With all the discussions about investing in IRA's, Roth IRA's etc., it seems like a good thing to get in on early in ones career/life. The earlier you start the better off you are. But, temporary workers are in a special situation, we are not certain if we will remain in the country till retirement or age 58. So, does it make sense for us to invest in a Roth IRA or a traditional IRA? What happens if one has to leave the country and go back before retirement?
Does the withdrawal get taxed with a penalty?
Does one necessarily have to take a withdrawal?
Is it possible to roll it over to your home country?
If one dies is it possible to have a beneficiary outside the country and if so how are the funds distributed?

Are there any other things to keep in mind when contributing to an IRA as a temporary worker?

I'm in this situation. (H1B)
I contribute 7% to a traditional 401 K as my company matches up to 7%.

I probably won't be in the states until I'm 58. My plan is to just leave it here and withdraw it when I'm older.
You have bank accounts now like Fidelity SmartCash. I figure you can open one of them in 40 years time and use free atm withdrawls worldwide to get at your money!

Nobody answered what happens if you leave country before you are 58 (apart from withdrawing on a penalty). Can't you get the funds then?

I think if you are not resident then per government treaty it charges fix tax. I think in this case you will not be charged state tax but flat 30% Federal Tax at withdrawal.

I am also in same situation and would like to know if some one stays here for 10+year and go back, does he gets SSN benefits? Taxation on 401k and roth. Especially since roth is not taxed at the end does other country(india)takes tax on them since they are not taxed by USA.

Thanks for starting an interesting thread.

Roth IRA's are the main thing I am interested in as they are tax deducted on contribution. But do they get taxed by the home country? Can you withdraw it with a penalty before 59 or without penalty after 59?

beatme said:dhobi said:Ecuadorgr said:Nobody answered what happens if you leave country before you are 58 (apart from withdrawing on a penalty). Can't you get the funds then?
My guess is, once you go back to your home country, you are no longer liable for any taxes since you have no legal resident status in the US. The year that you have no work history in the US, you should withdraw the funds. Make sure the Plan Administrator does not withold any taxes. These are just reasonable guesses, you really should check with someone who has done it.


Does this imply that anyone can move to another country for a year and withdraw their retirement funds penalty free? That would be a sweet loophole for early retirement.
If you are a US Citizen or Green Card Holder, you have to file tax return, no matter where you live.
The discussion here is for someone who is no longer a Legal US resident.
Many rich people gave up US Citizenship to save on taxes

IMHO there is nothing to prevent/worry for a temporary worker to contribute to any retirement plan. I myself did that mistake in the initial years. A few things to keep in mind:

1. Roth, 401K, IRA - are all ways to minimize the tax in the current year. Higher the 'savings' if you are in a higher tax bracket. If employer matches a %ge of your contribution, even more 'savings' - cause thats a free raise. Whether you are here permanent or temporary, if the argument above makes sense then start IRA, 401K, etc.
2. When you leave the country, you do not have to withdraw the retirements funds so you can leave the funds here until you have the need. When you withdraw the retirements funds before age 59 and you file the return that year, you will mostly pay the penalty but if returns until then and employer contribution is enough to cover the taxes (which you would have paid in any case had you not put it in IRA/401K) then you have 'tax-free' income up to your original contribution. Not bad, huh ? Even with the penalty that year if your gross income keeps you in the lower tax bracket than you are in now, you still save at the end.
3. Rollover to your country will not be possible. Distribution to heirs/beneficiaries should not be a problem but won't be quick and easy either. Check with your plan administrator.
4. Just make sure if you leave the job take your money with you to the new job or to a roll over IRA if you do not trust your former employer that much (nothing to worry, your money is always safe but just to avoid admin. hassle later).

Jumbosaver said:With all the discussions about investing in IRA's, Roth IRA's etc., it seems like a good thing to get in on early in ones career/life. The earlier you start the better off you are. But, temporary workers are in a special situation, we are not certain if we will remain in the country till retirement or age 58. So, does it make sense for us to invest in a Roth IRA or a traditional IRA? What happens if one has to leave the country and go back before retirement?
Does the withdrawal get taxed with a penalty?
Does one necessarily have to take a withdrawal?
Is it possible to roll it over to your home country?
If one dies is it possible to have a beneficiary outside the country and if so how are the funds distributed?

Are there any other things to keep in mind when contributing to an IRA as a temporary worker?

My take on this:
Definite YES on the 401(k) plan. You don't want to turn down free money in the form of matching contrbutions from your company.
As for the IRA...YES on that too. Once you leave your job, you can roll the 401(k) into the IRA, and keep it, even long after you have left the country. I recommend a Traditional IRA, not the Roth IRA. Traditional IRA will get you a tax deduction this year, but are taxable when withdrawn at retirement, whereas Roth IRA's are tax free when you withdraw but have no tax benefits now. Since you aren't sure of where you'll be at retirement age or even if you'll have any tax liability, a traditional IRA makes more sense.

I am in the same situation on a H1B (but will make green card application this year). My employer matches 100% of the first 8% I contribute to my 403b plan (and in 2 years time they will match 150% of first 8%). I have maxed my Roth IRA this year and have so far only been putting in the 8% to the 403b (although I may increase this for the last couple of months of the year to reduce my tax liability).

I plan to leave the money in the retirement accounts until I retire. The liability depends on the country you end up residing in, and the terms of the tax treaty (if any) between the countries. For the UK (where I am from) then you cannot be taxed twice (by US and UK) on the same income and there are tax forms for claiming foreign tax exemption. The worst case scenario for me should be that both the Roth IRA and the 403b income will be taxed once when withdrawn after the age of 59. My understanding is that moving abroad does not effect the money in the retirement savings at the time of the move unless you wish to withdraw the money then. If one moves abroad and then moves back to the US then I don't see how the Roth IRA could end up being taxed if you don't withdraw when you are outside of the US.

From what I remember reading...
You have to file your return for sure and if you are not a resident of US, then you will have about 30% withheld.