Roth IRA seems like a no brainer for a PR/ citizen. im on OPT about to enter H1B lottery but think i want to stay here long term and can risk 10% penalty on profits. I will likely never be in this tax bracket again and WA will likely not have 0% state taxes when i retire. Is it recommended?
Its free money and it will be great when u do it now and look back in future
I don't get why any H1b in Washington should even contribute to 401k
Why?
Folks contribute to save tax and you don't have any state tax. In case you take it out after 30 yrs when WA has state tax, you would need to pay state tax then. Until you go dead ass broke , you would be in the same federal fax bracket now and after 30 yrs so thats not a differentiator. Why not take the money as salary and invest it into the same vanguard plan as 401k does ?
Short answer. Yes use Roth. 1. Why are you even thinking about 10% penalty. Even if you lose H1b and leave USA, you don't need to withdraw your ROTH ira. 2. You are young and should aim to save as much as possible. Roth gives you ability to save more than traditional. ( Post tax 100$ ~= pre tax 125) 3. While you can invest in same ETFs or funds in a brokerage account, it doesn't give you ROTH benefits of no tax on withdrawls when you turn 60. Also, it's harder to be disciplined with brokerage account and not touch it till retirement as theres no penalty. 4. From Roth you can withdraw your contributions (not earnings) freely after 5 years of opening account. So whatever you decide.. at least open a Roth IRA with 100$. Five years later if you want to withdraw your trad ira funds, you can convert them to Roth and then withdraw the contributions without the penalty. (Will have to pay tax on conversion, but you have the penalty on contributions)
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