I came to NY on F1 in Aug 2005. I did a summer internship in 2006 in NJ and I also lived in NJ for those 2.5 months. Went back to school in NY and graduated in Dec 06. My OPT started 1/1/2007. I am currently working full time and my H1B will be filed by company this year. I am thinking about the cons of investing in 401k.

A) 1. What happens if I leave the United States in say 3, 5, 7 years to go back to India permanently?
2. Can I roll over the money to a provident fund account in India.
3. Will I be taxed on it?
4. Will I also have to pay the 10% penalty?

B) 5. Can I keep the 401k in US while I work and retire in India and withdraw it after retirement? Are Tax and Penalty charged here also?

C) 6. Since Ive heard of rolling over the account to IRA instead. Can I keep the IRA account in US when I leave? Tax and Penalty?

Which is the option that will have the least penalty. Depending on that I would like to invest a greater amount in 401k.

Thanks for your help.

1) You can roll the money into a rolover IRA and leave it in the U.S. managing it via phone and email.

2) Do not know.

3) Eventually, you will be taxed on it, but that can be managed.

4) Yes, if you take it out before you are 59.5 years of age.

5) Yes.

6) Yes.

Do some research and study your options. You have the time to educate yourself, so do so!