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chsh12 · Oct 25, 2007, 11:40 AM

Hi,

I am 29 yrs old, a US resident (tax purposes) but not a US citizen. My company has decided to match employee contributions by 50% up to 6%. I am very much interested to make the best of this opportunity, however I am not sure if I would be able to keep my 401K till 59 1/2 yrs. I have heard about serious tax implications and penalties and so wanted to get some some suggestions as to what should I do.

Please advise. :confused:

Thank you very much.

ScottGem · Oct 25, 2007, 12:36 PM

Why wouldn't you be able to keep it? A 401K is one of the best saving mechanisms available.

chsh12 · Oct 26, 2007, 06:38 AM

Thanks scott.

Well, the only reason is that I am not sure if I would be staying in the US for that long.
I was told it would be possible to roll it over to a brokerage account and hold it for that long. I am not sure how, if you any suggestions can you please advise?

ScottGem · Oct 26, 2007, 06:51 AM

If you terminate employment, you can leave the 401K with the company or roll it over ito an IRA.

chsh12 · Oct 26, 2007, 07:12 AM

Thanks again!

Would it be possible to roll it over to Roth IRA? Which is preferable?

ScottGem · Oct 26, 2007, 08:12 AM

I think it is possible, but which is preferable is depenedent on a large number of factors.

AtlantaTaxExpert · Oct 26, 2007, 08:48 PM

You must FIRST roll t over into a tradiutional rollover IRA, then keep it in the rollover IRA for a set period, say about ten minutes, after which time you can then roll it over to a ROTH IRA.

You will pay taxes on the second rollover, but then the ROTH IRA grows tax free for as long as you keep it in the ROTH.

BTW, you can keep it in the traditional rollover IRA as well, manage it from your home country, then start drawing on it at 59.5 years of age. You can take out just enough to keep from paying taxes to the U.S. on the distribution (though you WOULD have to file an annual tax return). I suspect that your home country may tax the distribution as well, but that depends on the country.

chsh12 · Oct 29, 2007, 07:42 AM

Thank you guys, for the information! I really appreciate your advice.

Just couple of quick questions, Roth IRA earnings are tax free till I withdraw them right? And can I withdraw them before 59.5? Would there be a penalty if I do 401K to Rollover IRA to Roth IRA and not keep it for till I am 59.5 yrs?

AtlantaTaxExpert · Oct 29, 2007, 10:30 AM

Since the ROTH IRA is funded with after-tax money, its earnings are tax-free PERIOD.

No taxs are due at all, either income taxes when you draw on the account nor estate taxes (if you do not access it, die and pass it on to your heirs).

There is NO penalty if you roll the money over from 401K to rollover IRA to ROTH IRA.