A:

Should you decide to invest in a Traditional IRA and receive a tax deduction for your contribution, the amounts that you later withdraw will be subject to income tax and an additional 10% early-withdrawal penalty. The penalty will be waived if you meet an exception.
Given that you are a non-resident alien (determined by your visa category- H1B), your withdrawal may not be subject to state taxes. You want to ensure that your IRA custodian indicates your residency status on your account file.
The ease with which you will be able to make withdrawals from your IRA is determined by the IRA product you invest in and/or the operational policies and procedures of your financial institution. For instance, if you invest in certificates of deposit (CDs) at a commercial bank, you are permitted withdrawals on or after the date the CD matures. Withdrawals before this maturity date may result in severe penalties, assessed by the financial institution. This is in addition to income taxes and any applicable IRS early-withdrawal penalties. On the other hand, some financial institutions offer IRA products that permit withdrawals at any time, without any penalty being assessed by the financial institution.
Be sure to check with your financial institution regarding the features and benefits of its IRA products, its policies and procedures, and the options available to you.
Please note that IRA distributions sent to you at an address outside of the United States are subject to mandatory federal withholding of 10%. Should you decide to waive this 10% withholding, your distribution will then be subject to the treaty rate of your country of residence. The treaty rate ranges from zero to 30%. Special documents are required for requests to waive the default 10% withholding.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. Am I losing the right to collect spousal Social Security benefits before I collect ...

    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
  4. What is the maximum I can receive from my Social Security retirement benefit?

    The maximum monthly Social Security benefit payment for a person retiring in 2016 at full retirement age is $2,639. However, ... Read Full Answer >>
  5. When should my tax refund arrive?

    More than 90% of income-tax refunds arrive in less than three weeks, according to the Internal Revenue Service (IRS). However, ... Read Full Answer >>
  6. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which ... Read Full Answer >>
Related Articles
  1. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  2. Retirement

    How Much Should You Have In Your 401(k) To Retire?

    Determining how much money should be in your 401(k) when you retire depends on several variables, many of which are uncertain.
  3. Retirement

    Retiring in Thailand: The Pros & Cons

    It's a lovely land, but before relocating, get the skinny on this Southeast Asian kingdom.
  4. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  5. Investing

    How To Make Sure Your Healthcare Costs Do Not Ruin Your Retirement

    The best proactive plan of action for a stable retirement is to understand medical costs, plan ahead, invest properly, and consider supplemental insurance.
  6. Retirement

    Is Retiring in France Safe Today?

    After a series of deadly terrorist incidents, some may be asking themselves this question.
  7. Investing

    3 Small Steps to Maximize Your Investing Goals

    Instead of starting the New Year with ambitious resolutions, why not taking smaller manageable steps that can have a real impact.
  8. Taxes

    Taxes: H&R Block Vs. TurboTax Vs. Jackson Hewitt

    There are more and more tax services to help ease the pain of filing income taxes. Here's our take on three of the biggest.
  9. Investing

    7 Creative Ways to Save for an Early Retirement

    Take note of these out of the box steps you can take towards securing yourself an earlier, more comfortable retirement.
  10. Your Clients

    Tips for Making Your Nest Egg Last Longer

    If you’re trying to figure out how to make your hard-earned nest egg last, there’s one piece of advice that stands above the rest.
RELATED TERMS
  1. Warrant

    A derivative that confers the right, but not the obligation, ...
  2. Bull Call Spread

    An options strategy that involves purchasing call options at ...
  3. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  4. Sequence Risk

    The risk of receiving lower or negative returns early in a period ...
  5. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  6. Taxes

    An involuntary fee levied on corporations or individuals that ...
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center