chamberlain94
New member
Hello, I’m considering starting to convert my 401(k) to Roth IRA and want to check if I’m missing anything.
Current situation: Male, 40, married, no kids. I’m a UK/US dual national and my wife is US citizen on 5 year track to ILR.
I spent about 16 years in US accuring almost $300,000 in a 401(k). While I am still employed by the same global company in the UK, I am no longer a US employee so it’s a bit like my 401(k) is with a former employer.
My general plan is:
- roll over my 401(k) to a traditional IRA with Schwab, with whom I already have a Roth IRA, brokerage account and investment current account
- each year, convert an amount from traditional to Roth equal to the standard deduction from married filing jointly. Currently $29,200. Our combined income in the UK is about £100,000. We use the foreign earned income exclusion and are far below the $240,000 threshold, so we have essentially zero US tax liability. I could adjust the conversion amount down to account for modest interest, dividend or capital gains from my brokerage and current account.
- after about 11 years the full amount would have been converted and I would have paid no 10% penalty or ordinary income tax
- after 5 years, the conversions (but not gains) would be available to withdraw with no penalty or tax should I wish to access the funds.
- at retirement age, any withdrawals would be tax free (whereas if I left the money in 401(k) my withdrawals would be taxable)
I’m evaluating my options for transferring relatively large sums of money from US to UK, with the view that any expenses I can cover with $s instead of from my pay in £s allows me to salary sacrifice more to my SIPP or other sal sac schemes (benefitting from 42% tax and 2% NI). SIPP currently stands at about £22,000 after 2 years of contributions (8% ss from me, 8% match).
I would also consider extra payments to my mortgage/ lump sum at renewal. Currently £213,000, 23 years left, 3 years left at 2.01%. Expect to be close to 60% LTV by renewal.
Thanks for any advice or feedback on my plan.
Current situation: Male, 40, married, no kids. I’m a UK/US dual national and my wife is US citizen on 5 year track to ILR.
I spent about 16 years in US accuring almost $300,000 in a 401(k). While I am still employed by the same global company in the UK, I am no longer a US employee so it’s a bit like my 401(k) is with a former employer.
My general plan is:
- roll over my 401(k) to a traditional IRA with Schwab, with whom I already have a Roth IRA, brokerage account and investment current account
- each year, convert an amount from traditional to Roth equal to the standard deduction from married filing jointly. Currently $29,200. Our combined income in the UK is about £100,000. We use the foreign earned income exclusion and are far below the $240,000 threshold, so we have essentially zero US tax liability. I could adjust the conversion amount down to account for modest interest, dividend or capital gains from my brokerage and current account.
- after about 11 years the full amount would have been converted and I would have paid no 10% penalty or ordinary income tax
- after 5 years, the conversions (but not gains) would be available to withdraw with no penalty or tax should I wish to access the funds.
- at retirement age, any withdrawals would be tax free (whereas if I left the money in 401(k) my withdrawals would be taxable)
I’m evaluating my options for transferring relatively large sums of money from US to UK, with the view that any expenses I can cover with $s instead of from my pay in £s allows me to salary sacrifice more to my SIPP or other sal sac schemes (benefitting from 42% tax and 2% NI). SIPP currently stands at about £22,000 after 2 years of contributions (8% ss from me, 8% match).
I would also consider extra payments to my mortgage/ lump sum at renewal. Currently £213,000, 23 years left, 3 years left at 2.01%. Expect to be close to 60% LTV by renewal.
Thanks for any advice or feedback on my plan.