

Ask HN: Your thoughts on if H1B employees should contribute to 401k or not? - skkbits

Mates ,
As a H1B employee in US, I always had second though about whether or not to contribute to 401(k). On one side there is some extra compensation but on other side there is huge penalty if I withdraw early. Given the wait for green card for folks from India and China its psuedo-same-employer-lockdown situation. So considering time value of money and given the inflation rate does it make sense to contribute to 401(k) or IRA ?
What other H1B folks on HN do ?
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akg_67
You should contribute maximum possible to 401(k) plan of your employer. You
get two main benefits from your contribution - employer match and tax
reduction as contribution are pre-tax.

Why would you need to withdraw early? In case you do go back to your original
country, either leave the 401(k) alone or rollover to an IRA. There is no
issue leaving the money in IRA/401(k) in US until you become eligible for
penalty-free withdrawal.

BTW, depending on the country and its tax treaty with US, you may be able to
move retirement funds penalty free from US to your country (for example (401k
to RRSP in Canada). Also, if you paid social security in US, you can get
equivalent credit in to your country's similar plan (for example, Canada
Pension Plan).

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turnip1979
> (for example (401k to RRSP in Canada)

Any sources on this? I find the laws around this to be incredibly complicated.
Good advice is hard to find due to the cross-border nature of this.

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akg_67
You may want to talk to a Canada Revenue Agency agent. My info came from a CRA
agent who was liaison with IRS on tax related policy issues. Also, a Canadian
Bank that has presence in US will be helpful in transferring 401k in US to
RRSP in Canada.

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wurzelgogerer
First of all, I'd like to state that I am in the same position as you are, but
I think you got some facts wrong.

1\. Green Card The green card wait list is actually really only for citizens
of China and India. I believe every other country has 0 wait time. I could be
wrong with the statement "every", but it definitely is the case for the
majority of countries. There is an allotted amount of green cards for each
country. As long as this is not surpassed for your country, you should be
good.

Let's talk about the 401k. It totally depends on how much matching you get
from your employer. Does your employer match your contributions 1 to 1 or with
a lesser ratio? If it is a lesser ratio, I would do the math. Assuming you are
in the State of California, there is a penalty of roughly 50% for early
withdrawal of the funds. So you will definitely get at least your own money
back, in case you do go back to your original country. But if you do end up
making it here for a until after a certain age, it might be worth considering.

Hope this kind of helps.

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dragonwriter
> Green Card The green card wait list is actually really only for citizens of
> China and India.

Depends on which visa category, for some its China and India, for others its
the Phillipines and Mexico that have really long wait times. I think there are
a few others that have short but non-zero wait times for some categories, but
that changes more frequently.

~~~
wurzelgogerer
Correct. it depends on the type of green card. Some other countries might have
a wait list, but nothing as considerable as the waitlists for chinese and
indian citizens.

~~~
dragonwriter
> Some other countries might have a wait list, but nothing as considerable as
> the waitlists for chinese and indian citizens.

Well, no, India and China have the longest lines for EB-2 _only_ (India at 10
years, China at 5) -- of the categories with any waitlist, this is the second
_shortest_ (After F-2A) for the longest two waitlists. Other employment based
categories, the longest lines are the Phillipines and India.

For family-based, in every category, the longest waitlists are Mexico and the
Phillipines (though the order between those two varies between different
categories), and every country has a waitlist because _total_ request exceed
the total quota (on the employment based side, this is also true of the two
components of EB-3, but none of the other categories). The single longest
waitlist of any category (family or employment-based) is F-4 from the
Phillipines, which is currently nearly _24 years_.

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skkbits
Though I am replying late I would like to thank all for answering.

