A 401k is an employer-sponsored retirement account. Your contributions are pre-tax (Traditional 401k) or post-tax (Roth 401k). Employer matches are free money on top.
401k basics for H1B holders
A 401k is an employer-sponsored retirement account. Your contributions are pre-tax (Traditional 401k) or post-tax (Roth 401k). Employer matches are free money on top.
2026 401k contribution limits
| Type | Limit |
|---|---|
| Employee contribution | $23,000 |
| Employer match (not counted toward your limit) | Varies (common: 3-6% of salary) |
| Total (employee + employer) | $69,000 |
| Catch-up contribution (50+) | Additional $7,500 |
Employer match — the most important number
Transfer money internationally with real mid-market rates and low fees. Trusted by 16M+ customers.
Send Money with Wise →
If your employer matches 3% of salary, contributing 3% = 100% instant return on that 3%. Always contribute at least up to the match. This is non-negotiable.
| Salary | Match rate | Annual free money |
|---|---|---|
| $100,000 | 3% | $3,000 |
| $150,000 | 4% | $6,000 |
| $200,000 | 5% | $10,000 |
Vesting schedules — the H1B trap
Employer 401k contributions often have a vesting schedule — you only "own" their contributions after a certain period of employment.
| Vesting type | How it works | Risk for H1B |
|---|---|---|
| Immediate | 100% vested from day 1 | No risk |
| Cliff vesting | 0% until 3 years, then 100% | Leave before 3 years = lose all |
| Graded vesting | 20% per year over 5 years | Leave year 2 = lose 60% |
Traditional 401k vs Roth 401k
Many employers now offer both. The choice:
- Traditional 401k: Pre-tax contributions, lower taxable income now, taxed on withdrawal
- Roth 401k: Post-tax contributions, no tax on withdrawal (same as Roth IRA but inside your employer plan)
For most H1Bs in high-income brackets: Traditional 401k for the tax deduction now + Roth IRA separately for tax-free growth.
401k portability — what happens when you change jobs?
- You can roll over your old 401k to: your new employer's 401k, or a personal IRA (Traditional or Roth)
- Rolling to IRA gives you more investment control
- Do not cash out — 10% penalty + income tax = you lose 30-40% immediately
401k when returning to India
See our detailed guide: What happens to your 401k when you return to India →
Watch the Roth vs 401k video →
📥 Get the Free H1B Credit Card Guide
5-page free PDF — which card to apply for based on your month-in-US, visa, and credit score.
🔒 Free 5-page PDF. No spam. Unsubscribe anytime.