Expiring H-1B Visa
How An Expiring H-1B Visa Affects Your Financial Plan
It can be a stressful time if your H-1B visa status is up in the air. Whether you lost your job, you are waiting on an extension approval, or you are reaching your visa’s limit, there are a number of things to prepare and figure out. While it may not be the first to come to mind, knowing what to do with your financial accounts should be one of these things! Especially if you end up needing to leave the country, you will be faced with some important decisions on where to keep your assets. Luckily, we can help.
What happens to my bank account if I lose my visa?
The short answer: likely nothing. The US does not prohibit you from owning US banking and investment accounts when your visa expires. In fact, it is generally best practice to leave these accounts open, especially if you are considering returning to the US later. Just watch out for account balance minimums or minimum transactions you need to meet to avoid fees or account closure. If you decide to close your US accounts, make sure you are aware of all tax consequences and account fees that may occur.
While the US allows you to maintain these accounts while abroad, your specific bank or brokerage may not. Due to strict regulations and increased management needs of foreign account owners, there are banks and brokerages that will close your account if you update to a foreign address. There are ways around this, such as using a friend’s address or forwarding your mail from a US address. However, these are not best practices and could result in more severe problems down the line. It’s best to notify your bank and, if needed, transfer your funds to a foreign-friendly bank. (See more below.)
If you are currently waiting on approval for an H-1B visa extension but your visa has expired, you should be able to continue banking and investing. However, be aware that this will likely affect your ability to access certain banking privileges such as taking out loans. The best way to avoid this is to begin your visa extension application as soon as possible. You can typically file as early as six months before the expiration date. If you need to accelerate the process, maybe for an upcoming home purchase, you may be able to upgrade to premium processing. It comes with a hefty fee, but premium processing on H-1B visas is expected to last 15 calendar days or less.
Can I keep my retirement accounts if my visa expires?
If you are staying in the US under another visa or you are planning to return in the future, it is likely best to leave your retirement accounts open. These accounts are great, tax-advantaged ways of preparing for retirement. Leaving them open allows your money to continue growing and working for you! If you decide to leave your accounts open, it is still important to know how they will be taxed in your home country. Many countries will acknowledge the tax-deferred growth of these accounts, but it varies by country and by account type.
I’m not returning to the US. Should I cash out my retirement accounts?
If you are leaving the US permanently, it may seem like bringing your retirement savings with you is the best decision. After all, it makes a lot of sense - why leave retirement money overseas? While transferring your US retirement savings to your home country may seem obvious, it’s generally not a great idea.
Non-US retirement accounts do not meet the requirements of US pension plans. Therefore, you would likely be unable to rollover any funds and would instead have to cash out your accounts in order to take them with you. Cashing out your retirement accounts is rarely the best option and can have large, long-term consequences to your financial plan. Here are a few of the reasons why:
You will be forfeiting your tax benefits. Many countries (depending on the tax treaty) recognize US retirement accounts and their tax-advantaged statuses through tax treaties. By closing your retirement accounts, you would be forfeiting the benefits that make retirement accounts such incredible wealth-building tools.
There will be a penalty for early withdrawal. Not only would you be giving up tax advantages, you would also be creating a large tax bill. Any non-qualified withdrawal (most often a withdrawal below age 59½) from a US retirement account would be taxed as ordinary income and will incur a 10% withdrawal penalty. This would cause a substantial drop in your accounts’ values with little to no benefit.
You may be giving up access to great investment options. As an investor in the US, you have access to modern, low-cost investment options that are not available in many countries. If you close your account, you may be forfeiting your access to these investments. Even a small percent difference in fees can have large effects on your overall portfolio growth when compounded over time.
You may be forfeiting the financial stability of the US. In addition to modern, low-cost funds, the US also provides economic stability. There are many developing nations whose economies and government-backings are less assured. Having funds in a US government-backed account could provide a valuable level of security to your finances.
Finding a Foreign-Friendly Bank & Brokerage
Once you decide which assets you want to leave in the US and which you want to take with you, you then need to inform your current brokerage. Not all banks and brokerages allow non-residents as clients. In fact, if they discover you have moved abroad and it is against their policy, they are able to freeze and liquidate your account without your consent.
It is becoming increasingly difficult to find investment services that allow foreign investors. This is largely due to increasing global efforts to prevent international money laundering. There are also certain investments that non-residents cannot participate in, like certain mutual fund companies. In the US specifically, there have been increased regulations that resulted in foreign citizens becoming a large administrative effort and an added compliance risk. Instead of taking on the risk and burden, the institutions instead deemed to opt-out and make it part of their policy to only allow US-residents.
It may be more difficult to find a brokerage, but there are still many options out there. You can typically find lists of international brokerages online, although it’s always best to confirm with your own research. If you need help finding a foreign-friendly bank or brokerage account, reach out for a chat. We can help you find international banking and investing services that will work with you as you transition overseas.
The Bottom Line
If your visa status is expiring, it can be overwhelming and difficult to know what to tackle first. The great news is that the US allows non-residents to keep their US banking and investment accounts open. Not only will this make the moving process simpler, but it also allows you to maintain access to tax-advantaged accounts, high-quality low-cost investment options, and security from insured brokerages.
With time though, you will likely find that having accounts across multiple countries often adds layers of complexity to your financial plan. There are tax consequences, different withdrawal strategies, and it all varies by country and tax treaty. You don’t have to manage it alone. At Aberdour Investments, we help simplify your financial life and guide you through these complex planning decisions so that you can Spend Your Life Wisely.