401k question after employment termination

[z0mb13]

I just quit my job, and decided to go back to my home country

However I have around $3000 in 401k. Half of it is my contribution, and the rest is my company's contribution. If I am not mistaken, the company's contribution vests immediately (I will have to check)

Now I need to know what to do with the money. Since I am leaving the country, I am thinking of just cashing it out, and get dinged with the 20% penalty. I will still be ahead due to the 100% matching that my company had. Also the amount is not that much anyways, so if I roll it over to a plan like the IRA, it might not be worth it in the long run.

Do you guys think this is a bad idea? any other options?

TIA

EDIT: I have decided to roll the money into an IRA, and then withdraw it next year where I would have zero income in the states. Which IRA should I open? Obviously I will be looking at something that has zero or very low fees. Thank you for the suggestions.

 

[Splork]

I would check to see if you're vested. Most companies require a certain lenght of employment before you become fully vested. My company requires 5 years of service. If you decide to cash it out, remember that you'll pay penalties at the end of the year too. Cheers.

-sp

 

[z0mb13]

Originally posted by: Splork
I would check to see if you're vested. Most companies require a certain lenght of employment before you become fully vested. My company requires 5 years of service. If you decide to cash it out, remember that you'll pay penalties at the end of the year too. Cheers.

-sp

this end of year penalties is on top of the 20%?

can I read up on this somewhere?

 

[PAB]

Originally posted by: z0mb13
I just quit my job, and decided to go back to my home country

However I have around $3000 in 401k. Half of it is my contribution, and the rest is my company's contribution. If I am not mistaken, the company's contribution vests immediately (I will have to check)

Now I need to know what to do with the money. Since I am leaving the country, I am thinking of just cashing it out, and get dinged with the 20% penalty. I will still be ahead due to the 100% matching that my company had. Also the amount is not that much anyways, so if I roll it over to a plan like the IRA, it might not be worth it in the long run.

Do you guys think this is a bad idea? any other options?

TIA

You need to do what's referred to as a rollover - you take all that money and move it into an IRA.

You don't want to withdraw it because you will be taxed as ordinary income AND penalized for early withdrawl. Put your money to work for you in the long run.

 

[OS]

Originally posted by: PAB

Originally posted by: z0mb13
I just quit my job, and decided to go back to my home country

However I have around $3000 in 401k. Half of it is my contribution, and the rest is my company's contribution. If I am not mistaken, the company's contribution vests immediately (I will have to check)

Now I need to know what to do with the money. Since I am leaving the country, I am thinking of just cashing it out, and get dinged with the 20% penalty. I will still be ahead due to the 100% matching that my company had. Also the amount is not that much anyways, so if I roll it over to a plan like the IRA, it might not be worth it in the long run.

Do you guys think this is a bad idea? any other options?

TIA

You need to do what's referred to as a rollover - you take all that money and move it into an IRA.

You don't want to withdraw it because you will be taxed as ordinary income AND penalized for early withdrawl. Put your money to work for you in the long run.

does it matter if he's leaving the country?

 

[PAB]

Originally posted by: OS

Originally posted by: PAB

Originally posted by: z0mb13
I just quit my job, and decided to go back to my home country

However I have around $3000 in 401k. Half of it is my contribution, and the rest is my company's contribution. If I am not mistaken, the company's contribution vests immediately (I will have to check)

Now I need to know what to do with the money. Since I am leaving the country, I am thinking of just cashing it out, and get dinged with the 20% penalty. I will still be ahead due to the 100% matching that my company had. Also the amount is not that much anyways, so if I roll it over to a plan like the IRA, it might not be worth it in the long run.

Do you guys think this is a bad idea? any other options?

TIA

You need to do what's referred to as a rollover - you take all that money and move it into an IRA.

You don't want to withdraw it because you will be taxed as ordinary income AND penalized for early withdrawl. Put your money to work for you in the long run.

does it matter if he's leaving the country?

Eh, he might want to come back!

 

[OS]

Originally posted by: PAB

Originally posted by: OS

Originally posted by: PAB

Originally posted by: z0mb13
I just quit my job, and decided to go back to my home country

However I have around $3000 in 401k. Half of it is my contribution, and the rest is my company's contribution. If I am not mistaken, the company's contribution vests immediately (I will have to check)

Now I need to know what to do with the money. Since I am leaving the country, I am thinking of just cashing it out, and get dinged with the 20% penalty. I will still be ahead due to the 100% matching that my company had. Also the amount is not that much anyways, so if I roll it over to a plan like the IRA, it might not be worth it in the long run.

Do you guys think this is a bad idea? any other options?

TIA

You need to do what's referred to as a rollover - you take all that money and move it into an IRA.

You don't want to withdraw it because you will be taxed as ordinary income AND penalized for early withdrawl. Put your money to work for you in the long run.

does it matter if he's leaving the country?

Eh, he might want to come back!

yeah, i just say that cause i rolled over a 401K once and I got a straight check for the full amount to send to the new plan.

If I was leaving the country and not coming back, I probably could have straight up cashed it and walked off.

 

[z0mb13]

Originally posted by: OS

Originally posted by: PAB

Originally posted by: OS

Originally posted by: PAB

Originally posted by: z0mb13
I just quit my job, and decided to go back to my home country

However I have around $3000 in 401k. Half of it is my contribution, and the rest is my company's contribution. If I am not mistaken, the company's contribution vests immediately (I will have to check)

Now I need to know what to do with the money. Since I am leaving the country, I am thinking of just cashing it out, and get dinged with the 20% penalty. I will still be ahead due to the 100% matching that my company had. Also the amount is not that much anyways, so if I roll it over to a plan like the IRA, it might not be worth it in the long run.

Do you guys think this is a bad idea? any other options?

TIA

You need to do what's referred to as a rollover - you take all that money and move it into an IRA.

You don't want to withdraw it because you will be taxed as ordinary income AND penalized for early withdrawl. Put your money to work for you in the long run.

does it matter if he's leaving the country?

Eh, he might want to come back!

yeah, i just say that cause i rolled over a 401K once and I got a straight check for the full amount to send to the new plan.

If I was leaving the country and not coming back, I probably could have straight up cashed it and walked off.

Hmmm I like this idea

but probably the check is made payable to the IRA right.. so I cant really cash it if I want to... or CAN I?

 

[her209]

So if you took the money and didn't pay the penalty, what can the US government do to you? :evil:





I kid... I kid.

 

[KLin]

Originally posted by: z0mb13

Originally posted by: OS

Originally posted by: PAB

Originally posted by: OS

Originally posted by: PAB

Originally posted by: z0mb13
I just quit my job, and decided to go back to my home country

However I have around $3000 in 401k. Half of it is my contribution, and the rest is my company's contribution. If I am not mistaken, the company's contribution vests immediately (I will have to check)

Now I need to know what to do with the money. Since I am leaving the country, I am thinking of just cashing it out, and get dinged with the 20% penalty. I will still be ahead due to the 100% matching that my company had. Also the amount is not that much anyways, so if I roll it over to a plan like the IRA, it might not be worth it in the long run.

Do you guys think this is a bad idea? any other options?

TIA

You need to do what's referred to as a rollover - you take all that money and move it into an IRA.

You don't want to withdraw it because you will be taxed as ordinary income AND penalized for early withdrawl. Put your money to work for you in the long run.

does it matter if he's leaving the country?

Eh, he might want to come back!

yeah, i just say that cause i rolled over a 401K once and I got a straight check for the full amount to send to the new plan.

If I was leaving the country and not coming back, I probably could have straight up cashed it and walked off.

Hmmm I like this idea

but probably the check is made payable to the IRA right.. so I cant really cash it if I want to... or CAN I?

If you elect rollover, they'll send you a check for the full amout. But if you don't put it into an IRA, then you'll get taxed at whatever your rate is when you file your taxes next year, plus a 10% penalty for withdrawing it before you were 59.5 years old.

The 20% they take out if you elect cash out will not be the limit of your tax when you file next year either. If your rate is say 25%, then you pay another 5% on the 3k, plus the 10% penalty.

 

[KLin]

Originally posted by: her209
So if you took the money and didn't pay the penalty, what can the US government do to you? :evil:





I kid... I kid.

Charge you more penalties and interest .

 

[z0mb13]

Originally posted by: KLin

If you elect rollover, they'll send you a check for the full amout. But if you don't put it into an IRA, then you'll get taxed at whatever your rate is when you file your taxes next year, plus a 10% penalty for withdrawing it before you were 59.5 years old.

The 20% they take out if you elect cash out will not be the limit of your tax when you file next year either. If your rate is say 25%, then you pay another 5% on the 3k, plus the 10% penalty.[/quote]

so the penalty is actually only 10%? The rest is just treated as regular income?

 

[KLin]

Originally posted by: z0mb13

Originally posted by: KLin

If you elect rollover, they'll send you a check for the full amout. But if you don't put it into an IRA, then you'll get taxed at whatever your rate is when you file your taxes next year, plus a 10% penalty for withdrawing it before you were 59.5 years old.

The 20% they take out if you elect cash out will not be the limit of your tax when you file next year either. If your rate is say 25%, then you pay another 5% on the 3k, plus the 10% penalty.

so the penalty is actually only 10%? The rest is just treated as regular income?[/quote]

Yes. So overall you would be paying 35%(if your taxable rate was 25%) to the government next year, or $1050 +/- a few bucks.

 

[saymyname]

Roll it over unless you really need the cash.

You might actually be able to roll it over and then withdraw it next year. That way you'd show zero income and would only have to pay the 10% penalty. You wouldn't be defrauding the IRA and could come back to the states one day without any problems.

 

[Michael]

You need advice on what happens to the 401(k) when you leave the USA. When you cease to be a resident there are a whole bunch of different rules that come into play.

Many companies will make you cash out of their program if you leave employment and only have a tiny amount of money in their funds. Usually they just give you a check and if you don't deposit it into an approved program or plan then you have to pay the 10%.

I suggest that you settle all your taxes properly. Who knows, you might be back.

regards,

Michael

 

[z0mb13]

Originally posted by: saymyname
Roll it over unless you really need the cash.

You might actually be able to roll it over and then withdraw it next year. That way you'd show zero income and would only have to pay the 10% penalty. You wouldn't be defrauding the IRA and could come back to the states one day without any problems.

good idea!!

 

[z0mb13]

bump for follow up question