The 401(k) You Forgot About

Janice Diaz (00:00)
You moved abroad for freedom, not confusion, but your money, your taxes and your U.S. ties didn’t stay behind. I’m Janice Diaz, an American living in Italy with more than 25 years in U.S. and global financial services.

My co host, Robert Rigby-Hall is a dual U.S. UK citizen who spent his career leading international firms and developing cross border teams.

Together for over a decade, we’ve built financial education for Americans abroad and U.S. connected families, helping you rethink what really follows you and how to make smarter decisions wherever you Live. Welcome to RethinkExpats!

Disclaimer: This show is for education. It is not tax, legal or investment advice. Always speak with a qualified professional about your situation.

Robert Rigby-Hall (00:52)
Welcome to another episode of Rethink Expats. And today we’re going to be talking about the 401(k) you forgot about. Lots of Americans abroad don’t realize that they have a 401(k), they left it behind. But it’s still very much alive. It’s sitting inside a company. The IRS hasn’t forgotten about it. And you need to remember that it’s there and decide what you can do about it. There’s also lots of non-Americans who worked in the U.S. for a period of time who received 401(k)s. Then they went back home and they forgot all about it as well. That’s a particularly large population because that group tended to then return to their home country and just not think about it.

As an owner of an advisory business, I’ve seen many clients over the years who’ve forgotten all about it. One of them was a good friend. He was Irish, lived in the U.S. for five years with a bank, went back to Dublin, and then suddenly, literally 15 years later when I’m having a conversation with him, says, huh, Robert, I think I might be in that category. I think I have a 401(k). Can you help me track it down? So lots of examples of both Americans or people who worked in the U.S., who’ve left 401(k)s in the U.S. and really need to start to take ownership of them.

Janice Diaz (02:08)
I’ve built financial education around this topic for over a decade because it’s such a common blind spot. People think I’m overseas, I’ll deal with it later and later usually means a problem. It usually comes up as they getting closer to retirement or there’s a tax situation and leaving it out there has many implications. Robert what is a forgotten 401(k)?

Robert Rigby-Hall (02:33)
Thanks, Janice. Yeah, it’s I think of it as a 401(k) savings plan that you left an old employer. Often it’s been untouched for many years. So it’s a savings retirement account that you left behind when you switched jobs, perhaps in the U.S. or when you, as I shared earlier, when you moved back from the U.S. if you’re an expat working in the U.S., you’re no longer adding to it. You’re probably not even checking in on it, but it’s still there. It’s invested.

It’s earning or losing and it’s costing you money in hidden fees. So for Americans abroad, these 401(k)s can be even riskier. They’re harder for you to get access to if you’re living overseas. It’s very easy for you to lose track of the account details. It’s still fully taxable and reportable to the IRS. So these forgotten 401(k)s they’re not lost, but what they are is they’re neglected.

So rolling these 401(k)s into an IRA gives you much more control, visibility, and flexibility, no matter where you live in the world. And it’s worth remembering that any good advisor also cares about this. Orphan accounts often create complexity, so actually working with an advisor to bring it into your portfolio of assets can be really helpful.

Janice Diaz (03:45)
And there are lot of reasons why expats forget, right? They move abroad, you’ve got a new life, focus shifts, you’ve got a new job, potentially. And so there are a lot of things going on and you think, well, it’s a 401(k), it’s my account, what could go wrong? It’s just sitting there. I’ll get back to it. It’s mine.

But paperwork feels impossible sometimes when you want to figure it out or transfer it over. so you just let it sit. Maybe you don’t have access to an advisor or you haven’t sorted that out. so account statements may not be reaching you because you’ve changed your address. so there are reasons why it’s easy to forget. why does it matter?

Robert Rigby-Hall (04:25)
Yeah, it’s a great point. I’ve been on the other side of it where I was trying to work to find out what my UK retirement assets were and how I could consolidate those retirement assets from different employers into one place. So I’ve seen it from the other side and it takes a lot of work to really get a hold of them, consolidate them and then to be able to start managing them and that’s really where a good financial advisor can come in and help get clarity for you.

I’ve been working with another financial advisor recently on what do we need to do in terms of social security in the UK as well. So we’re applying the U.S. and making sure you maximize your contributions. So there’s clear things that you can do both in terms of getting hold of retirement assets and managing those retirement assets as you go along.

Janice Diaz (05:14)
So, What’s the risk of doing nothing, outdated beneficiaries, that’s super important. RMD rules, again, super important, losing track of balances, all of this is important, but yet they are so commonly forgotten, my take on it is that I moved and I had a 401(k) and it was mine. So where’s it going? But that’s as simple as or naively I thought about it. But there are, issues that can come up like the beneficiaries and the tax rules and things changing. are those the common risks Robert?

Robert Rigby-Hall (05:47)
Yeah, I think they are. It’s I mean, the biggest risk is that you’ve got retirement income sitting there that you really have a right to, want that retirement income. So there’s risks that go along before you start withdrawing because you’re not choosing to invest. You don’t have control over how that’s being invested. And it may be that you’re at a stage of life where actually you’d rather do some riskier investments with some of that 401(k) money because you’ve got 10-15 years, 20 years before retirement it may be that you’re coming up to retirement and actually you’d like to take a less risky stance now if 15 years ago you left those 401(k) retirement assets and you said your profile was one of high tolerance of risk you never changed that risk profile now you’re getting near retirement, those retirement assets are invested in riskier assets, which may not be the best status of those investments for where you are in your investment lifecycle. So getting hold of them, being able to manage them, being able to set a risk profile and risk tolerance for them, that’s the downside. Plus, as I said, the fact that you simply don’t know that you have $200,000 worth of 401(k) sitting in the U.S. and that you lost track of that. And that’s going to generate some retirement income for you. So really important to work with an advisor to consolidate those 401(k)s you may have in the U.S. And if you’re a non-American, but you lived and worked in the U.S. for a period of time, exactly the same thing applies. Use this as an opportunity to find those assets, kind of recover those assets, get control of them and start investing them appropriately so that you can generate some income for yourself. Remember, these are assets that you contributed to, your company contributed to, you deserve to be able to benefit from those assets. So this is the opportunity to get hold of them by converting them so that they’re no longer sitting there in a company 401(k).

Janice Diaz (07:52)
We want to raise the awareness because there isn’t much awareness on this topic. You don’t often see advisors speaking about it, forgotten 401(k). Yeah, but they don’t really explain how deep the issue can be. And so we’d like to raise the awareness. We’d like you to know where your accounts are, know the basics of what’s required. And these are things that you should keep in mind.

Robert Rigby-Hall (08:16)
Exactly right. And it’s important that you work with a qualified U.S. advisor. You don’t want to make some moves that might mean that you move the account and you end up paying taxes when you move it. That would clearly create a loss of value. This information we’re sharing really is around providing you with education about that. Clearly not advice for advice. You need a good U.S. financial advisor who can help you through it.

So just remember, get hold of those assets, understand them, take control of them, invest them. They’re your assets, you worked hard for them, you invested your money as did the company to create them. So take hold of them, start getting value from them, start building that retirement asset for yourself. Don’t wait until it’s too late, get some control back.

Janice Diaz (09:05)
We put together a 401(k) rollover abroad checklist, what to gather, what to confirm, and the questions to ask when you’re trying to deal with an old employer plan from overseas. It’s available on the Rethink Expat site. Share this with anyone you know living abroad who has a 401(k) sitting in the background. Ignoring it doesn’t make it disappear. It just makes the cleanup harder later.

For more episodes and resources for Americans abroad, head to rethinkexpats.com. If you want to find a U.S. licensed advisor or dig into more education, visit americanexpatadvisors.com