SS benefits, 401k and Tresor Public

[JMD51]

Hi,

I am new to this forum which I find very interesting.
We spend close to 15 years in NJ with a Green Card status and we are now back to France after being laid off in the 2009 melt down. I was able to fing a one year contract which is going to end this year and then can get some unemployment benefit. I could take my retirement soon in France but I am trying not too, having to wait until 66 to maximize the US SS benefits.

If I read well the different IRS and Social Security publications, it seems that since I will no longer being able to maintain my GC status, my SS benefits will be taxed 25,5% and the proceeds of my 401k 30%. On top of it, from the threads I read, it is possible that the Tresor Public may very well try to add its own taxes on the 401k (or IRA if/when I do I roll over).
I was wondering if any of you had some advice how to preserve as much as possible of the money I will be getting from the US, because right now, future is looking gloomy ( -30%, exchange rate 1,4 - 1,5).

Thanks for your advices.

Jean

[Bevdeforges]

I'm in a somewhat similar situation, looking into to "transferring" my IRA and 401K funds from the US over here to France.

I'm waiting, too, to hit 66 or beyond to claim my social security, so I can't really help you there, but on the 401K and/or any IRA you may have over in the US, you might want to look at the French tax treatment of "assurance vie" especially foreign assurance vie, which you now are supposed to declare on your IR form. (box 8TT)

I've been declaring my 401K and IRA as "foreign assurance vie" contracts since the law was changed. As it turns out, they fit pretty nicely into the definition, and depending on when you first started your 401K, you may find they fit into the category of "produits exonérés".

Since you're being taxed by the US anyhow, they probably shouldn't be taxed by the fisc. And, there is also something in the instructions (which I need to have my DH read over to see if I'm understanding correctly) about contracts which were paid into during the time you were not subject to French income taxes. I think that gives you a further "out" as far as the fisc is concerned. In any event, the tax you're paying to the US is "deferred" (i.e. you're paying taxes on income you received in prior years, not on current income). Just because the US taxes your withdrawals from your 401K as regular income doesn't mean that it's regular income for French income tax purposes.

Take a look at one of the French books of IR instructions under the topic of "Produits des contrats d'assurance vie" and see if you think you can justify your 401K under the definitions given there. I admit I haven't gotten to the point of trying this yet, but it seems at least a logical assertion to me. At a minimum, you should consider declaring your foreign "assurance vie" on your 2010 French declaration, which may give you room to maneuver once you decide how you want to withdraw from your 401K fund.
Cheers,
Bev