401(k) penalties when leaving US

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I understand early withdrawal from 401(k) have tax consequences that are income tax + 10 % early withdrawal penalty.

What is the intention / consequence of this when leaving the US?

I am German and assuming I am deciding to leave the US in a few years, then will I have to pay penalties? Are there exceptions or other ways to avoid this? Should I keep the 401(k) and is that even possible? I do not understand of intention of penalties when there is no other choice than dissolving the account?

Ask the Experts - MetLife VII - Mar 2025

JamesG1

Alumni - Intuit

First of all, you are not subject to a penalty unless you withdraw funds from the 401(K). You may retain the account unless your employer plan has a requirement that you withdraw your funds should you leave the country.

Exceptions to the penalty for an early withdrawal from my 401(K) may be found here.

The new exceptions added in 2024 may permit you a little flexibility to withdraw funds for a 'financial emergency'.

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MinhT1

Alumni - Intuit

There are exceptions to the 10% early withdrawal penalty for a 401(k) which are listed in this TurboTax Help article.

Leaving the US is not an exception. You can still keep your 401(k) open, or if not permitted by your plan, you can rollover to a Traditional IRA. Such rollover is not taxable or subject to penalty.

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