[sgsumitgarg]

Hi,
I am an Indian, presently working for US company (subsidary of my Indian company).
I will be in US for a year or so and then after return back to India.
My employer gives the option to enroll for 401K plan.

I want to know how can I withdraw the amount deposited in 401K plan.
Also what would be the penalties that I would be required to pay?

Thanks in advance for your answers.

Regards
Sumit Garg

[AtlantaTaxExpert]

Sumit:

When you leave, you SHOULD be able to roll the money into a traditional rollover IRA, which you can then manage from India via phone and email. This will allow you to keep the money for your retirement, then withdraw once you hit age 59.5, paying minimal (if any) taxes.

If you withdraw it all at once when you leave, you pay ALL income taxes PLUS a 10% Early Withdrawal Penalty. It is unlikely to grow enough to compensate you for those taxes UNLESS the employer is offering a general match (say 50 cents on the dollar).

[MukatA]

Yes, you will be subject to early withdrawal penalty of 10% and the money will be taxed as ordinary income in the year you withdraw it. So should you invest in 401K or not, you need to decide.

[AtlantaTaxExpert]

Noted!