You do not have to be a U.S. citizen to contribute to a 401(k) for Verizon plan-but it is complicated, because your eligibility depends on things like whether you are working, what kind of visa you have, and whether your employer offers a 401(k).
Who Can Contribute to a 401(k)?
A 401(k) is available to all employees working for a company offering this benefit in the United States. To qualify, here is what you need:
- Employment with a Participating Company
First, in order to contribute to a 401(k), one has to be employed by an employer who offers such a plan. Your citizenship status or whether one is a U.S. citizen, a green card holder, or a non-resident on a visa does not matter.
- U.S.-Sourced Income Taxable in the United States
Your 401(k) contributions are paid in pre-tax money, which by definition means your earnings are subject to U.S. taxation.
- Work Authorization
Non-citizens in valid work authorization status may also be eligible to participate in the 401(k) plan, such as under an H-1B, L-1, or other type of employment visa, when an employer extends such benefit.
How Does Immigration Status Impact Your Contributions into 401(k)?
Your immigration status can affect how you manage your 401(k) savings in case you actually leave the U.S., or any tax implications occur.
- Resident Aliens (Green Card Holders or those who pass the Substantial Presence Test) pay taxes similar to US citizens. They have complete contribution allowed to a 401(k), realization of tax benefits (and withdrawal of monies) subject to all US standard rules.
- Non-Resident Aliens can also contribute if their employment is covered by a participating company, but usually, certain taxation and withdrawal rules that apply in their home country and any taxing treaties it has with the United States.
What Happens to your 401(k) If you Leave the U.S.?
If you relocate to your home country, for instance, your 401(k) does not disappear. However, it requires some strategic planning in order for one to handle it effectively.
- Leave It in the U.S.
You can leave your 401(k)-account sitting there and keep on growing. On the other hand, if you withdraw money while abroad, additional taxes and penalties may come in, especially if you happen to be below 59½ years of age.
- Withdraw the Cash
Early withdrawals below age 59½ have an additional penalty of 10% above and beyond regular income taxes. Additional withholding taxes may also apply to nonresident aliens.
- Rollover to Another Retirement Account
Depending on the international agreement about specified financial norms, it may be possible to transfer funds if your home country has similar retirement investment plans.
Tax Considerations for Non-Citizens with 401(k)s
Non-resident aliens contributing to a 401(k) should understand the tax consequences in both the United States and their home country:
- Risks of Double Taxation
Where there is no tax treaty, it is likely that you get taxed by both countries on your 401(k) withdrawals.
- Tax Treaties
Treaties between the U.S. and certain countries, such as Canada, the U.K., and a significant number of European Union nations, exist to alleviate double taxation or even avoid it when it comes to retirement income.
- Required Minimum Distributions (RMDs)
If account holders turn 73 years old, they have to withdraw a portion of their savings per year. There may be additional withholding taxes if the non-citizen lives abroad.Â
At M & A Wealth, navigating retirement savings as a non-citizen should not be frightening. Our team is experienced in focusing on helping you achieve the best with 401(k) for Verizon plans, understanding tax implications, and ensuring your retirement savings work for you. Contact M & A Wealth today to arrange a personal consultation and take that first step towards securing your financial future.
