Can I roll over an IRA or 401K to a KiwiSaver?

At the moment, we’re in the midst of a wave of new US migration to New Zealand. This does tend to result in common questions regarding the switch in financial life from the United States, to NZ.

In todays very brief article, we’ll cover this very common question of whether a US based retirement account can be rolled over into a KiwiSaver.

We’ll jump straight in…

Can I move my 401k and IRA to a New Zealand KiwiSaver Account?

The short answer here unfortunately, is no. Unlike the UK and Australia, which have provisions to transfer a pension to a New Zealand based retirement account, no such agreement exists with the US.

This does mean that without any rollover possibility from a US retirement account to a New Zealand KiwiSaver, only a full withdrawal and then transfer is possible.

What happens if I withdraw my IRA and transfer to New Zealand?

The tax implications of this can vary depending on the account type, your age, and whether you qualify for NZ transitional residence status.

As a basic requirement, if you wish to transfer your IRA or 401k to New Zealand, you must initiate a withdrawal from your US based provider.

This may be subject to the 10% early withdrawal penalty if you’re aged under 59 ½, and depending on the account type, you may also have US withholding tax applied, to pay tax to the IRS.

Will New Zealand tax my IRA or 401K withdrawal?

Potentially yes, and New Zealand tax advice should be sought from a competent professional. There are instances whereby a new migrant to NZ may be in their “transitional residency” period for tax purposes, resulting in no tax owing on the IRA or 401K withdrawal in NZ. However, the withdrawal could also be subject to full taxation at NZ tax rates.

It is important to obtain not only specialist US tax advice here, but also NZ tax advice. We are able to provide excellent referrals to specialised NZ advisors in this area.

Is it a good idea for me to transfer to KiwiSaver?

As you may have seen from other articles on our website, KiwiSaver can attract significant US reporting obligations, and in some cases US tax also.

However, depending on your specific situation, it may still prove a worthwhile switch from a tax perspective, and specific advice should be sought.

Summary

In summary, there is no formal process to transfer a US based retirement account to an NZ KiwiSaver or similar fund. The process does require a full withdrawal to take place, which means that any taxes or penalties due on the withdrawal, would need to be paid at that time.

If you’d like to discuss any of the issues in our article above further, contact us today for specialist US tax advice – info@usatax.nz – 09-242-3445