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I am not a US citizen, but I am employed by a US company and therefore am entitled to take out a 401k. If I pay into a 401k and then return to the UK before retirement, can I keep the 401k open if I am not earning in the US and if so what are the tax implications etc.? If I have to terminate it early how much will I be penalised?
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Greetings, 4Harleypuss, and welcome. You asked:

<<I am not a US citizen, but I am employed by a US company and therefore am entitled to take out a 401k. If I pay into a 401k and then return to the UK before retirement, can I keep the 401k open if I am not earning in the US and if so what are the tax implications etc.? If I have to terminate it early how much will I be penalised?>>

If you have more than $5,000 in your 401k plan when you leave your employ, then you may leave that money in the 401k plan until you reach age 59 1/2. If you have less, the plan may require you to take a distribution. If that happens, you may transfer the money to an IRA to continue the tax deferral until you reach age 59 1/2. At 59 1/2, you may take the money without penalty from either the 401k or the IRA, but it will be subject to income taxes. If you take the money before then, then you must pay income taxes and a 10% early withdrawal penalty. What you must pay in income taxes is subject to the international tax agreement between the UK and the USA. I confess I have no idea whether that is higher or lower than US rates, but I'm sure someone on the Tax Strategies board will be able to give you a more definitive answer if you post your query there.

Regards..Pixy
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