I am starting a new job and I was wondering how much I should invest in 401k/roth 401k. Also which one is the best to invest in? I am on a H1 visa right now. If I had to leave the country how can I remove the money from my account without paying penalty & Taxes (401k)? please advice.
You can’t remove it without penalty, but that’s true whether you’re on H1 or not. That is the whole point of 401ks. But it’s only ~10% so not the end of the world. If you have company match, that’s already 100% return if you put in just enough to get the maximum match
One alternative is to use 401k Roth IRA and open up your personal Roth IRA. When you are moving from your company, roll that 401k Roth to your personal Roth IRA. After 5 years since opening the account, you can take out your principal from your personal Roth IRA without any penalty. Talk to your financial advisor to discuss your personal situations.
Does your employer match your 401k contributions?
Myself I had regular 401k for years. In last 2 jobs I was offered Roth and I took it. Since I cannot predict future, at least this should limit my losses if any. Better than been all wrong.
Also I heard from someone that.. if i choose 401k my the taxes i pay now would be less as its deducted from my gross pay. And they also suggested that if I do not have income for 1 year at the time of retirement then i can remove the money with the lowest tax bracket applied. Is this possible?
Generally, standard 401k only. 1. When you retire you will probably pull less income from it than you are receiving now hopefully. You only need to pull as much as you need rather than trying to pull a high income 2. Whenever you have a choice of paying taxes now or deferring, always defer. There are creative ways to pay less taxes later that you might learn. SEPP 72t is one option to pull from your 401k without penalty early. But if you pay your taxes now, there’s no way to undo it later.
If you are going to be making over $100k a year I recommend the 401k, if below set up a Roth. However you will always be penalized so instead maybe look to do a IRA. I use Vanguard
Could you please explain the logic behind above 100k & below 100k?
In a 401k you are taxed up front not at the end vs Roth being taxed when you withdraw. There for on average you will most likely have more at the end if you have a 401k so it’s more beneficial, however with a 401k Roth you want to be able to contribute the most and pay taxes at the end