Is 401K A Good Option For H1B Visa Holder?

[Silent_Boy]

It is often difficult to make decisions about future, especially when you are thirty or forty years away from your retirement. However, the years do fly especially after the age of thirty five and if you had an extremely busy life raising a family coupled with a demanding career. So, if you are thinking of a good retirement plan then 401(k) and Roth IRA are very good options to consider.

What is a 401(k) and Roth IRA?

401(K):

 

401(k) is an employer-sponsored retirement plan. Employee’s contribution to the 401(k) plan will get deducted from their paycheck every time before taxation. In many cases, Employer will match up to some percentage of Employee`s contribution.

Employee’s contribution to the 401(k) plan will be invested in funds based on your choice. It is tax-deferred which means, you are not going to pay taxes until you withdraw the money.

Roth IRA:

 

Roth IRA is an individual retirement plan. Contribution to the Roth IRA will get deducted after taxation. So, no need to pay taxes at the time of withdrawal.

 

Is 401k a good option for a H1b visa holder?

 

Absolutely yes, contributions to 401(k) plan is a very good option for H1b visa holders. If your employer is offering 401(k) then it is highly advisable to join the plan for the below reasons.

• Contributions to the 401(k) plan are free from State and Federal taxes. You have to pay taxes only when you withdraw. If you are in a lower tax bracket when you retire, you will        be paying less taxes.
• If your employer is also contributing to the employee’s 401(k) plan, this is Free Money! You are getting a ROI of 100% for every dollar your employer matches. Where else can you get 100% ROI?
• 401(k) plan allows you to take loans against the money you have contributed to this plan. Loans will be issued for financing a home, health problems etc.
• 401(k) plan allows withdrawal of money during financial hard times. 10% penalty will be charged for an early withdrawal before the age of 59.5 years.

Here is an example for “Investing in 401(k)” VS “Not Investing in 401(k)”:

 

• Your Salary: 100k
• Employer Match : 100% match up to 4% of your Annual Salary
• Taxes: 30%

Investing in 401(k) Scenario:

• Your Contribution: 4% of 100k = $4,000
• Employer Match: 4% of 100k = $4,000
• Total Contribution: $4,000 + $4,000 =$8,000

If you want to withdraw after one year, you will be paying 10% penalty and 30% taxes. So you will get 60% 0f $8000 = $4800

If you don`t invest in 401(k):

You will be paying 30% taxes on $4000. You will be left with 70% of $4000 = $2800.

$4800 vs $2800. You decide 

[Puri]

gp

[THE_FNG]

Most H1Bs think 401K is not worth it. It definitely is worth it. You should definitely make use of it. Particularly if you employer matching

[Captain_nd_Coke]

Gp

[Puri]

do ur employers match even if ur on % basis and not a salaried employee?? 

my employer said he will match if I am a salaried employee 

[Chitralekha]

chalaa baa chepparu  gaa :)

goodpost

[tom bhayya]

FT athey 401k compulsory ga theesukodam better... consulting ki elago aa chance ivvaru most employers :)

[macha]

GP.... please throw some light on this.....401k kaka any other things for retirement plan ?? suppose nenu every month I am reay to pay 100 till my death or 50 yrs I need all that money at once... like LIC  or PF in India 

[tom bhayya]

GP.... please throw some light on this.....401k kaka any other things for retirement plan ?? suppose nenu every month I am reay to pay 100 till my death or 50 yrs I need all that money at once... like LIC  or PF in India 

 

Roth IRA:

 

Roth IRA is an individual retirement plan. Contribution to the Roth IRA will get deducted after taxation. So, no need to pay taxes at the time of withdrawal.

 

[ravula]

Desi employer gallu match chestara usual GA

[ravula]

chalaa baa chepparu gaa :)
goodpost

:o

You girl or dkc

[Chitralekha]

Desi employer gallu match chestara usual GA

yep.. Indian companies chala offer chesthai ala.

koncham manam pay chesthee.. remaining employer pay chestharu...

[Puri]

FT athey 401k compulsory ga theesukodam better... consulting ki elago aa chance ivvaru most employers :)

+1

[ravula]

yep.. Indian companies chala offer chesthai ala.
koncham manam pay chesthee.. remaining employer pay chestharu...

Nenu anedi Cts tcs valla gurinchi kadu
Employees who work in consultin Desi employers gurinchi

[macha]

 

Roth IRA:

 

Roth IRA is an individual retirement plan. Contribution to the Roth IRA will get deducted after taxation. So, no need to pay taxes at the time of withdrawal.

 

ohh only tax benefits aaaa?" kastaa edinaaa simple ways of explanation of IRA  or sources please...

 

what IRA is what are the benefits etc ?

 

where to open ?

what to do what not to do ? *=: