Question about 401K and SSN

[piyu7444]

Everyone -

If this has been answered please do not get 'mad' at me for asking it again but I could not find 'straight' answer on the forum in any old threads.

1) Can one take out 401K by paying some kind of penalty? Scenario is if someone is going back to home country for good there is no use leaving 401K money here.

2) SSN taxes - When one gets the benefit of it. Every pay we pay 6.2% SSN + Medicare taxes. What is the treaty/rule/law for Indians? I heard from some people that if you work for 10 years in USA years you can take lump sum amount instead of waiting for retirement age.
Is that true? If not what are the options?

Please no hostile responses. If you can help me I would appreciate it but if you cant just ignore the thread.

Thank you!:confused:

[breddy2000]

Yes you can. But you need topay taxes on the Non-taxable income that you claimed while filing taxes and on top of it you need to pay 10% penalty. However it is not a good idea to take it out now as the 401(k) has lost huge % with recent market conditions, if you have invested in stocks. Also if you plan to live in US for longer duration, the 401(k) money can be used without tax or penalty if you plan to use the money to buy a house(First home)

2) SSN taxes - When one gets the benefit of it. Every pay we pay 6.2% SSN + Medicare taxes. What is the treaty/rule/law for Indians? I heard from some people that if you work for 10 years in USA years you can take lump sum amount instead of waiting for retirement age.
Is that true? If not what are the options?

Yes it is true. In order to claim the SS benefits, you need to work atleast 40 quarters which is 10 years. Not sure whether you can take money in lumpsum.

[gcdreamer05]

Everyone -

If this has been answered please do not get 'mad' at me for asking it again but I could not find 'straight' answer on the forum in any old threads.

1) Can one take out 401K by paying some kind of penalty? Scenario is if someone is going back to home country for good there is no use leaving 401K money here.

2) SSN taxes - When one gets the benefit of it. Every pay we pay 6.2% SSN + Medicare taxes. What is the treaty/rule/law for Indians? I heard from some people that if you work for 10 years in USA years you can take lump sum amount instead of waiting for retirement age.
Is that true? If not what are the options?

Please no hostile responses. If you can help me I would appreciate it but if you cant just ignore the thread.

Thank you!:confused:

hi buddy dont take out the money from 401k, even if you were to go back to home country in our cases india, we can still get benefit , since india is in the list of countries which can receive a payment even if you left US. So that is like your PF money or pension money which you can still get sitting in india. so dont worry if you had to go back.

[piyu7444]

Yes you can. But you need topay taxes on the Non-taxable income that you claimed while filing taxes and on top of it you need to pay 10% penalty. However it is not a good idea to take it out now as the 401(k) has lost huge % with recent market conditions, if you have invested in stocks. Also if you plan to live in US for longer duration, the 401(k) money can be used without tax or penalty if you plan to use the money to buy a house(First home)

2) SSN taxes - When one gets the benefit of it. Every pay we pay 6.2% SSN + Medicare taxes. What is the treaty/rule/law for Indians? I heard from some people that if you work for 10 years in USA years you can take lump sum amount instead of waiting for retirement age.
Is that true? If not what are the options?

Yes it is true. In order to claim the SS benefits, you need to work atleast 40 quarters which is 10 years. Not sure whether you can take money in lumpsum.

I am not leaving US but my brother in law will.......I just wanted to help him out with the answers.....
Thanks breddy2000

Can someone throw some light on taking SS tax in lump sum?

[piyu7444]

hi buddy dont take out the money from 401k, even if you were to go back to home country in our cases india, we can still get benefit , since india is in the list of countries which can receive a payment even if you left US. So that is like your PF money or pension money which you can still get sitting in india. so dont worry if you had to go back.

Thanks gcdreamer05.

So at the age when we can get the SS back in the form of chqs. (In India or USA) does the invested money does not get impacted by the market?

[aachoo]

Thanks gcdreamer05.

So at the age when we can get the SS back in the form of chqs. (In India or USA) does the invested money does not get impacted by the market?

The SS money is not like your 401K. It is not invested for you in your account. The SS money is being invested by the government (one hopes) in total so that they can pay everyone in total. It is a guaranteed amount (at the present) based on your age, number of years worked, financial situation etc. Govt can decide to change the SS benefits at any time with a legislative change. AFAIK no lump sum withdrawal is possible for the SS benefits. Some countries (India I dont think is one of them, Canada is) you can ask the SSA to allow you to get benefits from your local government agency- sort of have a lump sum payment from the SSA in the US to the appropriate agency in the other country.
-a

[longwait4gc]

I am not leaving US but my brother in law will.......I just wanted to help him out with the answers.....
Thanks breddy2000

Can someone throw some light on taking SS tax in lump sum?

My understanding is once you leave US, you have to file tax return as Non Resident. That will be get taxed at 30% rate (after 4K standard deduction) + 10% penalty. So if you are not planning to come back then I dont think its a good idea to leave money in 401k.
Please ask your brother to talk to a tax consultant before leaving the money here.

[pkd666]

Not sure how it works. But as per this info on the SSA Website Citizens of india are eligible for SS payments if they have 40Qtr's work in the USA

http://www.socialsecurity.gov/pubs/10137.html

[number30]

Everyone -

If this has been answered please do not get 'mad' at me for asking it again but I could not find 'straight' answer on the forum in any old threads.

1) Can one take out 401K by paying some kind of penalty? Scenario is if someone is going back to home country for good there is no use leaving 401K money here.

2) SSN taxes - When one gets the benefit of it. Every pay we pay 6.2% SSN + Medicare taxes. What is the treaty/rule/law for Indians? I heard from some people that if you work for 10 years in USA years you can take lump sum amount instead of waiting for retirement age.
Is that true? If not what are the options?

Please no hostile responses. If you can help me I would appreciate it but if you cant just ignore the thread.

Thank you!:confused:


Regarding 401K It depends upon his income level in India. What happens to if someone is in India his income level will lesser then the income over here. So automatically his tax bracket will go down. If he is US citizen he needs to file the tax return but he can take 85000 exemption from foreign earned income in US.

They have Make sure that 401K withdrawals are not considered as Income in India and Tax implication in India.

[piyu7444]

Regarding 401K It depends upon his income level in India. What happens to if someone is in India his income level will lesser then the income over here. So automatically his tax bracket will go down. If he is US citizen he needs to file the tax return but he can take 85000 exemption from foreign earned income in US.

They have Make sure that 401K withdrawals are not considered as Income in India and Tax implication in India.


Thanks to all who replied. I am thankful for your inputs :)

[Caliber]

Finance Gurus, need your inputs:

I now have 40 credits. In case some thing happens to our GC journey and have to return back, what is the procedure for SSN? Any idea?

[kshitijnt]

Finance Gurus, need your inputs:

I now have 40 credits. In case some thing happens to our GC journey and have to return back, what is the procedure for SSN? Any idea?

Contact them after the age of 60 or 65

[crazyghoda]

Another option could be to file a class action lawsuit demanding the return of the contributions made. I think people who have gone/are going back should seriously consider this option. The Govt should realize the cost of sending legal immigrants who have contributed to the system.

Finance Gurus, need your inputs:

I now have 40 credits. In case some thing happens to our GC journey and have to return back, what is the procedure for SSN? Any idea?

[Caliber]

Another option could be to file a class action lawsuit demanding the return of the contributions made. I think people who have gone/are going back should seriously consider this option. The Govt should realize the cost of sending legal immigrants who have contributed to the system.

I hope you are a finance professional.

This option is not possible if 485 is rejected as we will have just 15 days time to leave the country.

Request Law/Finance gurus to put their serious opinions.

[chi_shark]

dont know about #2, however, for #1, you can always terminate 401 k. you have to pay income taxes and a 10% penalty. i dont know what is the 10% penalty and the tax calculated on... i am guessing its just on the final amount that you withdraw... so if your final balance is 100,000 $, your tax will be whatever it is and 10,000 penalty paid to IRS.

Everyone -

If this has been answered please do not get 'mad' at me for asking it again but I could not find 'straight' answer on the forum in any old threads.

1) Can one take out 401K by paying some kind of penalty? Scenario is if someone is going back to home country for good there is no use leaving 401K money here.

2) SSN taxes - When one gets the benefit of it. Every pay we pay 6.2% SSN + Medicare taxes. What is the treaty/rule/law for Indians? I heard from some people that if you work for 10 years in USA years you can take lump sum amount instead of waiting for retirement age.
Is that true? If not what are the options?

Please no hostile responses. If you can help me I would appreciate it but if you cant just ignore the thread.

Thank you!:confused:

[Winner]

Everyone -

If this has been answered please do not get 'mad' at me for asking it again but I could not find 'straight' answer on the forum in any old threads.

1) Can one take out 401K by paying some kind of penalty? Scenario is if someone is going back to home country for good there is no use leaving 401K money here.

2) SSN taxes - When one gets the benefit of it. Every pay we pay 6.2% SSN + Medicare taxes. What is the treaty/rule/law for Indians? I heard from some people that if you work for 10 years in USA years you can take lump sum amount instead of waiting for retirement age.
Is that true? If not what are the options?

Please no hostile responses. If you can help me I would appreciate it but if you cant just ignore the thread.

Thank you!:confused:


I’m not an expert in this area but this is what one of my co-worker did (at least that is what he told me). This happened 2 years ago. This guy who had lived here with his wife for about 6 years, had to leave to take care of his aging parents. He decided to leave on third week of January; his logic was he would have one pay stub for the year, which means that he has to file his returns for the year.

So if he took 25K from his 401K, and earned 2-3K (pay for 15 days in that year), he had to pay only 25% (15% tax + 10% early withdrawal penalty). I’m not sure how his earning in India would effect, but thought I’ll share with you.

[crazyghoda]

I hope you are a finance professional.


No I am not. I am just a big fan of Boston Legal :D


This option is not possible if 485 is rejected as we will have just 15 days time to leave the country.

Request Law/Finance gurus to put their serious opinions.

Lawsuits can even be filed from outside the country. All you need is a good law firm willing to take it on and a bunch of plaintiffs willing to sue. If a person has gone back, never to return what does s/he have to lose? For the lawfirm they get a slice of the eventual settlement.

Its a case that's likely to go to the Supreme Court since we are looking a hige amount that the Govt will have to pay out to every single person who has ever been here.

[darrylgonzalez46]

I would like to share an article 401k withdrawal rules (http://www.bankonyourself.com/401k-withdrawal-rules) with you which has helped me a lot to come out this headache

[crazyghoda]

Whoa!! Are you saying that a person actually has a CHOICE to pay SS and medicare tax and get benefits later in retirement or to opt out and be on your own? I dont think so. If that was the case, most folks who come here for a shorter duration would never opt for it. I believe only when in F1 status and working as a student can you exempt yourself, not on H1/L1.

If I am wrong, show me where its written that one can choose to not pay SS & Medicare taxes.

There is always an option to exempt ssn tax while filing tax if you decided to leave the country for sure or not going to take SNN benefits. It is your decision pay tax. So, can not file lawsuit demaning the return of the contributions.

[new2gc]

Whoa!! Are you saying that a person actually has a CHOICE to pay SS and medicare tax and get benefits later in retirement or to opt out and be on your own? I dont think so. If that was the case, most folks who come here for a shorter duration would never opt for it. I believe only when in F1 status and working as a student can you exempt yourself, not on H1/L1.

If I am wrong, show me where its written that one can choose to not pay SS & Medicare taxes.

Only F1 has that option, H1/Li --> No way....

[gcisadawg]

Everyone -

If this has been answered please do not get 'mad' at me for asking it again but I could not find 'straight' answer on the forum in any old threads.

1) Can one take out 401K by paying some kind of penalty? Scenario is if someone is going back to home country for good there is no use leaving 401K money here.

2) SSN taxes - When one gets the benefit of it. Every pay we pay 6.2% SSN + Medicare taxes. What is the treaty/rule/law for Indians? I heard from some people that if you work for 10 years in USA years you can take lump sum amount instead of waiting for retirement age.
Is that true? If not what are the options?

Please no hostile responses. If you can help me I would appreciate it but if you cant just ignore the thread.

Thank you!:confused:

What is your BIL's US status? His status ( non-immigrant/GC/USC) is an important factor in determining whether to leave the money or take it. Once he gets to India, what would be his status? There are various India statuses like NRI, ROR, RNOR....
If he comes under ROR then he would come under DTAA and it becomes a bit more complex.

No, SSA wont pay you lump sum. Once you have 40 points and reach early retirement age or regular retirement age , you can contact SSA thru their website and initiate the process.
A cheque would be cut out for that person who is living in India. But nobody knows what would happen if SSA becomes insolvent.

[punjabi]

Hi gcisadawg!

Some content of your post went over my head, but I absolutely liked your pledges!
:~)

I also have a pledge: $500 donation at the time of receiving GC. But I should break it down to little milestones like you.

What is your BIL's US status? His status ( non-immigrant/GC/USC) is an important factor in determining whether to leave the money or take it. Once he gets to India, what would be his status? There are various India statuses like NRI, ROR, RNOR....
If he comes under ROR then he would come under DTAA and it becomes a bit more complex.

No, SSA wont pay you lump sum. Once you have 40 points and reach early retirement age or regular retirement age , you can contact SSA thru their website and initiate the process.
A cheque would be cut out for that person who is living in India. But nobody knows what would happen if SSA becomes insolvent.

[legal_gc_seeker]

Also if you plan to live in US for longer duration, the 401(k) money can be used without tax or penalty if you plan to use the money to buy a house(First home)


breddy2000 , piyu7444 and others:

It is true that you can withdraw money penalty free from 401K or Traditional-IRA when you buy your first house . But the income tax is not waived, simply because you never paid tax on that income when you put it in 401K.

Irrespective of when you withdraw money from 401K, you will have to pay the tax, even after retirement.

Only the 10% early withdrawal penalty is waived under special circumstances like first house purchase, total disability, or for medical expenses etc.

[shivarajan]

In this economy the advice of NOT drawing $$ out of ur 401k is good one. U treat it as if "forgotten $$ into black hole" and revisit later (hardship, first home buying etc.). Also there are financial companies who manage 401k, who give loans on 401k with least interest (5%) where the interest part charged also goes back to ur 401k account and they DO NOT attract any "penalty or taxes". But remember its a loan against 401k (depends on ur employer and fin. institutions agreement who mange ur 401k). Only Catch --ur have to re-pay the loan back monthly/yearly etc and remember it's taxed $$ which u will be paying back. (this approach is not bad at times of need when ur need $$ [when in India] rather than withdrawing money for good)

Again for a person going to India for good, its a descent advice not to touch 401k for now, but as i understand there is no free lunch & In absence of a employer-employee relationship the fin. institution may charge u some fee on a monthly or yearly basis to keep/maintain ur 401k account or expect u to roll over into Roth. Iam not sure on that part.:confused: