Question about 401K and SSN

[Winner]

Originally Posted by 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!

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]

Originally Posted by Caliber

I hope you are a finance professional.

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

Originally Posted by Caliber

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.

[TravInd]

Originally Posted by 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.

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.

[darrylgonzalez46]

I would like to share an article 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.

Originally Posted by TravInd

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]

Originally Posted by 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.

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

[gcisadawg]

Originally Posted by 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!

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 more down to little milestones like you.

Originally Posted by gcisadawg

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]

Originally Posted by punjabi

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.