What happens to 401(k)/Roth)IRA when a PR moves out of US well before retirement age?

[letsee]

Pardon me for posting a question here , which is not STRICTLY immigration related. But I prefer to post it here since I do believe this community have the best collective knowledge and expertise to comment about the question. Also, I beleive many of our members may share similar concern..

OK, here it goes...

What happens to the funds in 401(k)/403(b), (Roth)IRA if the participant is not a US citizen (but a Permanent resident) but prefers to move out of US before retirement age? In my case I am 33, a Permanent Resident here but may have to go back to my home country due to family issues. I may live here in US forever. It’s a 50-50 game at this point. But I would need to find out what happens to my retirement funds If I decide to move out of the country after few years (say, 7 years) ? Cashing out and pay taxes/penalty is my only option OR am I allowed to leave the funds wherever it is (and make no additional contributions) and be eligible to get the distribution at my overseas address when it is due ?

 

[Jackolantern]

You can leave it in the account as long as you want (except for "required minimum distribution" rules on non-Roth tax-deferred accounts when you past age 70 and a half).

It's your money and you'll be able to take it out when you retire, regardless of where you're living at the time or whether you're a US citizen. The only real complication is the taxation ... depending on which country you're in, there is the possibility of double taxation by the US and that country when you take out the money, or at least the complexity of navigating the rules and tax treaties to avoid or minimize the double taxation. I also believe that for accounts such as 401(k) where the money was untaxed when it went into the account, the institution holding the account will withhold 30% of your withdrawals as taxes if you are a noncitizen living outside the US (i.e. a nonresident alien), but I believe you will be able to claim a refund the following year if 30% is higher than the applicable tax rate for your situation.

 

[TheRealCanadian]

The other potential complication is that some countries may not recognize the tax-deferred nature of some retirement accounts. The Roth is a good example - Canada treats that as a regular taxable account.