Hi,

I am an international student, working on OPT(F1 visa-student) status. I am not subjected to the SS and Medicare taxes as long as I am on opt( i have 10 months left on OPT).So the amount of taxes I pay comes upto 12-14% during my OPT.

Is it a good decision to start contributing to the 401k even during my OPT.(my company doesnt match for the first year, but later on matches $ for $ upto 5%).

What if I withdraw the money in my 401k after few years.I understand that i have to pay a penality of 10% + 20% income tax.But once i receive the money after the 10% penality and 20% tax, do i need to pay any other taxes on this amount when i file for taxes.

Anybody please help me with this

Thank you
Yed

AtlantaTaxExpert

Yed:

Saving for your retirement is ALWAYS a good idea, especially if the employer is providing a match for your contribution.

That match is FREE MONEY. You can then roll the 401K into a rollover IRA and manage it from your home country.

Yed

Thank you very much for the reply. I would appreciate if some one can give me a more elaborate answer on the taxes .(What if I withdraw the money in my 401k after few years.I understand that i have to pay a penalty of 10% + 20% income tax.But once i receive the money after the 10% penalty and 20% tax, do i need to pay any other taxes on this amount when i file for taxes.)

Thank you

AtlantaTaxExpert

Yes, you WILL have to pay more taxes. The 20% withholding is just a down payment.

You may pay as much as 50% of the distribution if you take it out early, depending on your income level and the state where the 401K is located (as state taxes will be due as well).