401k

Y

you_as_of_a

New Member
I am going to be working here for an assignment which lasts only two years and then moving back to India. My employer has a 100% match program...max upto 6%. This means if I contribute 6%, my employer will also contribute 6%.
My question is that is it worth bothering with 401k in my case? I am only aware of two deductions that will happen if I withdraw after two years -
1. 30-35% Federal Tax.
2. 10% Penalty tax

Does anyone know if State tax (Ohio) will be applicable to this? If yes, what percent?

If only above two deductions happen then I might be able to get some extra money since my employer is contributing 100%. Any thoughts? suggestions?
Thanks!
 
You do not have to withdraw even if you go to India. (I understand early withdrawal will mean the employer's contribution will not be available to you)
 
Oh so even my employer will deduct its contribution?! If this is true, then it wont make any sense investing in 401k.
I was assuming I will get to keep all the employer's share plus my contribution. Can someone please confirm this?

Thanks kabkaba for your input!
 
you_as_of_a,

Its best to contribute to 401K, even in your situation.

1. Whatever contributions you make, you don't pay tax taht year.
2. You are getting a match from your employer. Thats free money. Assuming its 100% vested. Otherwsie, you will get what ever vested percentage for your 2 years of the employer match of 6%. Say, you contributed $20,000 over 2 years and employer match is $1200 and vesting is 40% then you will get 1200*.4 = $480, free money

Lets say you withdraw in your third year.
1. Your income in that year might be "zero" in USA. Your 401K money is added to it and pay your taxes. AIK, 0% tax for first $18000! Hence, you almost avoided 30-35% tax in your first year!
2. You pay 10% penalty.

And then, either your money may gain some more (or loose) depends on how aggressive you are.

Yeah, most important thing is thats supposed to be your retirement money, which will look after you once you stopped earning and never ever forget to have some nest egg for your old age.
 
FunLover2000 said:
1. Your income in that year might be "zero" in USA. Your 401K money is added to it and pay your taxes. AIK, 0% tax for first $18000! Hence, you almost avoided 30-35% tax in your first year!
Click to expand...

It'll be taxed. Assuming he's back home, then he can either file as a US non-resident (in which case a flat 25% is taxed) or he files as a resident (if he meets SPT), in which case he needs to declare world-wide income.

After that, there's the 10% penalty.
 
Thanks, RealCanadian. Would you please throw some light on SPT?

TheRealCanadian said:
It'll be taxed. Assuming he's back home, then he can either file as a US non-resident (in which case a flat 25% is taxed) or he files as a resident (if he meets SPT), in which case he needs to declare world-wide income.

After that, there's the 10% penalty.
Click to expand...
 
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