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ranchod · May 8, 2009, 04:37 AM

|| Sarvam Krishna Arpanam ||

Hi,

I am on a H1B Visa. I have a question about 401k.

I do not intend to stay for long in the US. However, my employer matches 100% of my contribution to 401k (upto 10% of my salary).

I will be here for 3 years and contribute 4K per year thereby making a contribution of 12K in three years. My employer will also contribute 12K in these 3 years. At the end of three years,

1) Will I be able to take my money back while leaving for my home country?

2) How much money will I get back? I do know that it will depend on the performance how my contribution is invested. Assuming a scenario that there is no loss or gain, how much of that 24K will I be able to take back to my home country?

3) What happens if I don't withdraw this money while leaving the country? Can I get this money by staying in my home country at my retirement age?

Any help will be greatly appreciated

Regards
Prakash

AtlantaTaxExpert · May 8, 2009, 12:00 PM

1-2) Yes, but in doing so, you will pay income tax to the state and IRS plus a 10% Early Withdrawal Penalty to the IRS. In total, expect to pay about 35% in taxes.

3) You CAN leave the money in the U.S. by rolling it over into a brokerage (I know for fact that Charles Schwab will welcome your business with open arms), then managing the account from your home country via email and phone. When you withdraw them money after 59.5 years of age, some income will be due (rate will probably be determined by treaty), but it should not be near as much as you would pay if you withdrew it when you return home.

The Texas Tax Expert · May 8, 2009, 05:45 PM

Even if you pay taxes when you leave and withdraw the money, how can this be a bad deal if your employer is matching you dollar for dollar? If you know somewhere else where you can get a 100% return, please let me know :)

ranchod · May 8, 2009, 09:55 PM

Originally Posted by The Texas Tax Expert

Even if you pay taxes when you leave and withdraw the money, how can this be a bad deal if your employer is matching you dollar for dollar? If you know somewhere else where you can get a 100% return, please let me know :)

:) That's true.

I was not sure if I will get my employers contribution too if I withdraw earlier

MukatA · May 9, 2009, 12:14 AM

Normally, when you quit the job the employer will send you check for your 401K investment after withholding 20% tax.
You will need to report this as income on your tax return and as well pay 10% penalty of the early withdrawal.

The Texas Tax Expert · May 9, 2009, 06:03 AM

Originally Posted by ranchod

:) Thats true.

I was not sure if I will get my employers contribution too if I withdraw earlier

OK, if you are asking whether you are able to keep your employer contributions, that depends on your plan. Your employer can tell you that. You need to ask about the vesting rules.