Cashing 401K for Canadians
Moderator: Mark T Serbinski CA CPA
Cashing 401K for Canadians
I work in the US on H1B with a 401K account, but would likely retire in Canada after some 5-7 years. Question is what is the best way to cash 401K. After stopping to work (in preparation to retire), will not being a resident of either country for a short time, and cashing it during that period, help? Can one be a resident of a no-tax state for a couple of months, and cash in those months, thus save on tax. Kindly advise. Thanks.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">After stopping to work (in preparation to retire), will not being a resident of either country for a short time, and cashing it during that period, help.<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Going to a no tax state would eliminate state tax, obviously. You would still have IRS tax and penaly, regardless of where you lived (even 'nowhere') at the moment of the withdrawal.
The best way to cash out 401(k) is to do so gradually in years when you have lesss income, <u>like while you are retired</u>
<i>nelsona non grata... and non pro</i>
Going to a no tax state would eliminate state tax, obviously. You would still have IRS tax and penaly, regardless of where you lived (even 'nowhere') at the moment of the withdrawal.
The best way to cash out 401(k) is to do so gradually in years when you have lesss income, <u>like while you are retired</u>
<i>nelsona non grata... and non pro</i>
Thanks Nelson,
Penalty comes into picture only if funds are withdrawn before the age of 60 or so, which I will pass when I plan to withdraw. I plan to retire in Canada. Don't you think withdrawing while on CPP will impact CPP and other benefits? After retiring, if I wait to apply for CPP, etc., and withdraw all 401K over two successive years (of low income), will that not be beneficial?
Penalty comes into picture only if funds are withdrawn before the age of 60 or so, which I will pass when I plan to withdraw. I plan to retire in Canada. Don't you think withdrawing while on CPP will impact CPP and other benefits? After retiring, if I wait to apply for CPP, etc., and withdraw all 401K over two successive years (of low income), will that not be beneficial?
Clawback of OAS (there is no CPP clawback) is something to watch for.
You can only collect OAS at 65.
If you are not subject to penalty, then withdrawing at least some of the funds before leaving US may be a good idea.
<i>nelsona non grata... and non pro</i>
P.S. Don't forget to apply for SS when you are of age. You are entitled to it if you worked a total of 10 years in US and Canada.
You can only collect OAS at 65.
If you are not subject to penalty, then withdrawing at least some of the funds before leaving US may be a good idea.
<i>nelsona non grata... and non pro</i>
P.S. Don't forget to apply for SS when you are of age. You are entitled to it if you worked a total of 10 years in US and Canada.