EricK

What are people's views on paying into a 401K, pension plans etc when they have only just arrived in the US on a Visa (L1A in my case)? Hopefully things do work out and I will be here for the long term, however having only just got here so many things could happen - Visa not renewed after 3 years (unlikely as I work for a large US based multi national, however could happen), lay offs etc etc. Did people start paying into schemes straight away, or wait till things were more settled?

EricK

Sorry managed to post in the wrong forum.. could a mod please move it to the general USA forum - thanks.

fatbrit

What's the matching employer contribution?
When's it vested?

Look up the tax penalties for early withdrawal, fire up your fav spreadsheet, and you should have your answer.

tonrob

I moved here on an L1-A just over 5 years ago. It took me about a year before I staretd paying into a 401K, only because it took me this amount of time to get my arse into gear and find out how it all worked. 3 years later I started paying into an IRA as well and was kicking myself that I didn't do that sooner too.

Now I have a Green Card and am set to stay for the forseeable (which was my intent all along) so it seemed to be the right thing to do.

ChocolateBabz

Hubby's work are making employee/employer contributions to UK pension scheme while we are here on L1A/L2's so not paying into 401K. Greencard applications are now in so if approved and we are permanent over here that will stop and we will have to start paying 401K contributions.

E3only

Appreciate it may or may not be a short term move but this is how I see it.

-No 401(k) means more disposable cash and unless one is extremely disciplined, one will most certainly end up spending it.
-401(k) is just like any other ‘retirement’ plan so having one is critical in my opinion. I, personally, wouldn’t worry about early withdrawal etc. it’s a retirement fund so you should just think long term.
-employer matches 6% (e.g.) which is awesome
-401(k) is pre tax which effectively means I am basically getting a 25-30% (avg tax rate) return on day one if you know what I mean. Add to that 1:1 contribution by employer
-Don’t leave it for later – it will never happen
-Short term can turn into long term

This really is a no brainer to me but again, everyone’s financial situation is different of course. I am 29yo so I am not maxing the amount I could transfer to 401(k) but I am thinking of going to the max level of the 1:1 contribution match

Also, read somewhere the early withdrawal fee ‘MAY’ run up to 10% on top of normal tax rates however I stand corrected.

Cheers

Sally Redux

When we were considering moving back to the UK, the various options and penalties for moving these funds were very confusing - the HR person where my husband works frankly admitted to having absolutely no idea as she had never come across this scenario before. So it is something of a gamble if you don't know where you'll end up, but if there is a matching element and you can access the money at some point I would think it is worth doing.

im9907620

If you are not too sure about staying in the US and don't want the money tied up in a US plan then you could still contribute up to a max of £3,600 p.a. into a UK plan for 5 years after leaving, assuming you had one running when you left.

augigi

Yes, took almost a year after I started until I was getting the match, so I started paying in then. Can't waste free money. Early withdrawal penalties did not outweigh the benefits from savings and from reducing taxable income.

Ozzidoc

I agree!

(Nice to see you posting augigi xxxx)

E3only

+1
Exactly. Free matching effectively is a 100% return on day 1 if you know what I mean. Not to mention the potential for growth.......

jackattack

As a famous phrase goes - just do it.
Unless you are extremely short of cash to pay bills and buy food then you should pay into your 401(k). I'd recommend paying in just enough to get the employer match - after all that is 'free money'.
Our employer matches up to 6% (nice), and get someone in HR to help you figure out how much to pay in each paycheck, they are typically very used to doing this stuff. If it looks like you'll be staying here longer, then try and increase the % each year.

fatbrit

The mechanism to use if wanting to maximize your tax free benefit is:
Max to employer contribution limit, then--if you want even more in--switch to a regular IRA up to its limit, then--if you want even,even more in-- go back to the employer's plan and keep feeding in there up to the tax limit.

The reason for this is that holdings outside the employer's plan are more flexible than those within--you hold control over IRA funds.

EricK

I actually decided to go ahead and do it. I contribute 6% which is matched by my employer.

E3only

Good work. I went for the 6% and my move at this stage is not permanent but you never know right. I don't want to be 1 year from now and thinking of staying here and lose out on the 6%, you know what I am saying.