{ "media_type": "text", "post_content": "Moving out of the US for 5-6 years, does it make sense to keep the 401k as is or withdraw it and pay the fine and penalty as it could still be used as a 25-30% down payment for a house ? The balance is under 70k right now. I will be moving back after 5-6 years.", "post_id": "61ef2077ae9111002c27f284", "reply_count": 12, "vote_count": 1, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter", "feed_type": "bowl" }

Moving out of the US for 5-6 years, does it make sense to keep the 401k as is or withdraw it and pay the fine and penalty as it could still be used as a 25-30% down payment for a house ? The balance is under 70k right now. I will be moving back after 5-6 years.

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Do not withdraw it whatever you do. I lived overseas for 9 years, and you can take all that money compltely tax free if you play your cards right. You heard that right....dont pay a penny in tax. Here is what I did: 1.) Roll that 401k into a traditional IRA 2.) Leverage your foreign earned income exlusion each year against your salary. 3.) Depending upon your salary, the foreign exclusion may cover all your salary, and if it does, you got your standard deductions as tax free income. 4.) Each year roll over the amount of your standard deduction ($12.5k if single or $25k if married) from your traditional IRA to a ROTH Ira. Over 6 years you should be able to convert all $70k of that account to a ROTH by applying the income against your yearly std deduction. I did this over 9 years abroad on almost $100k in an old 401k. As long as you keep the $ in the roth until you hit 59.5 yo, then you have that money totally tax free.

helpfullike

Thank you!

If you are moving back, don’t withdraw unless you can’t do without that money. If you are switching employers, you can roll it into an IRA

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Keep the 401k. Wiping out 70k in retirement savings and paying penalties to do it is a bad idea.

likesmart

Let it coast Look up Coast FIRE Not that you have enough in there. But it's a start.

Do not withdraw!

Wow, cool. So just to confirm my understanding, you basically pulled ~ $12k a year out of your 401k (turned traditional ira turned roth ira) tax free over the course of couple years.

Correct

Your 401k is for retirement, not a down payment. Why would it matter where you are in the world? Don’t touch it.

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