[EN] How to Withdraw 401(k) for Foreigners Leaving the US: Tax & Penalty Guide

 

Reviewing US 401(k) withdrawal and tax documents before leaving the United States.

Foreign Workers Leaving the US Should Check Their 401(k)

Many foreign professionals working in the United States contribute to an employer-sponsored 401(k) retirement plan.

If you worked in the US under a visa such as H-1B, L-1, O-1, or a similar work visa, you may still have retirement savings in the US after leaving your job.

Leaving the United States does not automatically mean you lose your 401(k).

In many cases, foreign workers can keep the account, roll it over to an IRA, or take a distribution. The right option depends on your age, tax status, country of residence, and future financial plans.

Direct 401(k) Withdrawal Can Trigger Tax and Penalty

If you take money directly from a 401(k), the taxable amount is generally treated as income.

For many people under age 59½, an early withdrawal may also trigger an additional 10% tax unless an IRS exception applies.

A direct cash distribution from a 401(k) is also generally subject to mandatory 20% federal income tax withholding.

This does not always mean your final tax bill is exactly 20%. Your final tax result depends on your tax return, income level, residency status, and any applicable tax treaty.

IRA Rollover May Help Avoid Immediate Tax Withholding

Some foreign workers transfer their 401(k) savings directly into a Traditional IRA.

A direct rollover can help avoid immediate income tax withholding while keeping the money inside a tax-deferred retirement account.

This may give you more time to decide whether to keep the money invested, withdraw later, or plan around your future tax situation.

Before rolling over, check whether the IRA provider accepts non-US residents or account holders who may later live abroad.

IRS Section 72(t) May Help in Limited Cases

Some account holders use IRS Section 72(t), also called Substantially Equal Periodic Payments (SEPP), to take scheduled retirement distributions before age 59½.

If the rules are followed correctly, these payments may avoid the additional 10% early withdrawal tax.

However, SEPP rules are strict. Payment amounts, timing, and duration must be handled carefully.

This option is usually better reviewed with a CPA or tax professional before use.

Keep These Documents Before Leaving the US

Before leaving the United States, keep copies of:

401(k) account statements

employer retirement plan documents

W-2 forms

tax returns

IRA rollover records

Form 1099-R, if you receive a distribution

passport and visa records

These documents may be needed later for tax filing, rollover questions, or proof of retirement account history.

Check Tax Rules Before Taking Money Out

US retirement accounts can create tax issues even after you leave the country.

Your final result may depend on:

your age

US tax residency status

country of residence

state tax rules

tax treaty rules

total yearly income

withdrawal method

For large balances or cross-border tax situations, it is safer to check with the IRS, your retirement plan provider, or a licensed CPA familiar with international tax issues.

This article is based on publicly available IRS retirement and tax information as of May 2026. Tax rules, penalties, withholding rules, and treaty treatment may change depending on law updates and individual circumstances.