US non-resident pension planning management

Foreign Pension Plans

The Internal Revenue Service (IRS) does not recognize foreign pensions as qualified plans in the US, so any contributions you make to a foreign scheme will be tax deductible in the United States, plus contributions made by your employer will only increase your taxable income.

Foreign pension plans can become even more complicated if its invested in foreign Exchange Traded Funds (ETFs) or mutual funds as these are classed as passive investment companies and are likely to incur tax.

Lastly, it is important to remember that any distributions from your fund are likely to be taxed by both your country of domicile and the country you reside in—although some investors may be able to claim Foreign Tax Credit and others may be able to utilise tax treaties to avoid double taxation.

For many non-resident aliens, the best option may be a SIPPs.

401k Retirement Plans

If you have the choice of a 401k, this is often the best options. 401ks are a common retirement plan which provide tax relief on contributions. As of 2019, the basic limits on employee contributions are $19,000 per year for workers under age 50 and $25,000 for those 50 and up. Employers can match contributions also.

If you did decide to leave the US, you would have to roll the plan over into another account or withdraw funds. If you are younger than 59½, you will be subject to a 10% early withdrawal penalty.

IRA Rollovers

401ks can be rolled into IRAs as long as you setup the IRA in advance. If you are younger than 59½, you will be subject to a 10% early withdrawal penalty just like 401ks.