What happens to your US accounts if you move back?
401(k), RSUs, HSA, Roth conversions, and the IRMAA cliff. US decisions that seem small now but add up over five years.
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Overview
The US accounts you build up, and what happens to them if you leave
If you are on an H-1B or L-1 and facing a long wait for an EB-2 green card, the tax-advantaged accounts you open in your first three years can grow into six-figure balances. At $250K in total pay with a 6% employer match, your own contributions plus the match can take a 401(k) past $150,000 in five years, before any market growth. An HSA you opened because the high-deductible plan was cheaper turns into a tax-advantaged investment account that many people forget they have. RSUs that vest after your fourth year can be a large part of your net worth.
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Few people ask at the start what happens to these accounts if they leave the US. The answer depends on the account, when you stop being a US tax resident, and which tax treaty position you take when you leave. Cashing out a 401(k) before age 59½ normally means a 10% penalty plus ordinary income tax. If you are moving back to India, timing withdrawals around India's RNOR period can lower the overall tax bill. A Roth IRA you funded in the 22% bracket can be withdrawn free of US tax later, wherever you live. An HSA is different: non-medical withdrawals before age 65 carry a 20% penalty plus income tax, which is a real cost if you overfund one and then leave.
This topic covers the five US decisions readers ask us about most. None of them is urgent in any given quarter, but all of them add up over time. It is better to make these decisions on purpose around year three than in a hurry in year eight, when your EB-2 priority date moves or your family decides to move back.