# Pulling out 401k overseas



## blahblahnyc

Hi all,

I am an Australian who has been living in the US for the past 15 years and am ready to bite the bullet and return home and am curious if anyone on this forum has followed this path:

The question I have is I will wish to pull out the money of my 401k (yes I understand the early withdrawal penalty + federal) in the new year.

I wish to avoid paying new york and nyc taxes since I will no longer be present in the country. My question is:

Would I need to move to a more amendable state (such as florida?) before I move? If so any experiences from others on such steps?

Would the 401k distribution be taxable in Australia? Or is it preferable that I make the distribution before I return?

Curious on everyone's experiences (even if it is not relevant to Australia).

Blah.


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## Bevdeforges

Whether you pay NY taxes or not depends on where you are resident (tax resident) at the time that you withdraw your 401K funds. But your primary tax liability will be in the US.

Check the Australian-US tax treaty and also the Australian definition of income if you're back in Oz by the time you withdraw your funds. Several countries I know of (that tax residents on their worldwide income) treat withdrawals from a 401K or IRA as simple transfers of capital, based on the notion that these were funded while you were resident in the US and that you have a primary tax obligation to pay the US taxes on withdrawal.

And, you may want to consider just leaving your 401K plan where it is and letting it grow until you hit the age where you can withdraw from it without penalty. It could provide a nice little nest egg when you need it - and there would be no question of state taxes if you are resident outside the US at that point.
Cheers,
Bev


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## blahblahnyc

Bev,

Thank you for your response. My understanding is that even if I am overseas for 20 years - I will still need to pay tax on that income as that is the last remaining residence that I was in. 

I will definitely look at the treaty and see what it suggests - what I have read so far is that it is regarded as deferred compensation and will need to be taxed.

My taxable income will be 0 when I leave - so rather than waiting till I earn income back home it may be advantageous to take the tax hit


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## Bevdeforges

Oh yes, even if you're overseas for 20 years before you withdraw it, you will have to pay US tax on it. That was the deal when you signed up - and even those of us who are US citizens will have to pay taxes on our 401Ks and IRAs even if we renounce.

But I would check into the "deferred income" aspect of it for wherever you are when you withdraw it. In some places, it's considered to be income deferred from when you were NOT subject to local taxes, so your country of residence won't bother you about it. 
Cheers,
Bev


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## BBCWatcher

I'm not sure why you'd want to pay a tax penalty as a consequence of early withdrawal. Is there a "damn good reason" why you'd do that, such as you're broke and absolutely need the money? (Even then you may be much better off _borrowing_ against the value of your 401k, as long as you're careful and know what you're doing.)


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