Returning to India by mid-end of 2019, need 401k advice
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?
I am the same boat, not sure about the most tax efficient way to withdraw from 401k. But I am pretty sure I would rather take the money out than wait for 30 years. A lot of things can change over 30 years.
But do you continue contributing to the 401k or keep investing in US equities or have started repatriating?
Yes all applicable taxes plus 10%. It’s a killer. Also, look at the history of this country. We’ve been through hell and back politically/economically and have always grown stronger. The world is interconnected like never before (which you all have helped with) making the world more interdependent and transparent than ever before. Leave it unless you absolutely need it.
I see, all applicable taxes + 10% makes it a lot clearer man. If I leave the country in mid 2019, do I pay 10% + tax rate assuming my 401k to be annual income, when I withdraw the entire amount in 2020? 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.
Unfortunately that is a very true statement. The thing that does concern me is the skyrocketing Debt/GDP ratio. That is the truest measure of fiscal health, and that number concerns me greatly. Everything else is just noise. (Sorry if that sounds incentive. I’m the poor immigrant blue collar kid that made it).
Veet51, don’t forget about the exponential returns you’re leaving on the table. The loss of the future value of your money trumps 10 times over any potential tax consequences. Unless you believe this country won’t exist in 30 years leave it in place.
Country and money will exist in place, we may not have access to it, that's the concern.
Good point. Well, you could leave a certain percentage behind to hedge in favor or access and take home the majority. it doesn’t have to be all or nothing.
If you let it there, make sure : 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
Why would one be withdrawing money 'from' India? You mean, in the potential event of moving to a foreign country in the future?
Of you withdraw your 401k when you are an India resident then you are going to pay Indian taxes which might be higher than us?
Consult a tax attorney. Call Fidelity at their retirement department. They are knowledgeable. Consider a rollover into an IRA. It is more flexible than a 401k on withdrawal reasons to avoid penalties, eg buying a home. Read pub 529 on IRS.gov. Look up India's tax rules on holding overseas accounts and if they give you a tax free window to bring in funds which are untaxed elsewhere. I see a giant Excel spreadsheet in your future. And good luck with your new chapter in India!
My general rule: leave the money in the account where it is growing until you actually need it. 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.
You really need to read the mad fientist blog and how to access your retirement funds earlier. Google Roth ira conversion ladder
Anyone read Tony Robbins book on 401k and how is not worth it?
That guy is a block head. Has no business giving financial advice. Good person to look toward if you’re thinking about walking over hot coals or need advice on “visualization”. He feeds off of and profiteers from weak minded people. His fan club consists of dreamers that don’t want to get their hands dirty and do the work to execute.
Although, some of his advise, i assume, is good advice.
Read about sepp. It let's you withdraw penalty free
You have access to one of the greatest financial markets the world has ever seen. Leaving your money in place will allow you to grow your money exponentially over the next 30 + years (assuming you’re reinvesting dividends etc). People around the world would kill to have this opportunity. Leave it in place. Also continue to contribute. It’s a tax deferred account so you won’t need to worry about paying taxes on it until you’re withdrawing the money (assuming this is a traditional vs Roth IRA). You’ll also likely be subject to a 10% early withdrawal penalty if you take your money out before you’re 59.5 years. (Not sure of this given your situations). Just my two cents.
Is it federal tax+10% if I withdraw early? (In which case it's very similar to the CA tax rate which I pay and get the money right now, no?) Aren't people paranoid leaving money in a different country where you could be denied entry, government could impose capital controls against moving money out, Fidelity could just plain lock your account for a variety of potential reasons etc... ? I mean, every single one of my college buddies had a 1-3 month delay just to get a valid FAANG H1B stamped, I'm definitely afraid of leaving money in a place I can't fly to 'tomorrow' if I wanted to.
What if you left your job in January of some year? Your Federal gross income for the year would be close to nothing and so your 401k withdrawal should be taxed the lowest, plus any penalty.