Early retirement non-resident

A

Ahearn

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Hi, I worked in Ireland for a company for 8 years and accumulated a DC pension fund. I transferred to the US arm of the same company. My pension has a leave date of the date I transferred. I’ve been unable to contribute to it for the past 9 years (time in US same company), so it just goes up/down with the stock market. I can’t transfer it to a 401k, revenue rules.

can I early retire in Ireland and get access to TF lump-sum and taxable cash While still staying employed in the same company in the US? Otherwise it’s just dead money at the whim of stocks right now. Any other possible options? anybody have any experience with this? I’ve read a lot but it’s mostly ex_pat retirements back to Ireland with foreign pension funds.

cheers!
 
We have consulted on a few cases exactly like this recently.

You need to have reached the minimum age to access benefits, typically 50 or 60 and you move into an Irish post retirement structure which allows you to file your taxes with the IRS with the minimum complexity.

You need to have a big enough fund to make the effort worthwhile so in the meantime put it all into a global equity index fund
 
Thanks Marc, I am 50+ but the fund is not large, circa 150k, it is currently 97% in an indexed global equity fund. I am not overly concerned with the tax bill once it is not ridiculous. Just looking to get access to the fund from the states.
 
Ok you’ll potentially be able to have access to up to €86,500

you will need to take tax advice in the USA around the implications of receiving a foreign pension payment either in one payment or instalments

Just because the first 25% is tax free in Ireland has no bearing on the tax treatment of the pension in the USA

it isn’t going to be cost effective for you to leave it for more than a few tax years
 
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Ok is that 63,500 the minimum AMRF requirement? I figured that did not apply since that was some sort of policy fund where I would need a contract with an insurance company which could not take place for non residents (like an ARF), maybe I am mistaken - I will go read again. Agreed on the tax advice.
 
Yes exactly you need an AmRF remember it’s Irish law that applies to the pension and US to the payments with a credit for any Irish tax paid at source
 
Ok thanks again, regarding the AMRF do you happen to know if foreign regular income is used to satisfy the odd 12k per annum requirement? I.e. I intend to continue in employment in the U.S. which would have a normal retirement plan also. I guess I just don’t understand this 63k ’hold’ for a non-resident. I read Irish life don’t offer ARF/AMRF as they are not licensed outside Ireland but did not read it anywhere in the revenue pension book.
 
It has to be guaranteed income to satisfy the €12k requirement so a state pension or similar. Employment income won’t count
 
Last question, (I feel I am delving into professional services here) would you know the current tax rate for a taxable cash after tax-free lump sum - hard to determine if it is 20% 40% + USC + PRSI.
 
This is the position for US citizens living in Ireland with an Irish pension. Since the IRS taxes US citizens on their worldwide income irrespective of where they live, it’s reasonable to assume that the rules are going to be the same for a resident alien.

Pension planning

Under the United States and the Irish Income Tax Treaty a US citizen employed in Ireland and participating in a pension plan established by the Irish employer, the rules are that the employee may deduct (or exclude) contributions made by or on behalf of the individual to the plan; and benefits accrued under the plan are not taxable income. The Treaty further provides that the deduction (or exclusion) rule only applies to the extent the contributions or benefits qualify for tax relief in Ireland and that such relief may not exceed the reliefs that would be allowed in the US under its domestic rules.

Distributions or lump sum payments from a pension to the U.S. residents living in Ireland are subject to taxation in the U.S. based on the “Saving clause” in the Ireland-U.S. Tax Treaty Article 1:

“Notwithstanding any provision of the Convention, a Contracting State may tax its residents (as determined under Article 4 (Residence)), and by reason of citizenship may tax its citizens, as if the Convention had not come into effect”

(http://www.irs.gov/pub/irs-trty/ireland.pdf)

To avoid double taxation, the United States allows a credit against United States tax through tax paid to Ireland on the same income

So I use something like the PWC income tax calculator to work out the Irish tax due on a given gross pension income

download.pwc.com

Income tax calculator — Budget 2025 | PwC Ireland

The provisions of Budget 2025 have been announced. Use our interactive calculator to work out your income tax liability for the year ahead.
download.pwc.com download.pwc.com
 
I had a couple of follow on question on this if anyone can help (after receiving early retirement options)

25% tax-free does not seem to be based off the fund value? Is this normal?
there is a taxable-cash limit that is so low it seems ridiculous so excluded as an option? This is normal?

I cannot avail of an ARF/AMRF as a non-resident. I am left with one option, small tax-free lump sum and annuity for life.

do I have cause to appeal any of these items with the scheme admins/revenue etc?
 
So after looking at this further, the 25% tax-free lump sum from the fund valuation is based of getting an ARF/AMRF. Seems I cannot do this as a non-resident. Looking for this information currently, just read it on one site.

the restrictions on taxable cash of 30,000Euros is a Revenue limitation - trivial pension.

do I have any recourse to speak to Revenue on this? Seems so ridiculously restrictive for non-residents - I just want my funds that I’ve invested and managed over the last almost 10yrs. Or any point seeking expertise in retirement advice? Seems it hard and fast at the minute.

my Options would seem to be a small TF lump sum and v.small annuity.
‘or just forget the early retirement option and just leave it at the whim of the stock market.

meh...
 
Who told you that you can’t arrange an ARF as a non-resident? We do this all the time

plus as previously noted your lump sum is tax free in Ireland, you don’t live in Ireland
 
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