I'm planning to stay in the U.S. for 3 to 5 years. My company offers a 4% match for 401k contributions. Is it worth investing in a 401k plan with all the fees and penalties? Or is there a better way to save?

  • So, if you put in 4% of your salary, the company matches with another 4%. I gather the fees and penalties are not that bad (50%). It seems like free money for a little extra hassle (if you intend to withdraw it in 3 to 5 years), though it will depend on your tax rate...
    – Peter K.
    Jan 26, 2015 at 20:22
  • also make sure you stay around long enough to be fully vested. Jan 26, 2015 at 20:46
  • Let's assume that tax bracket is 20%
    – balki
    Jan 26, 2015 at 22:12
  • 1
    Have a look at: wellsfargo.com/investing/retirement/tools/… That suggests that the total you must pay is 20% + 10% penalty = 30%... on the TOTAL withdrawal (your 4% plus your employers 4%). I can't see a real negative.
    – Peter K.
    Jan 26, 2015 at 22:25
  • @balki 20% now, 0% when you're back to your home country and 401k withdrawals is your only US-sourced income. Better pay 10% then than 20% now, no?
    – littleadv
    Jan 27, 2015 at 0:34

1 Answer 1


You should fund the 401(k) and get the 4% matching because it's free money.

When you leave the US, patience is a virtue to get the money penalty-free:

  1. Rollover to an IRA.
  2. Take "Substantially equal periodic payments" for 5 years or until age 59 1/2, whichever is longer, to avoid the 10% penalty. A long payout time for someone starting out, but penalty-free.

Or you can take the 10% penalty and take out the money all at once. You'll still owe income tax in either case, something to keep in mind if an early withdrawal would put you into a higher tax bracket. Also see this article: Can Foreigners Withdraw 401(k) Funds Early?

Another thing to keep in mind is that you never know what might happen -- you could fall in love with the US (or someone in the US, [smiley face]), apply for residency, decide to stay a long time, and that 401(k) with the 4% matching might turn out to have been a very nice thing when you retire.

  • 1
    Where did the 5 years came from?
    – littleadv
    Jan 27, 2015 at 0:29

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