My current effective tax is 35%. If I decide to convert to Roth, I'd eat 35% tax on my 401k conversion amounts, and then tax free withdrawal with ladder. I can't do this after I leave USA so my tax will likely never drop below 35% in USA. If I convert 401k -> IRA after I leave, I can withdraw up to 40k USD every year when retired, 10% penalty + 20% income tax = 30% taxes. This is enough for my home country + taxable accounts/savings
Is this one of the rare scenarios where just the simple option of early IRA penalty is the best choice?
I think it's cheaper if early retirement to early withdraw from 401k + penalty than ladder conversion to Roth IRA as a foreigner? Is this crazy?
byu/YsDivers intax
Posted by YsDivers
2 Comments
I’m not too sure you’ll be able to collect IRA funds after you return to your native country and your US visa authorization expires. In some cases of legal US resident moving abroad, US government requires them to report worldwide income and file 1040 tax returns every year.
Information needed for better understanding:
Age, marital status, 401 balance, years/ age to planned retirement.
Will you qualify for Social Security?
For instance, pulling 40k / year from 401k (married filing jointly) will mostly be absorbed by the standard tax deduction and will likely have insignificant US tax consequences. At the same time, tax reporting will be required in your country since 401K rules probably won’t apply overseas.
Please provide more information…
Mandatory withholding for non-US persons?