Hi, I need some expert advice on IRA / 401K plan.
Background I am an alien worker currently working on H1B. I recently joined a company which offers 401K (after 6 months) and also I am in a initiation process to file my Green Card. However I am planning to return to my home country after 5-6 Yrs. I need to take a decision before April 15 whether I should put some money in IRA or not.
My understanding My understanding is both IRA and 401K are tax differed and hence I will have to pay taxes when I withdraw it more over I will even have to pay a 10% fine if I decide to withdraw it before maturity. Also there is a 5 Yrs vesting period to withdraw 401K money. My initial plan was since 401K is free money why to leave it? Accordingly I had a thought that I will have a Traditional IRA a/c for current year (Since not eligible for 401K this year) and will put 4000$ in it. Next year onwards I will put money in 401K and company will match certain % to it. After initial 5-6 Yrs when I plan to go back I will rollover 401K money into IRA and will leave the country. The following year (year after leaving US) since I won't have any US income I can withdraw it in phases to avoid tax?
Problem However this leads to numbers of questions -
- Whether my understanding is correct. Can I phase out the withdrawals to avoid tax and/or penalty?
- Will it make any difference if by that time (though looking at the pace looks very hard) if I get my Green Card and then leave the country ( I know I have to maintain the status but still will it make any difference)
- Do we pay taxes as per tax slab or it is a flat 30% tax for alien workers?
- Are there any issues while rollover?
In a totality does it make sense to have IRA/401K account? Or it will be a loss business ?