I would have converted my 401K AT to 401K Roth vs Roth IRA (Megabackdoor) all these years... Rather odd why restrictions don't apply to 401k *allegedly*.
Last edited by asteroidnix on Thu Apr 29, 2021 11:04 am, edited 3 times in total.
Topic Author
asteroidnix
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

mrploppy wrote: Tue Apr 27, 2021 10:25 am Welcome to the mysterious world of NRA 401(k)/IRA holders! You've certainly come to the right place for advice - especially from @TedSwippet - although you seem very clued up already. I'm a Fidelity-expat and I'd kept my leftover 401(k) for a while having moved back to the UK - but read on!

I can only add a few points from my own experience.

1. Be prepared for Fidelity to withhold 30% from any withdrawals you make from your 401(k)/IRA, regardless of the presence of W-8BEN, or any rational arguments around the tax treaty. There appear to be very limited and specific circumstances when they won't withhold 30%. I managed it eventually - documented here. If they withhold tax, it forces you to file a US tax return to get your refund, for which ...
2. Keep your US bank account(s) open - to receive your refund electronically and for any withdrawals you want to make from retirement accounts - Fidelity wont send money electronically overseas (although I'm in the process of exploring that with regards to my new IRA). They will send a USD cheque - but that's a nightmare.
3. Beware the 401(k) (although you're much better placed than I was in that you have an IRA). The 401(k) is never truly 100% under your control. For one thing, I had to go through my ex-company (the plan sponsor) in order to set up periodic withdrawals. Worse than that - as happened to me - your ex-company may choose to move their 401(k)s - including yours - to a different provider. They might move it to a company (a) you've never heard of and are not happy about, and/or (b) one who doesn't treat NRAs as well as Fidelity (although, in fairness, they could be better). In your situation, you could just roll it over to your IRA - easy. I've spent the last month or so opening an IRA with Fidelity in order to roll over my 401(k) before it got moved - documented here

Whatever you do, good luck! And let us know how you get on.
Thanks!

1) Thanks for the heads up. I won't be retiring for at least 10 years. So it may not even be worth submitting W8-BEN each year to save the hassle. With this strategy, I now have to do that with 3 more institutions, per account...
2) Will do. I will probably also open that Wise borderless account per TedSwippet's excellent suggestion.
3) I read about this and your struggles with international mail! I work for a FAANG who have a large plan at Fidelity and have had it with them since year dot, so hopefully never any movement on that front. Regardless though, it does show the precarious situation folks like us are in - at the mercy of opaque policy and administrative changes. I may look into withdrawing the Roth principal (no penalty) and moving to UK investments once back in the UK, but that's a decision for another day.
mrploppy
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by mrploppy »

asteroidnix wrote: Thu Apr 29, 2021 10:46 am @mrploppy - what's your experience of ETFs in Rollover IRA? If I knew about this, I would have converted my 401K AT to 401K Roth vs Roth IRA (Megabackdoor) all these years... Rather odd why restrictions don't apply to 401k *allegedly*.
Some years ago I took the easy/lazy approach of putting all my money into a target date retirement fund, so I can't say that I have any experience of ETF's per se. I know that there are some restrictions associated with being an NRA - but, as you say, I think they're to do with mutual funds.

I've rolled over into the exact same fund.

Update: I've dug out the correspondence I received (electronically) after rolling over. One communication, as expected, related to mutual funds - and the fact they're basically off-limits for NRAs. However, in that same correspondence, is the following statement:

Other securities remain available for purchase, including stocks, equities, fixed income, and Exchange Trade Funds. These limitations do not affect any workplace savings plans such as 401(k) and 403(b) plans serviced by Fidelity.

Hope that helps.
Topic Author
asteroidnix
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Joined: Wed Apr 21, 2021 1:06 pm

Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

mrploppy wrote: Thu Apr 29, 2021 11:11 am
asteroidnix wrote: Thu Apr 29, 2021 10:46 am @mrploppy - what's your experience of ETFs in Rollover IRA? If I knew about this, I would have converted my 401K AT to 401K Roth vs Roth IRA (Megabackdoor) all these years... Rather odd why restrictions don't apply to 401k *allegedly*.
Some years ago I took the easy/lazy approach of putting all my money into a target date retirement fund, so I can't say that I have any experience of ETF's per se. I know that there are some restrictions associated with being an NRA - but, as you say, I think they're to do with mutual funds.

I've rolled over into the exact same fund.

Update: I've dug out the correspondence I received (electronically) after rolling over. One communication, as expected, related to mutual funds - and the fact they're basically off-limits for NRAs. However, in that same correspondence, is the following statement:

Other securities remain available for purchase, including stocks, equities, fixed income, and Exchange Trade Funds. These limitations do not affect any workplace savings plans such as 401(k) and 403(b) plans serviced by Fidelity.

Hope that helps.
Cheers! Does help. Fully expecting for them to come back and still say no ETFs.

I am currently all in on FFNOX in Roth IRA. That's 85/15 distribution. Risk fine for my age, but I would like to maybe change allocation in 10 years to be more conservative. Maybe I should switch to target date before leaving as a hedge against further difficulties rebalancing. Which fund are you using if you don't mind me asking?
mrploppy
Posts: 70
Joined: Thu May 04, 2017 5:20 pm

Re: US -> UK Move - US Retirement Accounts Strategy

Post by mrploppy »

asteroidnix wrote: Thu Apr 29, 2021 12:24 pm I am currently all in on FFNOX in Roth IRA. That's 85/15 distribution. Risk fine for my age, but I would like to maybe change allocation in 10 years to be more conservative. Maybe I should switch to target date before leaving as a hedge against further difficulties rebalancing. Which fund are you using if you don't mind me asking?
I'm 100% in FPIFX - it's a 2020 fund. It's done pretty well even through the pandemic (although I guess it's all relative) so someone in Fidelity is doing their job! I wouldn't dare give anyone investment advice, and I'm sure you know this, but target date retirement funds automatically get more conservative as they approach the target. At one point I had 5 separate funds but I honestly wasn't interested enough to do the periodic reallocation and re-balancing, which is why I opted for a target date fund.
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asteroidnix
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Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

mrploppy wrote: Thu Apr 29, 2021 12:43 pm
asteroidnix wrote: Thu Apr 29, 2021 12:24 pm I am currently all in on FFNOX in Roth IRA. That's 85/15 distribution. Risk fine for my age, but I would like to maybe change allocation in 10 years to be more conservative. Maybe I should switch to target date before leaving as a hedge against further difficulties rebalancing. Which fund are you using if you don't mind me asking?
I'm 100% in FPIFX - it's a 2020 fund. It's done pretty well even through the pandemic (although I guess it's all relative) so someone in Fidelity is doing their job! I wouldn't dare give anyone investment advice, and I'm sure you know this, but target date retirement funds automatically get more conservative as they approach the target. At one point I had 5 separate funds but I honestly wasn't interested enough to do the periodic reallocation and re-balancing, which is why I opted for a target date fund.
Indeed! I may look at the appropriate Freedom Index for my retirement target. Freedom Index ~2050 would likely be currently equivalent to FFNOX in terms of asset allocation, if not even more aggressive.
Topic Author
asteroidnix
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Joined: Wed Apr 21, 2021 1:06 pm

Re: US -> UK Move - US Retirement Accounts Strategy

Post by asteroidnix »

Closing the loop, Fido got back to me again in writing. They re-confirmed the guidance about mutual funds being restricted with only re-investment of dividends in existing positions permitted. On ETF, they sincerely apologized and correct the previous written reply, saying that ETFs are indeed permitted. In addition they clarified that stock, fixed income and closed-end funds are also OK too.

Thanks again folks for the help here. I will circle back here in a couple months on how it all went.
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