401(k) for NRIs: Why You Should Never Skip the Employer Match
The match is free money — but what happens to your 401(k) if you move back to India? Here's the full picture.
Sneha Rao
May 3, 2026 · 8 min read
A 401(k) is an employer-sponsored retirement account. You contribute pre-tax dollars, it grows tax-deferred, and many employers match part of your contribution. That match is the closest thing to free money you'll encounter — and far too many NRIs skip it because they "might move back."
The match is a 100% instant return
A typical match is "100% of the first 4%." That means if you put in 4% of your salary, your employer adds another 4%. You doubled your money before the market moved a cent. No investment on earth reliably beats that.
Always contribute at least enough to capture the full match. Skipping it is a voluntary pay cut.
Roth vs. traditional 401(k)
- Traditional: contributions are pre-tax now, taxed when you withdraw in retirement.
- Roth: contributions are after-tax now, withdrawals are tax-free later.
If you expect to be in a higher tax bracket later (or to retire outside the US), Roth is often the smarter long-term play. Many plans let you split.
"But what if I move back to India?"
This is the real NRI question, and the answer is reassuring: your 401(k) is yours. It doesn't vanish if you leave the country. Your options:
- Leave it invested in the US and let it grow until retirement.
- Roll it into an IRA for more investment choices and lower fees.
- Withdraw it (worst option) — you'd owe US tax plus a 10% early-withdrawal penalty before age 59½.
If you become a non-resident again, withdrawals may face a flat US withholding, and India will tax the income too, though the tax treaty offers relief. The key point: moving back is a reason to plan, not a reason to skip free money.
The simple rule
Capture the full match, choose Roth if you're early-career, and don't touch it until retirement. Your 55-year-old self will quietly thank your 28-year-old self.