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I am 33 years old and currently employed in USA on a work visa. I am contributing to my employer provided 401k plan since 4 years. I might be moving back to my home country once I max out my current work visa leaving my 401k account untouched.

I can withdraw by paying 10% penalty, but I am thinking to leave the money till I turn 59-1/2 years and withdraw what ever left by then.

Questions:

Is it suggestible to leave my 401k money when I leave the country for good? Is it possible to access my 401k money outside the USA, after leaving the country more than 20 years ago? If yes, what is the process? Can I open a bank account again when I am physically not in the country to access the money?

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  • Does your home country have anything similar? A rollover might be possible.
    – chepner
    Commented Aug 26, 2019 at 23:59
  • @chepner Many countries have retirement savings schemes. As far as I know, the IRS treats transfers into all of them as early disbursements.
    – Rupert Morrish
    Commented Aug 27, 2019 at 1:07
  • I am not sure if my home country, India, has anything similar to 401k. I would still like to see if I can keep my funds in the US market and get appreciated over a period of time, rather than withdrawing.
    – Austin Evans
    Commented Aug 27, 2019 at 2:00

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Ask the company administering your 401(k) plan whether they will maintain the plan if you move permanently overseas. I believe the effort on their part will be limited to getting you to fill out a W8-BEN every three years, but apparently that is too much work for the bank running the IRA I rolled my 401(k) into, so go ahead and ask.

When you reach 59.5 and start withdrawing your money, it will have tax withheld. It may be possible just to let this go, and not file a tax return, but if you do have to file, the IRS wants to know about all your worldwide income. This could become expensive if you live in a country with low taxes or generous pensions, or if you are self-employed.

There seems to be some consensus that the best option is to rollover your 401(k) into an IRA with a global custodian such as Fidelity or Schwab, but be aware that while they may work with IRA holders in your country now, they can change that decision at any time, and you will be stuck trying to open a replacement custodian account from overseas, which in my experience is impossible.

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    The OP says they are on a non resident visa so the worldwide income thing does not apply, as they will be filing as a non resident non citizen, non green card holder.
    – Vality
    Commented Aug 27, 2019 at 1:18
  • Correct me if I understood wrong: If I rollover to IRA from Schwab, will I be able to get my money without any penalty, say after 60 years? Will I be able to get this information from a Schwab associate, or I can find somewhere on a US gov website?
    – Austin Evans
    Commented Aug 27, 2019 at 2:36
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    A non resident non citizen can make withdrawals from retirement accounts. The tax withheld depends on the country they are in and what treaties there are but is often between 15-30%. They can fill out a tax return to get the withholding back, but get no standard deduction or allowances so will pay income taxes from the first dollar. I was a non resident filing US tax returns for some years so am somewhat familiar. Penalties are largely the same but it can be logistically harder to manage them due to probably not having other US accounts which are normal post tax ones.
    – Vality
    Commented Aug 27, 2019 at 3:26
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    The biggest worry isnt that however, its that some other countries the OP may then be living in are much less favorable to US retirement accounts and may charge their own taxes on them too. Or have penalties for importing foreign income. That is even more complex and usually makes such accounts a bad idea even if the US tax treatment is manageable.
    – Vality
    Commented Aug 27, 2019 at 3:28
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    @Vality: An important factor is that penalties are assessed now, while taxes will be assessed on withdrawals decades from now, which means the money you'd otherwise pay as a penalty could be earning income. And of course, as with anything to do with government, everything is subject to change without notice depending on the whims of the governments involved.
    – jamesqf
    Commented Aug 27, 2019 at 3:46

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