You're moving back to India, or on to another country, and your 401(k) has years of savings in it. Should you cash out before you go? Leave it? Move it?
As of November 2, 2026, here is what the IRS's own guidance says, and where you need a tax professional.
- The IRS lists four options when you leave a job: leave it, roll to a new plan, roll to an IRA, or withdraw.
- Withdrawals before age 59½ generally carry a 10% additional tax unless an exception applies.
- For a 401(k) after leaving a job, the IRS page uses age 55 as the threshold for the additional tax.
- You have 60 days to roll over a distribution paid to you.
- For nonresident aliens, payers generally withhold 30% on US-source pension distributions absent a treaty exemption.
- The India-US treaty defines a pension as a periodic payment, and the IRS says treaty exemptions may not apply to lump sums.
What are your options when you leave?
The IRS says that if you're leaving your job and have a retirement plan, "you generally have four options for your account balance" (IRS, Retirement Topics: Termination of Employment):
| Option | What the IRS says |
|---|---|
| Leave it in the plan | Possible, though the plan can move a small balance out without your consent |
| Roll over to a new employer's plan | Only if your new employer's plan accepts rollovers |
| Roll over to an IRA | Traditional or Roth; a Roth rollover is taxable in that year |
| Withdraw the balance | You "will likely have to pay income tax on any previously untaxed amount" |
Leaving the US isn't on the list of things that force a withdrawal. The account belongs to you.
One number on that IRS page is out of date. It says "if your account balance is less than $5,000, your employer may require you to move it," but SECURE 2.0 raised that limit to $7,000 for distributions made after December 31, 2023. The tax code now protects a benefit from immediate distribution without your consent only if it "exceeds $7,000" (26 U.S.C. 411(a)(11), Cornell LII).
What does cashing out cost?
More than many people expect. The IRS says a withdrawal is generally taxable, and you "may have to pay an additional 10% early distribution tax if you aren't at least age 55 (59½, if from a SEP or SIMPLE IRA plan)" (IRS, Retirement Topics: Termination of Employment).
The age 55 exception applies if you leave the employer during or after the year you turn 55. More generally, "the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called 'early' or 'premature' distributions," and "individuals must pay an additional 10% early withdrawal tax unless an exception applies" (IRS, Exceptions to Tax on Early Distributions). Moving abroad isn't one of the listed exceptions.
The plan also withholds up front. "The old plan usually withholds 20% for federal income taxes from the distributed amount."
Can you change your mind after withdrawing?
Within 60 days. "If you withdraw some or all of your balance, you can still decide to roll it over to a new employer's plan or to an IRA within 60 days of receiving the distribution." Because of the 20% withholding, you'd need other money to roll over the full amount (IRS, Rollovers of Retirement Plan and IRA Distributions).
What changes once you're a nonresident?
Withholding. IRS Publication 515 tells payers that, for nonresident aliens, "in the absence of a treaty exemption, you must withhold at the statutory rate of 30% on the entire distribution that is from sources within the United States" (IRS Publication 515).
Whether you're a nonresident for tax purposes depends on the tax rules, not your visa. Our guide to taxes for H-1B workers and green card holders explains the substantial presence test.
Does the India treaty help?
Maybe, but not for everything. Article 20 of the India-US treaty says a pension "derived by a resident of a Contracting state from sources within the other Contracting state may be taxed only in the first-mentioned Contracting state." It then defines a pension as "a periodic payment made in consideration of past services" (IRS, United States-India Income Tax Convention).
A one-time lump sum isn't obviously a periodic payment. Publication 515 says the same thing in general terms: "Most tax treaties provide an exemption from tax on non-government pensions and annuities," but "the exemption may not apply to lump-sum payments," and "it does not apply to payments treated as deferred compensation." This is exactly the kind of question to take to a tax professional who handles both countries before you cash out.
What should you do before you leave?
- Decide whether to leave the money, roll it to an IRA, or withdraw, before your last day.
- If you leave it, check whether your plan or custodian allows foreign addresses.
- Keep a US bank account and your SSN details current for managing the account.
- Ask a cross-border tax professional about the treaty before taking a lump sum.
- Keep records of all contributions and withdrawals for both countries' returns.
If you're leaving because of a layoff rather than choice, our guide to what to do after an H-1B layoff covers the options for staying, and if you might return later, our guide to H-1B recapture time explains how unused H-1B time can be reclaimed. Our guide to health insurance after an H-1B layoff covers coverage while you decide.
What this means for you
- Leaving the US doesn't force you to cash out.
- A withdrawal is usually taxable and can carry a 10% additional tax.
- After you become a nonresident, expect 30% withholding without a treaty exemption.
- The India treaty's pension article may not cover a lump sum.
- Get tax advice before choosing.
Where to start
If you'd rather stay, a green card ends the uncertainty that makes these choices hard. Our free evaluation at /evaluate/ checks whether EB-1A or the NIW fits your profile, and Frank, our AI assistant at /frank, helps you build the evidence. Petitions are reviewed and filed by our partner law firm, Lai & Turner.
Sources
All checked November 2, 2026.
- IRS, Retirement Topics: Termination of Employment. Four options; age 55; 20% withholding; 60 days.
- 26 U.S.C. 411 (Cornell LII). $7,000 limit on distributions without consent, for distributions after 2023.
- IRS, Retirement Topics: Exceptions to Tax on Early Distributions. 10% additional tax; exceptions.
- IRS, Rollovers of Retirement Plan and IRA Distributions. 60-day rollovers.
- IRS Publication 515. 30% withholding; treaty exemptions and lump sums.
- IRS, United States-India Income Tax Convention. Article 20, pensions.
This article describes US tax rules in general terms and isn't tax advice. Green Card Guide AI is not a law firm and this article is not legal advice. It describes the rules in general terms; your attorney determines how they apply to your case.
Frequently asked questions
What happens to my 401(k) if I leave the US on H-1B?
It stays in your name. The IRS says that when you leave a job, you generally have four options: leave the money in the plan, roll it over to a new employer's plan, roll it over to an IRA, or withdraw it. Leaving the country doesn't force a withdrawal, though federal law lets a plan move out a balance of $7,000 or less without your consent.
How much tax do I pay if I withdraw my 401(k) before leaving?
A lump-sum withdrawal is generally taxed as income on any previously untaxed amount, and the plan usually withholds 20% for federal taxes. If you leave the job before the year you turn 55, you may also owe a 10% additional early distribution tax unless an exception applies. The exact result depends on your income for that year.
Does the India-US tax treaty make my 401(k) tax-free in the US?
Not necessarily. Article 20 of the treaty says a pension paid to an Indian resident from US sources may be taxed only in India, but it defines a pension as a periodic payment for past services. The IRS warns that treaty pension exemptions may not apply to lump-sum payments. Ask a cross-border tax professional before cashing out.
Can I keep my 401(k) after moving back to India?
Generally yes. Nothing in the IRS's options requires you to withdraw because you moved abroad. Ask your plan how it handles a foreign address before you leave. Keep your login details, US bank account and tax ID current so you can manage the account from abroad.
What withholding applies if I withdraw after I've left the US?
If you're a nonresident alien when you're paid, IRS Publication 515 says the payer generally must withhold at the statutory 30% rate on the entire US-source distribution, unless a treaty exemption applies. Withholding isn't necessarily your final tax, so get advice on whether you should file a US return for that year.
Green Card Guide AI is not a law firm and this article is not legal advice. It describes evidence-building strategy in general terms; your attorney determines what belongs in your petition and how it's argued.
