401K strategy for Canadian layed off in US and returning

[bsayar]

Hi,

Should I maximize my payroll deduction for the remaining months before layoff (I have 3 more months going on payroll) to reach $15,000 maximum limit (assuming I have lots of money on the side). I will be on payroll till May, then will receive a package of 5 month salary plus 1 month vacation.

Will I be eligible for full $15,000 deduction or is it based on salary earned in US, or time worked in US on payroll ?

I need answers quickly as time is running out.

Thanks. Bobby.

[nelsona]

You are eligible for the full $15K. Your company may limit how much of your paycheck you can plough into your 401(k), so you might not be able to meet the $15K by May (you won't be able to put any of your severance into the 401(k)), and of course you will not get matching funds for the 'missing' contributions after you are laid-off.

But, other than that there is nothing stopping you from fulfilling the limit as soon as mathematically possible. if you find another job however, rememebr that you will not be able to contribute more than the $15K TOTAL between the 2 jobs.

If you are contemplating return to Canada, be sure you wait in US until you get your severance, to avoid having it taxed in Canada.

[bsayar]

Greetings,

Thanks for the tips. Any other things to be kept in mind if returning to Canada as far as 401 K goes ? Some questions that come to mind that I need to investigate, if anyone has answers I would appreciate it ...

1- will I be able to change portfolio allocation after return to Canada ? I gues not, if current brokerage firm (Fidelity) does not have brokers in Canda ... right ?
2- if I transfer from Fidelity to another firm will it remain 401K or do I have to roll it over to an IRA account ? (Keeping in company 401K is better, because you can withdraw pentaly free as early as 59.5 years old, but IRA only kicks in at 65 or later)

I will ask Fidelity about it ... I doubt they have Canada operations.

Bobby

[nelsona]

There is no difference in the age when penalty dissapears between IRA and 401(K), your information is incorrect on that point. I suspect that your 401(k) manager is putting out this false info to keep people in his fund: something to consider when determining if you should leave your funds with him.

To keep your 401(k) intact, it must be kept with that management firm, otherwise it comes out to either a rollover IRA or, if you work at another firm with their own 401(K), that firm's plan.

It is extremely important that you ascertain BEFORE leaving whether your curent dealer will let you mange your account from outside US. If not, you will need to take steps after you leave your job, but before returning to Canada to roll this over to an accepting IRA, set up some arrangement or at worst collapse it.

There is no leagl way for a broker in canada (even if they are a firm associated with your current broker) to manage a 401(k) or IRA. You need to deal with a US broker who has obtained legal permission to deal with you, or find some other way of getting around this issue.

[thegarnetgroup]

BSayar
1) If you roll your current 401K into an IRA it will not be problem to change the allocation.

[bizkit]

Would TD Waterhouse be willing to manage it for a Canadian since they have ties to TD in Canada?

[Rickerbucks]

Yes BUT, you have to move the account TO them BEFORE you move to Canada. They want a US address to open a new account.

They will let you trade an IRA account after you move BUT for some reason they will not open a NEW account AFTER you have moved to Canada.