College and Retirement Savings - should I stop, if moving to UK?

I currently have a college savings plan for my daughter, where I put away money every month.  I started this when she was born and she is now 22 months old.  The savings can only be used at US universities, so serves no purpose should my daughter go to a UK university.  Should I stop contributing to this savings plan and pull out the money I have saved, since I will be moving to the UK?

What do most people do with their 401K savings, when they move to the UK?  Do you keep the money in the plan and plan to use it for retirement?  Should I also stop contributing to the 401K and pull out the money I have saved?

I am aware of the tax implications of pulling out the money, but I am in a position that I can afford to pay the taxes.

Any advice is appreciated.

Personally, I'd leave the money where it is.  You don't know what life will bring you in the future or where you'll end up wanting to live out your retirement years.  Can you pull the money out of your child's savings account at a later date?  If so, I'd wait and do that, too.  Afterall, it does no harm sitting in an interest bearing account.  And who knows where she'll decide to go to university.  I'm sure there's not a whole lot in there yet (relative to college prices), but it makes more financial sense not to pay the penalties. 

Yes, I can pull out the savings at any time, but will have to pay the penalty.  I think leaving it where it is, is a good idea. 

Do you think I should continue to put money in the college savings plan and the 401K, until I move and even what about after I move?

If you have the "spare" cash to fund your retirement and college savings, I'd keep doing it.  God willing, you'll need the retirement money some day, even if the little one decides on a different route than college.  Look into the best vehicle for it though.  I haven't quite figured that one out yet, since our finances took a battering in the move. 

It might be worth hiring a dual-qualified (US/UK) tax advisor to help you make the most of your savings without getting hit by any surprise tax penalties.  They won't be able to offer you actual investment advice, but they should be able to tell you the implications of saving in particular types of accounts.  I know that guya is one, he hangs around on these boards and I expect he might chime in over the next couple of days. 

I suspect you'd have to roll your 401(K) into something like an IRA when you move across the Pond.  Unless you are moving with your company and they have some kind of agreement where you can keep funding it.  Actually you might be able to keep the 401(K) and just stop contributing to it as well.  Watch out for contributions to things like IRAs, because of the nature of tax filing while in the UK, there is a tax treaty between the 2 countries which essentially means that you pay UK tax and not US tax (within certain income limits) - effectively a you get a deduction against your earnings.  Because of this it appears you aren't getting an income and from retirement accounts and tax point of view it means you can no longer contribute.  I'd really speak to a tax professional about it further, though, as they will be able to advise you precisely regarding your position.

The college savings plan sounds tricky.  As Carrie said your daughter might decide to go to US university, it's so far off it's almost impossible to say what will happen.  Maybe you could stop contributing but just leave what's in there in place?  If it looks like down the road your daughter wants to go to US university you could potentially start contributing again?  In the meantime you could put the money in other investments that are more certain or use the money for your move to UK or whatever.  It's a difficult one...

University is getting more an more expensive in the UK, and in 18 years time it may well involve fees at the point of delivery for your daughter to go to Uni, so I'd keep the account.

Vicky

Thanks for the advice.  I will most likely keep my 401K and stop contributing, once I move or look into rolling it into an IRA.  I am going to look into the tax implications, as well.

I am still not sure what I want to do with the college savings plan.  The balance right now is not large, so if I were to stop contributing, with an average rate of return, the balance would be not be much in 16-18 years time.  If I continue to contribute at the rate I am contributing now, the balance will be around 36k in 16-18 years.  That isn't much either, considering the cost of US universities.  By that time, it would only pay for 1 year, but better than nothing.  Once I move, I would be able to increase my contributions, but I need to look into the tax implications both for now and for later, should my daughter not go to a US university.   

Ah, I misread...didn't realise that it couldn't be used in the UK...


Vicky

Vicky, I am looking into that now.  I just read on line that some college savings plans can be used at 800 foreign universities, so I need to find out if mine can.  If so, i will definitely keep contributing.

My impression was that some 529 plans could be used over here - this and the tax answer would need a lot more research; also from a UK trust expert too for some 529 plans because they all have slightly different wording...

Guya, yes, after further research I learned that my 529 can be used at some international universities, so that was good news.  I still have to do a lot of research on what my best options are, but most likely will be keeping the savings plan and contributing to it, when I move to the UK.