Retirement NZ vs USA 🇺🇸🇳🇿

[smorganmackay]

Hello & Kia Ora

I am a 26yo F who was born in the US and at the age of 18 moved abroad to study
I have now lived in New Zealand for six years and just started working professionally as of last year 2023
For retirement plans : in the US we have a 401k and in NZ there is something similar called a KiwiSaver

I haven’t been contributing to either and need to start making some decisions

I am currently planning on getting my residency in NZ (hopefully by the end of 2024) and furthermore to permanently stay in NZ.

Does anyone have any insight as to:
-can I contribute to a 401k as a citizen of America despite working internationally ?
-is a 401k more efficient than KiwiSaver?
-thoughts on KiwiSaver ?
-if you have been in this situation, what have you done?

Any guidance is much appreciated aka chuurs bro

 

[folkie]

@smorganmackay Okay a lot to unpack and it is complicated too… first off you will want to talk to both US and NZ accountants to understand the tax implications of your choices in your current job situation.

To clear something up for you, you can only contribute to a 401k if you are working for an American company that sponsors one. Otherwise you are contributing to an IRA. Both have differences and limitations because… laws.

Now the problem is that both an IRA and 401k are advantageous for retirement for US taxes… they are not recognized by NZ as retirement accounts and just look like foreign investment accounts and are taxed as such (look up NZ Foreign Investment Funds (FIF) for icky taxes you pay)… yay tax treaties being inconsistent and not updated!

So just use Kiwisaver, right? Well, welcome to being a US citizen and being required to submit tax returns regardless of permanently living in another country. The US doesn’t see Kiwisaver as a pension, and similarly will treat it as a foreign investment (look up US PFIC tax rules), which requires gnarly paperwork PER INVESTMENT… the paperwork is bad enough that US accountants in NZ charge you a couple hundred dollars per investment… and if you fail to file or get it wrong the IRS will potentially penalize you. You can get around this by picking a Kiwisaver fund that invests in US companies (like the S&P 500), and avoid this problem, but you will incur some higher fees from the investment company handling your Kiwisaver as they are paying the FIF under the hood. But unless you want to renounce your US citizenship, this is probably your best option, as long as you get decent Kiwisaver matching from your NZ employer.

Again, you gotta chat with US and NZ accountants to get a full picture for your situation.

 

[alisha_b]

@smorganmackay My goal is to move to New Zealand.

You should compare tax regimes and also potential returns in one versus the other. Whatever has higher tax adjusted and risk adjusted returns is your best choice.