My understanding based off reading a bunch of questions on this site, and elsewhere, is that the standard advice for an American citizen, working in, and planning to retire in the US, is as follows:

  1. Save a fair amount in 401(k) form, taking advantage of employer matching when available
  2. Then prioritize Roth IRA up to yearly maximum
  3. Then fund your 401(k) further, up to that maximum
  4. Invest any additional funds in miscellaneous accounts.

The question is what, if any, changes to this strategy would be recommended for non-residents who are likely to leave the country before retirement?

Suppose I'm happy to leave the funds in these accounts until retirement. My guess would then be that pre-tax 401(k) accounts (or pre-tax IRA contributions) become more attractive options. The logic being that if I work say 5-10 years in the States, then leave for a European country and work there until retirement, the US retirement income is likely to be relatively low and taxed accordingly. (I assume that there is no double taxation.) Thus maxing out pre-tax 401(k) contributions seem to be the way to go - even if there is no employer matching. Is my thinking correct here, or are there other factors I should know and care about?

If it helps, my background is this: I came to the USA as a PhD student, finished the degree, and am about to start a well-paying job. Both my position and work authorization are temporary affairs, and I'd say the probability of me staying long-term is at most 35%. My employer offers both pre-tax and Roth 401(k) options, but no matching in the short term (there's a vesting period).

  • Where do you come from and have you got any accrued pension benefits back home and if you don't stay in the USA is this where you would move back to Commented Jun 8, 2018 at 19:11
  • @Neuromancer Without being too specific, I'm from a Scandinavian country. I do have some pension savings back home, but we're talking small amounts from part-time jobs and the like. Whether I'd move back there or to e.g. Germany (where there are more jobs in my field) remains to be seen.
    – Anyon
    Commented Jun 8, 2018 at 19:27

1 Answer 1


I've always heard to max out 401k before going Roth.... However the math probably changes if you're currently not being taxed a whole lot and you likely will be later....

To further clarify: 401(k) contributions are not only pre-tax, they also reduce your taxable income. Which means that if you contribute $18k of your $68k income your adjusted gross income is only $50k. If you instead contribute $13k to your 401(k) and $5k to a Roth IRA your adjusted gross income is $55k.

You would pay 25% tax on the additional $5k. This would make sense if you're expecting that the earnings of the Roth IRA would be taxed at a far higher rate if they were instead in a 401(k). So if you would withdraw over $91k (currently) from your 401(k) per year you would be paying 28% on the additional payouts.

All the math, however, leaves out one very important detail. You don't know what the tax rates will be in 30 years.

OPINION: I would max out the 401(k) before anything else, because you're immediately increasing your contribution by your tax rate (assuming you have a set amount that you could invest every month). I would make the bet that the tax rate in the future is the same or lower than it is now, or that it doesn't matter that it's higher. I would rather pay the top tax rate on $1m/year income in 30 years rather than pay the minimum tax rate on $30k income.

  • Thanks! Yeah, I think the order changes depending on the income level, and that the strategy I outlined tends to work best for early-career professionals who still have some way to go to peak salary. As for your closing opinion, I would tend to agree, at least based on my current understanding of the options.
    – Anyon
    Commented Jun 8, 2018 at 18:50

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