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401 status after Green Card expiry (out of US for over 5 years)

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testshyam

Junior Member
What is the name of your state? CA (California)

I am a 40 year old Canadian citizen and US Green card holder. I have over $60K in 401K. I moved to India over 2 years ago and have probably lost the Green Card holder status. I have been filing tax returns in US showing that I have paid income taxes in India. What is the legal status of my 401K? Can I continue to hold it until I retire or even further?

Another question. Am I allowed to trade mutual funds in the US market with my money in 401K and also with my funds outside 401K (my savings)?

Thank you.
 


abezon

Senior Member
Make a visit back to the US. Set up a traditional IRA & a Roth IRA. When you do so, you'll need to have a US address & phone number. **You can't give your financial advisor any reason to suspect that you're not living in the US.** Once you have the IRA established, you can roll the 401k funds directly into it without paying any taxes.

Then, start converting the traditional IRA to a Roth IRA year by year. Figure out how much money you can add to your income without paying any taxes. If you're excluding your India income on Form 2555, & have no other income, you can convert the standard deduction & personal exemption amount each year. For single/no dependents, that's about $8,000/year. If you have kids or are married, it's probably higher.

Later, you can withdraw the Roth IRA money tax free. If the funds stay in the Roth for 5 years, the earnings are all tax free too. Furthermore, under the Canadian/US tax treaty, even if you're living in Canada when you withdraw the funds, Canada cannot tax the money. This is the sweetest tax deal any Canadian can get.

A Roth IRA can be held untiil you die if you don't want to pull out the money.

You can set up a broker account online & trade stocks via internet.

You cannot trade stocks in a 401k, since you don't have any control over how the money is invested. You can find IRAs that let you trade within them.
 

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