401k Withdrawal

[lkrath]

I have 401k saving in USA. I have moved oback to India in 2010 and left the same organisation in 2013. So i know that i am eligible to withdraw my 401K amount now BUT can anyone help me answering my below queries.

1. If i withdraw in this year what will be the tax implication. If i leave my money in the account and withdraw next year will i get any tax benefit.

2. If anyone can suggest me any tax saving plan please let me know.

3. If i leave the money in the account for some years.. is it advisable to do so.

I dont have any plan to go back USA in new few years. Neither i have any other income in USA. I have a bank account and 401k account in USA thats it.

Please advice.

[bUU]

You didn't indicate your age, but I assume you're not yet eligible for penalty-free withdrawals according to US law. I'm not an expert, but I believe you would be subject to taxation (and chances are that a 20% [?] tax withholding would be imposed, so you'd have to file US tax form 1040 NR) and a 10% early-withdrawal penalty would be assessed.

However, that might still be a decent option, since currently IRA custodians are required to withhold 30% to pay the federal tax on IRA distributions to non-resident aliens (even after age 59 1/2.)

The United States does not have pension treaties with other nations that avoid US taxation on 401k and IRA withdrawals. (That's often a source of confusion by some.) I think I remember reading that the United States does work with Canada to help folks transfer such monies into Canadian retirement accounts, but that's still after paying US tax.

I have read something about a technique whereby you'd roll the money into an IRA (in the United States), assuming you can find a custodian that will allow a non-resident alien to have an IRA. Then, do a Roth conversion every year, low enough that you aren't liable for US tax on the conversion. Then you'd be taking what are effectively supposed to be tax-free withdrawals from the Roth IRA once you're old enough. However, I don't know if that actually could work, nor do I know if that won't still be hit with the 30% federal tax on IRA distributions to non-resident aliens. Sounds dodgy to me, so there's probably something illegal about it, or something in place to prevent it.

[cardtrick]

You are not liable for taxes on your worldwide income, since you're a non-resident alien. You can keep your withdrawals low enough, so there are no taxes. So, all you'll get hit with is the 10% penalty for early withdrawal.

[lkrath]

Thank you soo much for your reply and guidance. I am 35 years old.

So what should be a better plan? Should i withdraw entire amount and file tax return? I dont have have big amount it must be around 5k only. So keeping this in mind please suggest should i withdraw full amount and close the account?

When you say to keep the withdrawal low . what is the lowest amount on which there wont be any tax?

[bUU]

You'll need to consult an accountant to be sure - we're just random people on the internet, and your's is a relatively uncommon situation.

[ryaneinstein]

I have 401k saving in USA. I have moved oback to India in 2010 and left the same organisation in 2013. So i know that i am eligible to withdraw my 401K amount now BUT can anyone help me answering my below queries.

1. If i withdraw in this year what will be the tax implication. If i leave my money in the account and withdraw next year will i get any tax benefit.

2. If anyone can suggest me any tax saving plan please let me know.

3. If i leave the money in the account for some years.. is it advisable to do so.

I dont have any plan to go back USA in new few years. Neither i have any other income in USA. I have a bank account and 401k account in USA thats it.

Please advice.

Please PLease Please do not do an early withdraw the penalty will not suffice. Hold off. Getting a payday loan is almost as beneficial as doing this in my opinion if that goes to show you how bad it is.

[Jerry91]

As you do not have any plans to come back to USA, it will be better for you to withdraw the money from your 401k account. Apart from the penalty part, you won’t be liable for anything else.

[bUU]

Penalty and tax.