401k withdrawal

Oracle
401kQuest

Go to company page Oracle

401kQuest
Dec 8, 2021 81 Comments

I'm moving back to India next year for good (FIRE). I want to know if I can withdraw my Pre-Tax 401k penalty free and just pay the income tax?

If you know any Tax consultant that can answer this question please comment/dm me their contact details.

TC 280, 45yo, NW ~900k,
#FIRE #tax #irs #401k #h1b #india

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 TOP 81 Comments
  • Oracle
    bacha

    Go to company page Oracle

    bacha
    45 yoe, wow
    Dec 8, 2021 5
  • Micron
    hoooo

    Go to company page Micron

    hoooo
    You can't avoid penalty. That's 10% gone for sure. Don't withdraw everything at once. Each year withdraw the amount that is not taxable in US (i.e. pay these 0% taxes in US) You will effectively lose only 10% I.e. penalty every year. After 60, withdraw without penalty.
    Dec 8, 2021 8
    • Google / Eng
      BlindNexus

      Go to company page Google Eng

      BIO
      SWE L4
       BlindNexus
      @Oracle as quantum mentioned, IRA and 401k are two separate vehicles for very similar purposes. As a tldr 401k is company sponsored/created, IRA can be done by you. Contribution limits on IRA are lower.

      Please do some research (genuinely) so that you understand the two and can figure out how to maximize your savings and investment potential!

      r/personalfinance and r/FIRE on Reddit have excellent resources.
      Dec 12, 2021
    • Oracle
      Bumble🐝

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      Bumble🐝
      my point. 401k will always have pretax
      Dec 12, 2021
  • Microsoft / Eng
    Bl2c9r

    Go to company page Microsoft Eng

     Bl2c9r
    You have a grace period of 3 years after returning to India where they won't charge any tax on foreign income. You'll still pay the 10% penalty to the IRS.
    Dec 8, 2021 5
    • india has tax treaty with us and 401k trated as retirement do check
      Dec 8, 2021
    • There is no 401k exemption in India. But it’s in work, so might get exempted in next few years. Once you move to India and depending on your number of years in US, you will get some grace period in which any foreign income will not be taxed(for people who have spend 9year outside it was 18 month). So during this period if you take it out you will only pay taxes/ panelty in US. In any case you will be paying a tax in US and claim it on Indian tax return and might have to pay difference in India if your tax bracket is higher
      Dec 14, 2021
  • New / Product
    pinknike

    New Product

     pinknike
    Do it other way round. Pay the penalty and minimize the tax
    Dec 8, 2021 7
    • New / Product
      pinknike

      New Product

       pinknike
      That is what I meant.
      Withdraw in US first and then NRI account in India
      Dec 8, 2021
    • Once you are not a us residence, you will be in a 30% fixed bracket so above advices will not work. Why not leave this money in US invested
      Dec 14, 2021
  • Op, what's your strategy for fire? How much did you save ? How much did you invest?

    What's your stock investment balance?
    What's your 401k investment balance?
    Did you buy a house in India? If so, how much did it cost, location and no. Of beds ? What was your strategy for loan?

    What's your networth?

    What are your plans once you reach India? Are planning to do a small side job ?

    Congrats on FIRE πŸ”₯
    Dec 8, 2021 7