I have around 300k in 401k. Returning to India in next 4-5 months. Can stretch to max Jan 2019. I have below questions. Can anyone please take some time and respond to the best of their knowledge? Thank you for your time :) 1. What to do with 401k? Option 1: take tax hit along with penalty and take out everything and invest the money in india in stocks or whatever. I will take out ~100k each year to get the least tax hit and avoid paying taxes in India Option 2: keep it here and let it grow forever and withdraw only after I am 59 and half. I am 31 right now. 2. I want to go with option 2 but I am not sure how risky it is to keep money in US and being citizen of India living in India. Will I lose it all? Will they be safe forever? 3. Right now everything is invested in s&p provided by fidelity inside 401k. Do I need to convert it into ira once i quit or can I keep it in 401k even after I quit microsoft?
Just withdraw $10-20k per year while living in India. You will hardly pay any tax and that goes pretty far to supplement your income in India
Option three. Roll it over to a traditional ira. Then convert to Roth ira using the Roth ladder conversion strategy and pay little to no tax
When you are in RNOR status, make sure the last few days of that is when you sell everything you own within 401k and rebuy it the next day so that the price that day becomes your new cost basis within 401k. Now you only pay tax in India if there are any gains on top of that. So slowly withdraw $30k per year to either move to Roth to avoid 10% penalty or take 10% hit and move funds to India while paying almost no tax in USA
Not sure if I understood it right. You mean if I sell everything on some day and buy it the next day I do not need to pay taxes in Us coz of the new cost basis?
Yes the cost basis gets adjusted and you do not owe taxes unless you sell and have more gains on top of this
To all those people who say go back to India. This is what happens when they go back. Instead of keeping the money in us economy they take it with them. If you morons really understood why immigrants are good for a country. But I know that is too much to ask from the Trumptards.
Found the desi stuck in GC backlog
I want to keep the money in US but since I don’t know whether I will be able to manage funds from back in India and if not whether I will be permitted to enter US again or not I better sell everything and take it with me. Risk factor associated with keeping money here is very high for me.
You have to convert to ira. Don’t withdraw. Instead convert to Roth IRA upto the tax free amount every year (24k married filing jointly). You don’t have to repatriate from Roth account, but you can if you want to. You can withdraw your Roth balance after 5 years. This way you don’t pay tax as well as pay no penalty. Yes it takes 15+ years to get whole balance, but I think that’s better than paying 25% tax + 10+ penalty. Plus you get exposure to US market during that time,
Could you explain more about this 401k rollover to Roth IRA tax free business? I've heard of backdoor Roth conversions but this sounds much better.
Standard deduction is not available for non residents. Is there any other way To not pay taxes on the first 24k?
Option 3: if you don't need money urgently then you can go to India ... Take out around 50k or less based on amount of tax you want to pay.. you will still be hit with 10% panalty..but tax will be less.... One caveats: you need to file federal income tax in US for every year you take out money from 401k..
Roll over or keep it as is and wait till you are eligible to withdraw. Why do you need to do anything else with it? You're not going to lose it
I agreed.. if you don’t need the money, just let it keep growing.. your not going to lose your money..
OP said above- "I want to keep the money in US but since I don’t know whether I will be able to manage funds from back in India and if not whether I will be permitted to enter US again or not I better sell everything and take it with me. Risk factor associated with keeping money here is very high for me."
Did you check RFC account. May be you can use that to transfer the money later also.
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Do you mind if i ask how long it took to grow to 300 thousand?
Around 7 years. I used to max out every year and get company match. Got a very good return too so it is kind of doubled of what I have contributed
What fidelity fund did you choose? Your returns are way better than mine and I maxed it out and picked index funds too.