I maxed out 401k as long as I was with Microsoft (they pay 9k to 401k). I recently joined a bay area company. Job's great, they don't contribute to 401k tho, they provide some 401k account with a small financial institution, benefits seem to be none - just hold money pre tax.
I will sell real estate assets and investments in the US when I leave to India. Regarding 401k, I am uncomfortable leaving my money until I'm 60 (under 30 now) in a foreign country that could prevent anyone from entering at any point, but I am open to withdrawing over 1-2 years if there are huge tax benefits of doing so. Considering that I'm moving to India by mid-end 2019:
1. Should I continue to contribute to 401k like I did earlier? (Or just invest post tax money in US equities instead? Done decently okay - indexes seem to be doing great, trading account made 9.8% last 3 months)
2. If yes, do I continue to contribute into the Fidelity 401k account that Microsoft provided? Is that even possible from a different employer? Or do I start a new one with this small institution?
comments
Look at India stock market, it will very likely double in next 5 years and govt sovereign bonds (safest) in India give you 7% and they are tax free after 3 years, that is you don’t pay any taxes on gain. Point is safest option in India gives you 7% and riskiest option in US gives you 10%
Do you have need for that money when you land in India? If you don’t then no pressing reason to liquidate imo.
Secondly, when you no longer have US income, you will be in lowest income tax bracket that is the best time to withdraw with penalty from 401k. If you do it mid-late 2019 you are looking at higher tax bracket because you have income already that year. You may also withdraw with penalty slowly (spread over multiple years) to ensure you have income which is in lowest bracket each time you withdraw. Obviously depends on how much you have accumulated in 401k.
1/ India doesn't tax those capital gains. Most likely they do and don't recognize 401k
2/ when you withdraw your money from India look at the tax rate because you will be paying tax from there as you are an India resident. Here you are guarante to not go over 33%+10%+state tax.
3/ say hi to headaches like double tax between the two countries
2. If you have pre-tax 401k, and you come under California state tax then you will additional tax. So you could consider withdrawing next after you move to save on US taxes
3. For India tax (India never explicitly said they will consider 401k with special status, it is just like an income source for their tax purpose ) residency rule check RNOR status rules..
I think we hold different opinions on US outlook man... Just drive 30 minutes outside any major city, you see people living in near dilapidated houses, their children have zero access to the future, their professional services jobs have gone to Mexicans and their six and seven white collar figure jobs are slowly going to Asians, Indians and Eastern Europeans. World might transparent and interdependent, but at the end of the day this country belongs to the hundreds of millions you see out of your window on road trips, and they've not been happy for a long time. To every man his own.