Hello,

I graduated from college on an F1 visa in may of 2006 and started working under my OPT allowance until December of 2006, when I switched to an E-3 status. In 2007 I filed as a resident alien. Was I eligible?

Secondly, am I allowed to contribute to an IRA? And if so, what are the tax implications when I leave the country? Are these different than for my 401(k) ?

Thank you very much in advance.

Yes, for 2007 you will file resident tax return.
Yes, you can contribute to an IRA. Read more: about Trad IRA and Roth IRA Your U.S. Tax Return: Traditional IRA and Roth IRA (http://taxipay.blogspot.com/2008/05/traditional-ira-and-roth-ira.html)

Thanks for the reply.

What do I do when I leave the country, before retirement, which is more likely to happen than not?

If I wait until my retirement age to withdraw, do I still have to pay taxes if I am living overseas?

Thank you very much again and the blog was helpful.

Foreign persons should think twice before investing in a retirement plan in the U.S. How will you manage your retirement investment?
Withdrawal before 59 1/2 is subject to early withdrawal penalty. Also all withdrawals are taxable income.
In 401K, if you do not have any activity for a year, you may even pay some charges.

Thank you again. So my best bet is not invest in a 401(k)? If I withdraw my money at 59 1/2 while I am not in the US, are there any penalties?

There ARE penalties for withdrawing the money before age 59.5, but NOT after. It does not matter where you are located.

You MAY have to file a non-resident alien tax return (Form 1040NR-EZ), but that can be managed as well.

As for whether you should invest in the 401K or not, that depends on a variety of factors, such as when you vest in the pension AND whether your employer matches cintributions. The match, after all, is FREE MONEY.