How should our consideration of financial savings vehicles change if we're planning on emigrating to a country with a tax treaty with the US? My spouse and I are planning on moving out family to the UK in about 10 years. I don't know if we'll stay there through retirement, but we'll be there at least 5-10 years. We'll be working at least part time while we're there.
Right now we're putting most of our money into a pre tax deferred comp vehicle (457) but are putting a small amount into a Roth IRA. Our AGI, is about $58k right now. We put $18,200 into our 457s (2, so we're not over the limit), $4800 into a Roth IRA, $5000 into a flex spending account for child care, and about $5000 that goes into our mandatory pension scheme. We're in the 15% tax bracket.
We don't plan on touching our Roth IRA or 457 for the first few years after we emigrate but we don't know what country we'll be living in once we do decide to start drawing from them. How do the tax treaties work? If we draw from the 457 while living in Britain we'll owe tax to the US, correct? And we may owe a bit more to the UK government since they in general have higher taxes, is that correct? Anyone know how the UK treats Roth IRA withdrawals? Considering we may be withdrawing money while in the UK would it make more sense to max out Roth IRAs taxed at 15% (mostly, maybe a bit at 25%)?