The 401k is an incredible investment vehicle when you are living and working in the USA. However, it can be complicated to convert or re-invest when you live in Switzerland.
Many expats chose to leave their 401k as it is and are often unaware that there are other investment options available to them. There can be several challenges when it comes to converting your 401k into an IRA or alternative retirement plan.
What are the main challenges?
No longer having a U.S. address is often the first hurdle. Many expats, unaware of the challenges that face them in the future, don’t convert their 401k before leaving.
What will an IRA give you?
1. Better investment choices
As with any investment strategy, there isn’t a one size fits all approach. But, there is more choice available than you might first think. A 401k is typically limited to a few investment choices. Generally speaking, the more options you have, the more likely you’ll identify those suitable for your long-term strategy.
2. Lower costs
Costs depend on the plan you select, but there are more choices. You will be in a better position to choose a plan with lower fees.
3. Withdrawal fees
You gain control and can, therefore, manage your withdrawals and the taxes you’ll pay. IRA’s additionally offer more flexibility for asset liquidation. A 401k typically takes an equal amount of each investment.
4. Improved control
Not only will you have more control over the fund selection and liquidity, but you’ll also be able to nominate more than one beneficiary. If there are multiple beneficiaries, or a trust you would prefer to nominate, an IRA gives you more choice than a 401k.
As with any financial plan, it’s essential to review the pros and cons of each approach and consider the costs and returns for each. We recommend reviewing your choice with your long-term plans and reflecting on where you see yourself taking retirement.