Should I stop contributing to my 401k?

Amazon
ukcanind

Go to company page Amazon

ukcanind
Apr 3 20 Comments

Unfortunately my name wasn't selected in this year H1-B lottery and this was my last chance. My STEM OPT expires feb 2023 and I'm wondering whether I should stop contributing to the 401k or not?

Anybody who has faced this situation, or is facing it right now? What did you do?

I started 401k late and only contribute 4% have around ~6k in it, by end of year I should have ~12k. I don't plan to retire in US but definitely hoping that I might come back for a few years in the future.

Also if I ever want to get my money out while not in the USA and before 57, will I have to pay a plenty even now that my visa is gonna expire.

#personalfinance #investments #401k #taxes #h1b #amazon

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TOP 20 Comments
  • Visa
    Zghfe523

    Go to company page Visa

    PRE
    Amazon
    Zghfe523
    You are ill informed. You should absolutely max out your 401K in this case.
    If you don't have any annual income in US, you can take out upto 30K a year from your 401K at 10% tax. No other penalty.
    If you don't put money in 401K you pay taxes. This amount is pre-tax and some of it is put in by your employer. Kind of free money.
    You should definitely put as much as you can.
    Apr 3 5
    • Visa
      Zghfe523

      Go to company page Visa

      PRE
      Amazon
      Zghfe523
      IF YOU DONT HAVE ANY INCOME IN US FOR THE PAST YEAR, YOU CAN WITHDRAW AT 10% PENALTY/TAX that's it, no other tax or penalty. You are penalised and taxed both if you have ANY US income, which is 10+40%=50%. Can't you see the difference between 10 and 50?
      Man you need to learn to Google more. I'll pip you if I'm your manager. 🍌🍌🍌
      Apr 4
    • Amazon
      ukcanind

      Go to company page Amazon

      ukcanind
      OP
      Ah makes sense, thanks for explaining it.
      Apr 4
  • Google
    kuriusKat

    Go to company page Google

    kuriusKat
    Always contribute since your company would match some % of it. If you leave this year you can withdraw it a few years later or whenever you are not a tax resident paying only the early withdrawal penalty of 10% and practically no tax drive your won't have any other US income. Since most companies match more than 10% you'll come out ahead.

    Since this wasn't income from when you were a resident of your home county, it likely won't be taxable in your home county (Please check /confirm taxation in your home county. US and Eritrea are the only countries that tax income even when income is from foreign sources).
    Apr 3 2
    • Meta
      metamate™

      Go to company page Meta

      metamate™
      You'll still need to pay some tax since a non resident has no standard deduction currently.
      Apr 3
    • Google
      kuriusKat

      Go to company page Google

      kuriusKat
      Might be. You could continue to withdraw just enough to be in the lowest bracket over multiple years. So at Max you would lose 20% of your contribution+ employer match (10% penalty for early withdrawal + 10% lowest tax bracket). I.e they keep .8 x (employee contribution + employer contribution)

      The other option of not contributing to 401k means that they would loose marginal tax rate * 401k contribution. They keep (1- marginal tax rate)* employee contribution.

      They can calculate whatever is more profitable but to me it seems like the first one should be more profitable since most companies match at least 50% of 401k contributions upto to some limit.
      Apr 3
  • Meta
    metamate™

    Go to company page Meta

    metamate™
    After you leave the US and resign from your current employer, you'll be able to rollover your 401k to IRA. Afterwards, each year you could convert some funds from the IRA to Roth IRA, paying minimum tax and no penalty. Finally, after 5 years, you'll be able to withdraw the same converted amount from Roth IRA penalty free.
    Apr 3 1
    • Google
      kuriusKat

      Go to company page Google

      kuriusKat
      This sounds like a good idea to avoid the penalty.

      They would also need to consider how IRA/Roth IRA/401k is taxed in their homes county and if the US and Home country have a tax treaty that might affect this.

      For example, India has employee provident fund (epf) that is kinda like 401k and they also have a public provident fund (ppf ) which isn't tied to an employer. My understanding is that the India US tax treaty gives special treatment to epf but not to ppf - so epf proceeds are taxed only in India where it's tax free but not in USA whereas ppf is taxed in USA as well.
      Apr 3
  • this comment section is so mis-informed that it’s no surprise that the average american is so broke. @synopsis especially needs to read a damn personal finance book.
    Apr 3 2
    • Please expand
      Apr 3
    • 401k is not a “scam” even if the employer doesn’t match. It is an easy to avoid paying taxes now (when you have a higher income) to later date (when you have a lower income). This is particularly useful if you live in a state like Cali or city like NY where the taxes are sky high.
      It also acts as a forced savings of some kind (mileage may vary on this one)
      Apr 3
  • What’s to stop you from withdrawing the money once you leave the country and just never paying the tax?
    Apr 3 2