Any scenario where 401K does not make sense for immigrants??
Alternative option of parking money at 7-8% guaranteed deposit rates in home country. Please advice.
If you know 100% you're not staying in the us then don't do 401k. If you think 99% chance you're not staying in the US then do a 401k.
Not always the case. At microsoft they give 50% match, so even if you are not staying, it is actually better to just put the money and then take it out and pay the penalty
I don't see why many people don't seem to contribute at least as much as to get all of the company match. It's simple math to compute and a no brainier decision even if you have to pay the penalty later.
You can cash out your 401k at retirement regardless of where you live once you reach a certain age. There are countries who have agreements to treat 401k like a tax free retirement savings plan which means you get the same benefits. Also, the 7-8% guaranteed deposit rates will be taxed as ordinary income by the IRS, so your true rate will be closer to 4% (assuming no variations in exchange rate, but even so, i am not sure you'd be able to claim losses from foreign exchanges drops) My philosophy with those things are: Who knows what the tax code will be in 5-10 years, so I'd rather choose the option that keeps the money in my wallet now.
7% guaranteed deposit must mean there is either significant currency risk or something else is fishy. If you're actually planning to live in USA you need to plan in USD.... Not specific to immigrants, but the only issue I could imagine is if you are planning to withdraw soon, your gains will be taxed as income rather than long term gains in the US and the compounding will not make up for it. You could probably do after-tax or Roth 401k to avoid the penalty on withdrawals even then....
what if you're planning to cash out 401k and run to your home country and not pay the taxes here
depending on how much your company would match, it might still make sense. you could easily calculate this. assuming your incremental tax rate is t, and you were considering putting $x in 401k and the company will match $y, then compute: x*t vs (x+y)*(t+.1) where the 0.1 is the early withdrawal penalty.