Hi, I am pretty new to the 401k concept here in the USA. I am litle hesitant to contribute since I don’t know if its worth it. I am on a work visa and still not sure if I will spend the rest of my career in this country.
Do you know if your employer matches 401k contribution?
Employer matches half of what I contribute up to a certain amount.
When you withdraw before retirement age, you need to pay 10% penalty. Because employer is covering more than 10%, you should invest
Contributions are pre tax. If you head to your home country you’ll end up out even as penalty is about the same as state income tax...and you dont pay state income tax abroad.
Yes, OP should pay taxes along with penalty. But, still you pay less than employer match right ?
Employer match for your business to help you get your money out of the work?
Max out pre-tax, withdraw and pay the penalty when you leave the country. Your federal tax rate will be lower and your state income tax will be 0.
Thank you for the suggestion.
When one leaves the country , technically they need to pay state tax too, isn’t it ? Unless you mean - leave the country and after some time has elapsed, withdraw it
It makes even more sense as an immigrant
As in the benefits when you are withdrawing?
Yup, you are deferring taxes for the future. Your income will be lower in the future
Yes
If I contribute say 9-10% and my employer matches half of it. Is there a probability that I will come ahead if I withdraw before retirement ? I guess I’m still confused.
Put about 25% of total savings target towards the 401k. You will save taxes and get free money from employer match. When you leave the country, 401k can remain invested here, and you can manage it online. Usually there is no fee. Alternatively, at that time you can convert to an IRA. When you reach retirement age, you can withdraw from abroad without penalty.
Your citizenship status is irrelevant. Do you like free money? If yes then participate at least up to company match. And for fuck sake and for the 9 millionth time...401Ks are portable. It's your money, your account. If you leave your employer and the US the money will continue to grow. Educate yourself
Does your employer match it? If yes, do invest
Employer matches half of what I contribute up to a certain amount.