Investing in 401K as a New Grad on a Visa
I'm a New Grad on a Visa (F1-OPT) My employer currently doesn't provide 401K matching(they might in the future) Does it still make sense to invest in 401K ? Since I'm not a US citizen, I'm not sure about my future here and might leave at some point which would mean that I'll have to pay income tax and a penalty in case I withdraw early. I'm wondering if I should just use post-tax income and make other investments since I'll have more flexibility. Any advice would be appreciated. TC 150k Yoe: 1
Do it. Worse case you can withdraw your money and still have more than not doing it at all. Lots of folks on visa have missed out on this.
Just invest in 401(k). Ignore everyone who tells you otherwise. I regret not doing it when I was a new grad for similar reasons. * Even without the match, it lowers your taxable income in the current year (by referring it). So it saves you some $. * if you are like 99.9% of F1 new grads in tech, you will choose to stay in US and make a lot more money. You will have extra cash on hand and short of ways to invest it. * early and often investment is key to large retirement income * you get financial discipline early and become savvy enough to seek other investment opportunities for the money you do save vs it sitting in a bank * worst case you can always withdraw money from 401 early by paying then taxes + 10% penalty. There are ways around the penalty (please check if leaving the US permanently qualifies)
Thanks for the advice but if there's no match and if I'm going to pay tax later on, why not just pay it now and invest it somewhere else. I'm hoping that my TC wont go down and I would be paying not just the penalty but also more income tax at that point.
@NEC Labs America - May be you didn’t understand the first point. You will be reducing your taxable income by contributing now. For me this is a no brainer. If you do withdraw in future, since you basically will have no income in US if you leave, your tax rate is pretty much nothing other than 10% penalty.
No brainer, invest it. Don’t leave of penny from employer. SIMPLE AND SHORT🙂
Yeah, but it's not like they're matching anything
Oh then do when they start matching maybe 🙂
I didn’t start until I got my H1B
If uncertain and employer doesn't match, wait till employer matches
What if I don't invest and they match some amount that was already invested?
That's absolutely great