[Scibby]

For you americans who have made the move or for anyone who knows. What have you done with your 401k's once you moved? Especially if you were planning on staying in NZ. Cashed out, some sort of transfer to another financial instrument or just leave them in the current plan back in the States?

Cheers
Scibby :o

[seattle]

We are leaving ours in the U.S. We are definitely not cashing them out early as the penalties are quite high - You'll owe regular income taxes plus 10% early withdrawl fee-(and of course its not a good time to take money out due to the tanking stock market here). I know that you can roll the funds over to another employer's fund program but I don't think it can be in a foreign country. This is a good question- maybe someone else knows the answer to this? You could also roll your funds over to an IRA where you have the control to invest the money as you see fit- but then you lose the ability to borrow against the IRA (most employer plans will let you borrow against your 401k). Also I'm not sure what the NZ tax consquences are on any money that you pull out early.

[clg]

We have not pulled anything out, yet. But I am now seriously thinking about it and am going to look into the tax consequences. I am willing to pay the penalty and other than that if we do it in stages the US tax consequences will not be that bad. It is NZ I am more worried about. Also, Obama talked about allowing people to draw 15% of retirement funds penalty free. If that is the case we will definitely take advantage of it. We have been in cash there for a while so the current exchange rates make this very appealing. I don't see much upside potential in the US and see a lot more downside risk so I would really like to get as much cash out as we can while we still can. I am going to try and find a good accountant to talk to about this. I will pass on any info I get.

[seattle]

I guess it would depend on what kind of investments your 401k is in- if its in stocks- i wouldn't think now is a good time to sell them off since you will realize your losses. I think the NZ bases its tax on worldwide income so any distributions are probably taxable there as well (although you have thw whole foreign tax credit). Its definitely worth seeing a tax accountant- if you can find one here that knows NZ taxes as well. The exchange rate may go lower so that is helpful. Are you in Los Angeles now?

[Mrs Pony]

OH and I have about 4k combined in our 401k's... We're just planning on taking it all out... maybe get half of it...

[clg]

NZ does tax worldwide income. We are not actually in 401ks but some other things (403?) I used to work at an university and my wife in government so the rules are a bit different for them. We would need to setup some sort of loss to offset the gain if possible in NZ which is why I need a good accountant! Left LA a few years ago. Never going back.

[seattle]

NZ does tax worldwide income. We are not actually in 401ks but some other things (403?) I used to work at an university and my wife in government so the rules are a bit different for them. We would need to setup some sort of loss to offset the gain if possible in NZ which is why I need a good accountant! Left LA a few years ago. Never going back.

oh right- you must have a 403(b) plan which can be rolled over to another 403(b) or an IRA. I know that 403(b) plans don't invest in indvidual stocks but I think they can have mutual funds. Not sure if you would want to cash out on those until (if?) the stock market recovers? Luckily my Oh's current company is on the hook to do our tax returns for a few years (due to another expat engagement) so their acctg firm will have to figure it out- hopefully we can figure it out from there. We grew up in L.A. area- never going back either (except to visit family)

[clg]

Some are 403 but two others as well. One of which I think we can pull money out of without penalties, but it is treated as income. We have a fair number of options in ours, various mutual funds and most importantly various bond funds so we have been in govt bonds for long enough this has not hurt us. Now, I am starting to get nervous about the US debt and $ hence I just want to get out if it will not be too big of a tax hit.

I'll go back to LA to visit (unless I can convince people to meet up somewhere else!) but that is about it!

I know someone who works at PWC here and I am going to try and get someone to talk to through her. If I find out anything interesting I will pass in on.

[Super_BQ]

You can google in NZ on taxes for overseas investments in pensions and holding direct positions in shares.

From what I recall, there is a threshold of $50K NZD before being subjected to IRD's Foreign Investment Fund rules. If your 401K portfolio is valued more than $50K NZD, then you have to assess what % gain has the portfolio gained.

Do a search on this forum where I have explained how NZ's tax structure only favours those that gain but gives no credit to those that have a paper loss.
IMO it's grossly inequitable for NZ tax dept to tax only the paper gain but not to give a credit for years where you have a paper loss.

2008 has been a bad year for share investments on Wall Street so even if you did not disclose, your portfolio will not trigger any tax to pay from a paper loss.

I forgot to mention the reason for such FIF rules is to only prop up NZ's national savings scheme "Kiwi Saver" which is suppose to be like a 401K plan. However the KEY difference is that managed funds that operate in NZ for Kiwi Saver are taxed annually - run much like a business. Whereas investors in the US that place $ in mutual funds have what they call "Tax free compounding" until withdrawal. The opposite is done here so at time of withdrawal of the Kiwi Saver plan at retirement will trigger no tax to pay on the gain. While the 401k will trigger a capital gains tax upon withdrawal - but the 401k person can convert into an annuity so the level of income upon retirement is dictated by the tax payer to stay below a certain income tax bracket. This is something you can't do in a Kiwi Saver scheme.

BQ