This all comes down to time: You can spend the maximum on taxes and penalties and have your money now. Or you can wait about a decade and not pay a cent in taxes or penalties. Consider (assuming no other us income and 2017 tax brackets which we know will change):
Option 1 (1 year):Option 1 (1 year): Take all the money next year and pay the taxes and penalty:
- Taxable Income (sans Standard Deduction of $6350): $28650
- Penalty: $3500
- Taxes: $932.5 + .15 * ($28650 - $9325) : $3831.25
- Total Taxes + Penalty: $7331.25
Option 2 (2 years):Option 2 (2 years): Spread it out to barely exceed the 10% bracket:
- Taxable Income both years (sans Standard Deduction of $6350): $11150
- Penalty: $3500
- Taxes Year 1, 2: 932.50 + .15 * ($11150 - $9325): $1206.25
- Total Taxes + Penalty: $4706$5912.2550
Option 3 (6 years):Option 3 (6 years): Spread it out to cover your Standard Deduction each year:
- Taxable Income: $0
- Penalty: $3500
- Taxes: $0
- Total Taxes + Penalty: $3500
Option 4 (6-11 years):Option 4 (6-11 years): Same as Option 3 but via a Roth Conversion Ladder:
- Taxable Income: $0
- Penalty: $0
- Taxes $0
- Total Taxes + Penalty: $0