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CGCPA
CGCPA, CPA
Category: Tax
Satisfied Customers: 3739
Experience:  over 40 years experience in tax matters
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I am quitting my job in the US and leaving for another country.

Customer Question

I am quitting my job in the US and leaving for another country. I have about $18,000 in my 401-k account.
My question is: should I cash out this year or next? As I will not be working in the US next year, my only income (if I cash out next year) would be the 401-k money...if so, will I be subject to a lower tax bracket?
I am assuming that if I cash out this year, the 401-k money would be added to the income I have already earned and as a result, it would be in a higher tax bracket.

So will I pay less taxes if I cash out next year rather than this year, or does it not make any difference at all?
Submitted: 3 years ago.
Category: Tax
Expert:  CGCPA replied 3 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

 

There are basically two questions for you to be considering:

 

First, why will you cash out? It is not required of you to do this.Although you will not be able to add to the account, it will still be able to grow in a tax advantaged manner.

 

Second, what exactly do you believe will happen with the stock markets in the next year? Do you believe they will decline, advance, or remain static? While taxes will be more expensive this year since you will need to add this income to your other income, next year is an unpredictable. Tax rates could go up, down, or remain the same. If they remain the same I would postpone the withdrawal until next year for tax savings, but only if I believed the investment will grow or remain static.

 

As you can see, a large part of this decision is based on your personal view of the future. Personally, I would leave the money in place or roll it over into an IRA roll over account. This is a specific type of IRA used just for this purpose.

CGCPA, CPA
Category: Tax
Satisfied Customers: 3739
Experience: over 40 years experience in tax matters
CGCPA and other Tax Specialists are ready to help you
Customer: replied 3 years ago.
I do agree that things could change next year...I am hoping that things would remain the same or improve!

The money would be very helpful, but as you suggested, i think I need to consider an IRA roll over account.

But as far as taxes are concerned, I would definitely have tax savings if I took out the money next year...right?
Also do you know of any official website/resource where I can get the US tax brackets?

Thanks!
Expert:  CGCPA replied 3 years ago.

As far as the tax concern, unless the stock markets do a miraculous thing, yes it will less costly to do this over two different years. The Federal tax rates can be found at the IRS web site http://www.irs.gov/ They are found in the instructions for the form 1040 at this link:

http://www.irs.gov/pub/irs-pdf/i1040.pdf

 

 

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