For internationals who’d surely withdraw their 401K before turning 60 - what’s the best 401K strategy? Normal vs ROTH? Max. up to $18k or just max to get employer match?
My company matches up to limit. So I do that. Everything after that is after tax 401k to Roth backdoor. In Roth you can take out the capital (principal) after 5 years - no penalty. So no brainier to do this. If you however need money less than 5 year horizon, just save it in etf, bonds etc.
Do you do normal or roth for the company match?
401k laws say companies can only match on pretax money. So even if you contribute 100$ which becomes 50$ after tax, companies only match 100$ (if it is 50% match by company that would be 50$) and that would go into pretax account. Company match account is always pretax. You can choose for your contributions (whether pretax or Roth), but for companies it is already chosen.
Here’s a simple (brilliant) strategy Max (if you can) your traditional 401k (not ROTH 401k). This means you’re not paying taxes on the deferred part. If(when) you leave the US, start to draw down from it. Yes, you’ll pay 10% penalty, but if your (other) US income is zero or limited that’s the only tax you’ll pay. Don’t forget that taxes start after the first $10,320 of income. So you can conceivably withdraw $10,320 at only a 10% tax rate (ie early withdrawal penalty) when if you pay the tax today you’re likely paying 25%+
Great, never thought of it. So this assumes i do the ROTH right?
No. Don’t do Roth. You’re already taxed on ROTH Defer taxes now, and pay none later except for the early withdrawal penalty This will not work if you have other US passive incomes however. E.g rental income or partnership returns (K1).
Put just that much which will give you max company match.