Ask HN: Your thoughts on if H1B employees should contribute to 401k or not? | Hacker News Reader

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

6 pointsskkbits9 comments

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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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).

> (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.

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.

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.

> 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.

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.

> 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.

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

Minor nitpick. America defines country of origin by the country you were born in and not the country whose passport you hold. You could be a caucasian guy born in Shanghai to British parents and still be years behind in the wait line.

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

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