[USER]

Hi, I’m currently in US and in process of moving to New Zealand. I need help in understanding how to manage my 401k money.

I’m a 29 year old with $101,000 in my 401k, currently in California and I make about $105,000/ year.

My current understanding is once I quit my job that is currently sponsoring my 401k, I’ll need to move it to my IRA account.

What is the best way to do this in the most cost effective and wise way?

Anyone have experience with this especially when moving abroad?

[Fiona]

Kia ora, hope you have a great time in Aotearoa. My Aunty and uncle moved from the US to NZ (they were NZ and Australian born but lived the majority in the US) and one thing that surprised a few people is that you still have to pay taxes to the US, even if you don’t live there.

[Ellen]

You can rollover into a rollover IRA with Fidelity (they are fee free and also have great customer service). You can give them a call to get the steps you need to rollover your IRA.

You will also need to contact your current 401k provider to get their process as well.

Some mail a check, some can do direct deposit, etc, and you’ll have like 30 days (or something like that) from when you get the check to deposit it into the rollover IRA account without tax penalties.

You especially need to get the steps from both sides and do it before moving because it’s not quick, especially if your 401k company needs to mail a check to your current address

[Phani]

Are you planning to move back to US anytime in future? If not, is that something you want to take it with you or do you need cash immediately or use it to create a cash flow wherever you are?

Different scenarios have different solutions…need little more info

[Phani]

Moving abroad introduces unique tax and investment considerations for your 401(k). Below is a step-by-step guide to managing your 401(k) when moving to New Zealand, while minimizing costs and maintaining long-term financial growth.

1. Understanding Your 401(k) Options When Moving Abroad
Once you leave your U.S. employer, you typically have four main options for your 401(k):

Option Pros Cons
Leave it in your current 401(k) No immediate tax implications, stays in U.S. tax-advantaged account Limited investment choices, might have high fees

Roll over to a Traditional IRA More investment choices, tax-deferred growth Future U.S. withdrawals may be taxed
Roll over to a Roth IRA Future withdrawals tax-free Immediate tax hit on conversion

Withdraw the money Access funds now 10% early withdrawal penalty (if under 59.5), taxed as income

Best Option for You?
*Most expats choose to roll over their 401(k) into an IRA because it keeps investments growing tax-deferred while offering more control and lower fees than many employer-sponsored plans.

*A Roth IRA conversion is generally NOT ideal when moving abroad because you’d face a big upfront tax bill, and New Zealand doesn’t tax withdrawals from foreign retirement accounts.

*Recommended action: Move your 401(k) to a Traditional IRA.

2. How to Rollover Your 401(k) to an IRA

Steps for a Cost-Effective Rollover
1. Open a Traditional IRA
• If you don’t already have one, open a Traditional IRA with a low-fee brokerage (e.g., Fidelity, Vanguard, Schwab).

• Ensure the IRA allows international account holders (important for expats).

2. Initiate a Direct Rollover (Avoid Taxes!)
• Contact your 401(k) provider and request a direct rollover (trustee-to-trustee transfer) to your IRA.

• Do NOT request a check payable to you personally—this triggers a mandatory 20% tax withholding.

3. Choose Low-Cost, Long-Term Investments
• Since you’ll be in New Zealand and likely won’t contribute

further, consider a simple, diversified portfolio like:
• Total U.S. Stock Index (VTI or VOO)
• Total International Stock Index (VXUS)
• U.S. Treasury Bonds (BND) or Inflation-Protected Bonds (TIPs)

4. Confirm U.S. Brokerage Allows Expats
• Some U.S. brokers restrict accounts for non-U.S. residents.
• Fidelity & Schwab are expat-friendly. Vanguard has stricter rules.

3. Tax & Withdrawal Considerations as a U.S. Expat in New Zealand

*Does New Zealand Tax Your 401(k)/IRA?
• New Zealand does NOT tax U.S. retirement accounts (401(k)/IRA) while they remain in the U.S.

• However, if you withdraw from your IRA, the U.S. will tax it as ordinary income (unless it’s a Roth IRA).

*What Happens When You Withdraw Money?
• If withdrawn before age 59.5, there’s a 10% early withdrawal penalty + income tax.

• If withdrawn after 59.5, it’s taxed as regular income in the U.S.

• New Zealand does NOT tax U.S. retirement withdrawals, so you only owe the IRS.

*Foreign Tax Credits & U.S. Tax Filing
• Since New Zealand does not tax U.S. retirement accounts, you cannot use Foreign Tax Credits to offset U.S. taxes.
• However, you must still file U.S. taxes annually and report worldwide income.

4. Managing Investments from New Zealand

Best Practices for Investing While Abroad:
• Keep your Traditional IRA invested in U.S. index funds for tax efficiency.

• Avoid frequent trading to prevent complexity in U.S. tax reporting.

• Reinvest dividends automatically to continue compounding growth.

Avoid Mutual Funds – Stick to ETFs
• Due to New Zealand tax rules on foreign investment funds (FIF tax rules), owning U.S. mutual funds may trigger extra taxation in NZ.

• Solution: Stick to ETFs (Exchange-Traded Funds) like VTI (Total U.S. Stock Market ETF) instead of mutual funds.
5. Key Takeaways & Action Plan

Best option: Roll your 401(k) into a Traditional IRA to maintain tax-deferred growth and avoid penalties.

Use ETFs (not mutual funds) for lower fees and better expat tax treatment.

Use a U.S.-friendly brokerage like Schwab or Fidelity to manage your IRA while living abroad.

New Zealand does NOT tax your U.S. retirement accounts, but the U.S. will tax withdrawals.

Avoid early withdrawals to prevent the 10% penalty and unnecessary taxes.

Next Steps for You
Open a Traditional IRA (Fidelity or Schwab recommended).
Request a direct rollover from your 401(k) provider (to avoid tax withholdings).

Invest in tax-efficient ETFs (e.g., VTI, VXUS, BND).
Check your brokerage’s expat policies to ensure account access in New Zealand.

Continue filing U.S. taxes annually while living in NZ.

Final Thought:
By rolling your 401(k) into an IRA and keeping your investments simple, you can continue growing your retirement savings tax-efficiently while enjoying life in New Zealand.

This strategy ensures maximum flexibility, lowest costs, and no unexpected tax hits.

Would be happy to clarify anything further—safe travels and best of luck with your move!

[Author]

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