[wyh]

Hi,

I was working in US from Oct 2009 to Oct 2010 with H1B visa.
Since Nov 2010, I have been transferred to Australia by the US company to work for 1.5 year.

My employer is required to pay pension fund for me in Australia.
So they gave me an option to either :

I) Continue with my 401K, they pay my pension fund in Australia and when I leave Australia after 1.5 years, I should refund them the Australian pension fund they have contributed.

OR

ii) Stop my 401K, take up the pension fund in Australia.

My question is, if I stop my 401K, can I still keep the money in the 401K without withdrawing it until I am over 59 years old?
Or am I required to withdraw my 401K as soon as I stop contributing to the fund?

Thanks,
Yin

[AtlantaTaxExpert]

Yin:

There are other implications here other than the tax consequences. A comparative analysis between the 401K and the Australian pension fund is needed to determine which is the better deal pension-wise.

Assuming the Australian assignment is temporary, you should NOT be required to withdraw any funds from the 401K, nor should you if you are under the 59.5 year age limit.

[wyh]

Hi AtlantaTaxExpert,

Thanks for the reply.
Hope you can confirm my understanding.

Yes, the Australian assignment is temporary.
However I am not sure whether after this assignment, the company will send me back to US or send me somewhere else.

Since I am only on H1B visa and my visa will expire in Sept 2012.

Questions:
1) If my company send me somewhere else after this assignment or I quit the company and not return to US, does that mean I can still keep my 401K in the US until I retire to avoid the early withdrawal penalty?

2) Does that also mean I will not be forced to withdraw my 401K as soon as I no longer have any ties with US?

Thanks in advance.

Merry Christmas and Happy New Year!
Yin

[AtlantaTaxExpert]

Yin:

1) The custodian of your company's 401K account will probably let you stay in the account until retirement age if the balance of the 401K exceeds $10,000. If not, you can always roll the money into a rollover IRA woth any of a number of brokerage firms (I normally recommend Charles Schwab, but there are other brokerage firms who will accept your account).

2) No, not as long as your account balance exceeds $10,000.

[wyh]

AtlantaTaxExpert,

Thank you for the quick reply.

I certainly do not and will not have $10,000 in my 401K any time soon. Maybe another 10years.

If I start contributing to Australian pension fund, I will be taxed at 15% now and when I am force to withdraw it after my assignment is done in 1.5yr time, I will be taxed at 35% as penalty.

I am now 32yo. Therefore, it will be quite some time for me to reach retirement age yet.

I am guessing since I am not forced to withdraw from 401K and can have it rollover to IRA, this will be a better way in managing my retirement.(I am guessing I can rollover even if I am a non-US Citizen / Resident. Right?)

Another question. When you mention other implications and comparative analysis in your earlier reply, can you please elaborate by giving an example?

That would help tremendously.

Thank you,
Yin

[AtlantaTaxExpert]

Yes, you CAN roll it over even as a non-citizen. Charles Schwab should help you.

Based on what you said about the taxes on the Australian pension, no comparative analysis is needed. Stay with the 401K.

[wyh]

Thanks. That helps.

[AtlantaTaxExpert]

Glad to help!