401(k) accounts and non-US residents | Guideline Help Center (2024)

FAQs

401(k) accounts and non-US residents | Guideline Help Center? ›

You are considered a non-resident alien (NRA) if you are authorized to live and work in the US but are not a permanent resident or US citizen. As a NRA, you are eligible to participate in your employer's 401(k) plan as long as the following requirements are met: Your employer's plan allows participation by NRAs.

If you're a foreign national earning income on a W-2, chances are that you'll be able to invest your savings in a tax-deferred 401(k). Like any other 401(k) saver, contributions may lower your taxable income for the year, and your employer might match a portion of the contributions.

When it comes to early retirement account withdrawals, the rules are the same for both U.S.residents and nonresident aliens. Your entire 401(k) withdrawal will be taxed as income by the U.S. even if you're back in your home country when you withdraw the funds.

401(k) participants can contact our Customer Success team by submitting a form, emailing support@guideline.com, or by phone at (888) 344-5188. If you need assistance distributing funds after separating from your company, you can find instructions on Guideline rollovers here.

You may even be able to get some free guidance from your plan administrator or from your employer. However, some investors just aren't comfortable making investment decisions on their own and may need a professional to guide them through their 401(k) plan. That's where a financial advisor can be a big help.

Plans can and often do exclude non-resident aliens with no US-source income, and those are permitted statutory exclusions (like union, under age 21, etc.). Plans are not required to do so.

Contrary to popular misperception, non-citizens can open the most popular types of retirement account: a 401(k), traditional IRAs and Roth IRAs.

You are considered a non-resident alien (NRA) if you are authorized to live and work in the US but are not a permanent resident or US citizen. As a NRA, you are eligible to participate in your employer's 401(k) plan as long as the following requirements are met: Your employer's plan allows participation by NRAs.

Illegal immigrants cannot receive Social Security benefits, but that doesn't mean they can't plan and save for retirement. That means investing.

You can do a 401(k) withdrawal while you're still employed at the company that sponsors your 401(k), but you can only cash out your 401(k) from previous employers.

Can the government touch my 401k? ›

401(k) plans are governed by a federal law known as ERISA (Employee Retirement Income Security Act of 1974). Assets in plans that fall under ERISA are protected from creditors. One exception is federal tax liens; the IRS can attach your 401(k) assets if you fail to pay taxes owed.

This is where the rule of 55 comes in. If you turn 55 (or older) during the calendar year you lose or leave your job, you can begin taking distributions from your 401(k) without paying the early withdrawal penalty. However, you must still pay taxes on your withdrawals.

You'll need to speak with someone at your company's human resources department to see if this option is available and how the process works. Generally, you'll need to complete some paperwork, and describe why you need early access to your retirement funds.

Getting professional help to manage a retirement account has been shown to increase 401(k) investors' returns. If your employer offers a match, be sure to contribute as much as you can to get the full match. It's important to educate yourself about investing and learn about rebalancing your portfolio.

The Employee Benefits Security Administration of the Department of Labor is responsible for administering and enforcing the provisions of Employee Retirement Income Security Act. ERISA covers most private sector pension plans.

However, some employees may be excluded from a 401(k) plan if they: Have not attained age 21; Have not completed a year of service; or. Are covered by a collective bargaining agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining.

Basic 401(k) Eligibility Rules

Employers can make every employee immediately eligible to participate in their 401(k) plan. However, they don't have to.

An Individual 401(k) plan is available to self-employed individuals and business owners, including sole proprietors, corporations, partnerships, and tax-exempt organizations with no employees other than a spouse. You must have a minimum 5% business share to be eligible.

In 2020 there were 147.79 million people employed in the U.S. and only 60 million of those participated in a 401k. That's 40% of the workforce. About 50% of women and 47% of men aged 55 to 66 have no personal retirement savings.