I'm a resident for tax purposes (H1B Visa) at the moment. I have accumulated $35K in my traditional 401(k) account including employer contributions.
I'm planning to permanently move out of the U.S., with no plans to come back for the foreseeable future. I'm aware that withdrawing my money from my 401(k) means I'd incur taxes + 10% penalty for early withdrawal. I wonder if the following strategy works:
- Leave the 401(k) account open when I move out in the middle of the year.
- In 2018, when I'm not a resident of the USA, I withdraw just enough to get my taxable income to the lowest tax bracket. Pay the taxes and 10% penalty.
- Repeat the same in 2019, 2020.... until there is not any money left.
Is this plausible? Am I missing anything basic?
Deeper question: In 2018, would a European country that I'd be a resident of potentially charge me income taxes for my 401(k) withdrawal (I'd have proof that I already paid U.S. taxes, right?)