Hi

I am an Indian national who got 2 yr visa for Studies in US(f1). After completing my degree, i am employed by a wall street bank as an associate. They have a 401k program in which they will not match my contribution for the first year but after that to an extent(5% of income). I have no intent of staying in US for ever. Also, the company filed for my H1B and that will be stamped this october. Right now i am on OPT.
My question is should i take that extra cut from my paycheque and get more in hand or still invest in 401k to ease tax stress.

I have read numerous responses (esp by scott and atlanta tax expert and I dont think i wanna wait till 59.5, even with the advent of the digital age bcoz i am not sure if that money will sit there and get interest or not). So, should i just take a hit and then when i move back after 3-5 years of wrk ex, i will have liquified assets rather than capital tied up in an account which i will have no access to(for withdrawal).

Can someone also point me a link where i can find out more about rolling over money from 401k to an IRA in India.

Thanks in anticipation!

AtlantaTaxExpert

It MAY be possible to transfer the money to an Indian-based IRA, but I do not know HOW to do it.

You MAY want to look at the possibility of using one of the new Roth 401K programs. The 401K is funded with AFTER-tax money and, after a period of time (much less than waiting until you are 59.5 years of age), can be withdrawn TAX-FREE with NO penalties at all.

prankster

I have heard that a W8 form helps me in this regard, i mean i can choose whether Indian or US govt taxes me. is that right?

AtlantaTaxExpert

That is NOT my understanding.

If you withdraw money early from an IRA or 401K, you WILL owe taxes to the U.S. government, because you received favorable tax treatment of the funding of that 401K or IRA.