401(k) when you leave the US: cash out, leave it, or roll it over?
A $200,000 401(k) cashed out at 45 by a nonresident loses $60,000 to withholding and $20,000 to the 10% additional tax before any refund. The alternatives, computed.
On this page 5 sections
Leaving the United States does not force you to do anything with a 401(k). It can stay in the plan, be rolled directly into an IRA with no tax and no withholding, or be cashed out, and the cash-out is the expensive choice. On a $200,000 pre-tax balance paid to a 45-year-old nonresident, the plan withholds $60,000 at the 30% statutory rate and sends $140,000; the 10% additional tax on early distributions adds $20,000 owed with the US return, leaving $120,000 before any refund. After an estimated Form 1040-NR, that becomes about $136,402. Taken instead while still a US tax resident with $100,000 of other income, the same balance nets about $125,036 after federal tax and the additional tax, before state tax. A direct rollover or leaving the money in the plan keeps all $200,000 invested, with no US tax until it is withdrawn.
The numbers
Every figure comes from the MoneyVibe 401(k) withdrawal when leaving the US calculator, with these inputs: a $200,000 pre-tax 401(k) balance paid at age 45; for the nonresident rows, 30% withholding, 75% of the balance from contributions (your own and your employer's) and 25% from earnings, single, no other US income in the year of payment, 2026 federal rates; for the resident row, single with $100,000 of other taxable income and the 2026 standard deduction. Results are federal only, rounded to the dollar.
| Choice at 45, $200,000 balance | Withheld at payout | Owed or refunded when you file | Yours after US tax and the additional tax |
|---|---|---|---|
| Cash out as a nonresident, before filing | $60,000 (30%) | $20,000 additional tax still owed | $120,000 |
| Cash out as a nonresident, after an estimated Form 1040-NR | $60,000 (30%) | $3,598 more owed | $136,402 |
| Cash out while still a US resident ($100,000 other income) | $40,000 (20%) | $34,964 more owed | $125,036 |
| Direct rollover to an IRA, or leave it in the plan | $0 | $0 | $200,000 |
The first row is what most people picture: 30% gone at payout, 10% more with the return, 40% in total. The second row is what the return is likely to show. Of the $200,000, the $150,000 from contributions is effectively connected income taxed at the 2026 graduated rates with no standard deduction ($28,598); the $50,000 of earnings is taxed at the flat 30% ($15,000); with the $20,000 additional tax the US bill is $63,598, which is $3,598 more than the $60,000 withheld.
The resident row works the other way. The plan withholds only 20%, but the whole $200,000 is added to the year's taxable income at the regular rates. On top of $100,000 of wages, that is $54,964 of federal income tax plus the $20,000 additional tax, so $34,964 is due with the return beyond the $40,000 withheld. State income tax, which the calculator does not add, comes on top.
The fourth row is the benchmark, and the gap widens with time. Left invested at 7% a year with 3% inflation, the $200,000 grows to about $347,500 in today's dollars by 59½, when the additional tax no longer applies. The page compares the two paths at their cash-at-payout figures, before any Form 1040-NR filing; at 59½ a filing would return part of the 30% withheld, as the age-60 example below shows.
| At 59½, in today's dollars (7% growth, 3% inflation) | Yours after US tax |
|---|---|
| Cash out at 45, reinvest the $120,000 at the same return | $208,500 |
| Leave it invested, withdraw at 59½ as a nonresident, 30% withheld, no additional tax | $243,250 |
Why it works this way
Your status on the payment date sets the withholding. A US citizen or tax resident who takes an eligible rollover distribution in cash has 20% withheld; section 3405(c) says the payer "shall withhold from such distribution an amount equal to 20 percent", and IRS Topic 413 confirms it applies "even if you intend to roll it over later". A nonresident alien is under section 1441(a) instead: the payer must "deduct and withhold from such items a tax equal to 30 percent", and Publication 519 (2025), chapter 8, says a pension distribution "is generally subject to the 30% (or lower treaty) rate of withholding". A lower treaty rate is claimed by giving the plan Form W-8BEN before the payment, and chapter 8 also allows graduated-rate withholding on the part from US services after 1986 if you ask for it on Form W-8BEN or 8233; nothing is reduced automatically. The year you leave may be a dual-status year: under Publication 519, residency normally runs to December 31 unless you qualify for an earlier termination date (for a resident under the substantial presence test, your last day in the US, provided your tax home is abroad and you have a closer connection to that country for the rest of the year and are not a US resident at any time the next year; a green-card holder's date is the day that status ends).
Withholding is a prepayment, not the tax. For a nonresident, Publication 519 (2025), chapter 4, says that distributions attributable to personal services performed in the US after 1986 "are effectively connected income to the extent attributable to contributions", and section 871(b) taxes effectively connected income at the graduated rates. The Instructions for Form 1040-NR (2025) report that part on lines 5a and 5b and send US-source pension income that is not effectively connected to Schedule NEC, line 7, where the flat 30% (or treaty) rate of section 871(a)(1) applies; the earnings part of the balance falls there. Publication 519, chapter 5, states that "nonresident aliens cannot claim the standard deduction", which is why the $150,000 contribution part is taxed from the first dollar. The tax withheld, shown on Form 1042-S, is credited on line 25g, so over-withholding comes back and under-withholding is due.
The 10% additional tax follows the money, not the passport. Section 72(t)(1) increases the tax of any taxpayer who receives an amount from a qualified retirement plan "by an amount equal to 10 percent of the portion of such amount which is includible in gross income". The exceptions in section 72(t)(2) include distributions made on or after 59½ and distributions "made to an employee after separation from service after attainment of age 55"; the IRS early-distributions page states the latter as separating from service during or after the year you reach 55. It is reported on Form 5329 and on Schedule 2, line 8, which Form 1040-NR carries as well. The plan does not withhold it.
A rollover avoids all of it, if it is direct. Publication 575 (2025) and Topic 413 say a direct rollover from the plan to an IRA has no withholding. If the plan pays you instead, 20% is withheld and you have 60 days to deposit the full amount in an IRA, replacing the withheld 20% from other money; whatever is not rolled over within 60 days is income that year and, before 59½, subject to the additional tax. The IRS rollovers page adds that a plan may move small balances to an IRA, or pay them out, without your consent; ask the plan about its limit before you leave.
Leaving it in place has a clock, but a long one. The IRS required minimum distributions page says withdrawals must generally begin at age 73, the first by April 1 of the following year; the SECURE 2.0 Act (Public Law 117-328) raises that age to 75 for people born in 1960 or later, which includes a 45-year-old today. An employer plan may let you wait until you retire if you still work there. Until then the account grows without US tax.
Treaties vary, so this post does not pick one. The IRS tax treaty tables page, Table 1, lists the withholding rates on pensions and annuities by country and the conditions attached. Some treaties reduce the rate, some do not, and the treaty text controls. Check the table for the country you will live in, and remember that 0% withheld in the US is not 0% tax if that country taxes the payout.
What changes the answer
- Age on the payment date. At 59½ the additional tax disappears. On the same $200,000 paid at 60, a nonresident has $60,000 withheld, owes no additional tax, and the estimated Form 1040-NR returns $16,402, for $156,402 kept against $136,402 at 45.
- Residency on the payment date. Taken as a resident with $100,000 of wages the payout nets $125,036; as a nonresident with no other US income, about $136,402 after filing. Check the substantial presence test calculator for the year of payment; the dual-status year itself is not modeled.
- A treaty rate claimed on Form W-8BEN. At 15% withholding, the plan pays $170,000 and $150,000 is left after the $20,000 additional tax. The calculator applies the rate you enter to the withholding and to the earnings part; it does not model treaty relief on the contribution part, which depends on the treaty.
- How much of the balance is contributions, and other US income that year. With 100% contributions and no earnings, the 1040-NR estimate keeps $139,402. Wages taxed on the same return push the contribution part into higher brackets.
What to do first
- Fix two facts before anything else: your US tax status on the day the plan would pay you, and the split between contributions and earnings on your latest plan statement.
- Run the 401(k) withdrawal when leaving the US calculator twice, once as a resident and once as a nonresident, and compare each result with the balance left invested to 59½.
- If you keep the account, give the plan or IRA custodian your new address and, once you are a nonresident, Form W-8BEN; confirm before you leave that the custodian will keep an account with a foreign address. If you roll over, ask for a direct rollover payable to the IRA, never a check to you.
What this does not model
State income tax on a resident's payout, tax in the country you move to, the dual-status year, treaty relief on the effectively connected part, itemized deductions on Form 1040-NR, the age-55 separation-from-service exception, Roth or after-tax balances, employer stock, plan loans, the expatriation tax for citizens and long-term green card holders who give up status, and your plan's own force-out limit. The growth figures are in today's dollars at the rates stated, not a forecast.
Next steps: run your own figures in the 401(k) withdrawal when leaving the US calculator, compare contribution types with Roth or traditional if you might leave the US, read the library chapter leaving with a 401(k) and the lesson leaving the US for good: what to do with your money, and when, or see the glossary entries for 401(k) withdrawals after leaving the US, the 10% early-withdrawal tax and tax treaties.
Not tax or legal advice. Federal rules as published by the IRS and in Title 26 of the United States Code, read on October 10, 2026; confirm with a tax professional who knows both countries before acting.