If you’re working in the United States on an H-1B, L-1, O-1, or other work visa, the 401(k) is likely your most powerful wealth-building tool. It reduces your current taxes, grows tax-deferred, and often comes with free money from employer matching.

But for visa holders, the 401(k) comes with complications that don’t affect U.S. citizens: What happens when you leave the country? How does your home country tax withdrawals? Could your heirs face a 40% estate tax on money you thought was protected?

This guide covers the 2025 and 2026 contribution limits, the new SECURE 2.0 rules that affect high earners, and the critical exit strategies you need to plan before you leave the U.S.

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Key Points

• The 2025 401(k) contribution limit is $23,500 (projected to rise to $24,500 in 2026).
• Workers aged 60–63 get a “Super Catch-Up” allowing up to $34,750 in total contributions for 2025.
• Starting in 2026, high earners (over $145,000 in FICA wages) must make catch-up contributions as Roth—no more pre-tax option.
• Tax treatment when you withdraw depends heavily on your country of residence and whether a tax treaty exists.
• The U.S. estate tax exemption for non-residents is only $60,000—a $500,000 401(k) could trigger $150,000+ in estate taxes if you die holding it.

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2025–2026 Contribution Limits

The IRS adjusts 401(k) limits annually based on inflation. Here’s what you can contribute:

Basic Contribution Limits

Category	2025 Limit	2026 Limit (Projected)
Employee contribution (under 50)	$23,500	$24,500
Catch-up (ages 50–59)	$7,500	$8,000
Super Catch-up (ages 60–63)	$11,250	$11,250
Total annual additions (including employer contributions)	$70,000	$72,000

What These Limits Mean for You

If you’re under 50: You can defer up to $23,500 of your salary into your 401(k) in 2025. At a 35% marginal tax rate (common for senior H-1B engineers), that’s roughly $8,225 in immediate federal tax savings—before counting state tax savings.

If you’re 50–59: Add the $7,500 catch-up for a total of $31,000 in 2025.

If you’re 60–63: This is the sweet spot. SECURE 2.0 created a “Super Catch-Up” that lets you contribute $11,250 on top of the base limit—totaling $34,750 in 2025. This window closes at age 64, when you drop back to the standard catch-up amount.

Why the Super Catch-Up Matters for Senior Visa Holders

Many L-1A executives transfer to the U.S. for a final 5–7 year assignment before retirement. The Super Catch-Up window (ages 60–63) aligns perfectly with this profile.

If both spouses work and qualify, a couple could shelter over $69,500 annually from taxable income during their highest earning years.

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The 2026 Roth Catch-Up Mandate (High Earners)

Starting in 2026, if you earned more than $145,000 in FICA wages the previous year, you lose the option to make pre-tax catch-up contributions. All your catch-up contributions must go into Roth (after-tax).

How the Threshold Works

The rule uses “FICA wages” from the previous year—wages subject to Social Security and Medicare taxes. This includes:

• Base salary
• Bonuses
• Vested RSUs (Restricted Stock Units)

For many H-1B tech workers, RSUs push total compensation well above the threshold. A $130,000 base salary plus $30,000 in vested RSUs equals $160,000 in FICA wages—triggering the Roth mandate.

The “New Arrival” Exception

Here’s an important loophole: The test looks at FICA wages from the employer sponsoring the plan in the preceding year.

If you join a U.S. company in January 2026, you have $0 FICA wages from that employer in 2025. Even if your 2026 salary is $300,000, you’re exempt from the mandatory Roth catch-up for 2026 and can still contribute pre-tax.

This gives new arrivals a one-year window to maximize tax deferral before the Roth mandate kicks in.

2025 vs. 2026 Status

• 2025: Catch-up contributions can still be pre-tax, regardless of income. The IRS delayed implementation.
• 2026: The mandate takes effect. High earners must use Roth for catch-up contributions.

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F-1 and J-1 Visa Holders: A Special Tax Advantage

If you’re on an F-1 (student) or J-1 (exchange visitor) visa, you have a unique tax situation that creates an advantage under the new rules.

The FICA Exemption

During your “exempt” period (5 calendar years for F-1, 2 years for J-1), you’re classified as a Non-Resident Alien for tax purposes and exempt from FICA taxes. Your wages aren’t subject to Social Security or Medicare withholding.

Why This Matters for the Roth Mandate

The 2026 Roth catch-up rule triggers based on “FICA wages.” If your wages aren’t subject to FICA, they don’t count toward the $145,000 threshold.

Result: An F-1 student on OPT earning $200,000 in tech has $0 FICA wages. They can continue making pre-tax catch-up contributions in 2026—even while H-1B holders at the same salary must use Roth.

This is a significant, temporary tax advantage for F-1/J-1 holders who are still in their exempt period.

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Tax Residency: Resident Alien vs. Non-Resident Alien

Your tax treatment depends on whether the IRS classifies you as a “Resident Alien” or “Non-Resident Alien”—which is different from your immigration status.

The Substantial Presence Test

Most visa holders (H-1B, L-1, O-1, TN, E-3) determine tax residency through the Substantial Presence Test. You’re a Resident Alien if you were physically present in the U.S. for:

• At least 31 days during the current year, AND
• At least 183 days during a 3-year period (counting all days in the current year, 1/3 of days from last year, and 1/6 of days from two years ago)

What This Means for Your 401(k)

Resident Aliens are taxed on worldwide income and treated identically to U.S. citizens for 401(k) purposes. You get the full tax benefits.

Non-Resident Aliens are taxed only on U.S.-source income. You can still contribute to a 401(k), but the tax benefit only offsets U.S.-source income.

F-1 and J-1 Exception

F-1 and J-1 visa holders don’t count days toward the Substantial Presence Test during their exempt period (5 years for F-1, 2 years for J-1). They remain Non-Resident Aliens unless they choose to elect Resident Alien status.

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The Mega Backdoor Roth: Maximizing the $70,000 Limit

The $23,500 employee contribution limit is just the starting point. The total limit for all contributions—employee deferrals, employer matching, and after-tax contributions—is $70,000 for 2025 ($72,000 projected for 2026).

If your employer’s 401(k) plan allows after-tax contributions and in-service withdrawals (common at large tech companies like Google, Meta, and Microsoft), you can use the “Mega Backdoor Roth” strategy:

1. Max out your $23,500 pre-tax or Roth contribution
2. Contribute additional after-tax (non-Roth) dollars up to the $70,000 total limit
3. Immediately convert those after-tax contributions to Roth

Since the basis is after-tax, the principal converts tax-free. All future growth is tax-free in the Roth.

Cross-Border Consideration

This strategy works well if you’ll retire in a country that recognizes Roth distributions as tax-free (UK, Canada under treaty). It’s riskier if your destination country doesn’t recognize U.S. Roth accounts and will tax withdrawals as ordinary income.

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Cross-Border Taxation: What Happens When You Leave

The real test of your 401(k)’s value comes when you withdraw—and that depends heavily on where you live when you take distributions.

Default Rules (No Treaty)

Without a tax treaty, distributions to a Non-Resident Alien face:

• 30% flat withholding on the gross distribution
• 10% early withdrawal penalty if under age 59½
• State taxes: Generally not applicable—federal law (P.L. 104-95) preempts states from taxing retirement income of non-residents

Country-by-Country Treaty Analysis

Tax treaties can dramatically change your outcome. Here’s how major destination countries treat 401(k) withdrawals:

India

Treaty status: Unfavorable. The U.S.-India tax treaty does not protect 401(k) distributions from U.S. taxation.

• U.S. withholding: Full 30%
• Indian tax: India taxes global income for residents, but grants a Foreign Tax Credit for U.S. taxes paid
• Timing mismatch: The U.S. taxes on withdrawal; India may tax on accrual unless you file Form 10-EE to defer

Strategy: Indian nationals often face the highest tax friction. Many choose to withdraw during a “gap year” with low or no other U.S. income, file Form 1040-NR, and claim a refund if their actual effective tax rate is lower than 30%.

China

Treaty status: Favorable for periodic payments.

• Mechanism: Under Article 18, pensions are taxable only in the country of residence
• Process: A Chinese resident can file Form W-8BEN to reduce U.S. withholding to 0%
• Risk: The exemption applies to “pensions,” often defined as periodic payments. A lump sum might not qualify and could default to 30% withholding

Strategy: Structure withdrawals as substantially equal periodic payments rather than lump sums.

United Kingdom

Treaty status: Clear and generally favorable.

• Lump sums: Taxable only in the U.S. (source country). A UK resident taking a lump sum pays U.S. tax but 0% UK tax.
• Periodic payments: Taxable only in the UK (residence country). A UK resident taking monthly income pays UK tax but 0% U.S. tax.

Strategy: The UK’s 25% tax-free lump sum rule for UK pensions doesn’t directly apply to U.S. 401(k)s. However, since lump sums are taxable only in the U.S. under the treaty, the effective result can be tax-efficient depending on your U.S. effective rate.

Canada

Treaty status: Allows source taxation but caps it.

• U.S. withholding on periodic payments to Canadian residents: Limited to 15%
• No direct rollover to RRSP exists

Process for RRSP contribution:

1. Withdraw from 401(k) (U.S. taxes apply, 15% withheld)
2. Report income in Canada (taxable)
3. Claim Foreign Tax Credit for U.S. tax
4. Contribute the gross amount to your RRSP (deductible), offsetting the Canadian tax

Constraint: You need sufficient RRSP contribution room to make this work.

Australia

Treaty status: U.S. pensions are generally taxable in Australia.

• U.S. retains primary taxing rights
• Australia provides a Foreign Income Tax Offset (FITO)
• U.S. 401(k)s don’t qualify as “foreign superannuation funds” for transfer purposes

Hidden risk: Australia taxes “applicable fund earnings”—the growth since you became an Australian resident. Even if the principal isn’t taxed, the growth portion may be taxed at marginal rates upon withdrawal.

The “Saving Clause” Exception

Most treaties contain a “Saving Clause” that lets the U.S. tax its citizens and residents as if the treaty didn’t exist.

Important: This clause typically doesn’t apply to people who are neither citizens nor current residents. Once you leave the U.S. and break tax residency, you can fully access treaty benefits (like 0% withholding for UK or China periodic payments) that weren’t available while you lived in the U.S.

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The Estate Tax Trap: The $60,000 Problem

While income tax gets most of the attention, U.S. estate tax represents a catastrophic risk for foreign nationals that few plan for.

The Exemption Gap

Status	Estate Tax Exemption
U.S. Citizens / Domiciliaries	~$13.99 million (2025)
Non-Resident Non-Citizens	$60,000

Yes, that’s a $13+ million difference.

Why Your 401(k) Is at Risk

U.S. retirement accounts (401(k)s, IRAs) are legally “U.S. situs” property—assets located in the U.S. for estate tax purposes. This is true regardless of where you live when you die.

Example: The Math That Destroys Wealth

An Indian national works in the U.S. for 10 years, accumulates $500,000 in a 401(k), and returns to India. If they die while holding this asset:

• Exemption: $60,000
• Taxable estate: $440,000
• Tax rate: Graduated rates reaching 40%
• Estimated liability: ~$150,000+

That’s 30% of the account value gone to U.S. estate taxes—on top of any income taxes.

Countries With Estate Tax Treaties

Only a handful of countries have estate tax treaties with the U.S.: Canada, UK, Germany, Japan, and a few others. However, these treaties are complex and don’t automatically solve the problem.

Important caveats:

• Treaty relief typically depends on specific domiciliary tests—where you were domiciled at death, not just your citizenship
• Some treaties (like Germany’s) may still allow the foreign country to impose its own inheritance tax on 401(k) distributions
• The exact treatment of retirement accounts varies by treaty and requires professional analysis

India and China do not have estate tax treaties. Nationals of these countries face the full $60,000 exemption limit with no treaty relief available.

Even if you’re from a treaty country, don’t assume you’re protected. Consult an estate planning attorney who understands the specific treaty provisions before relying on treaty relief.

Mitigation Strategies

1. Term life insurance: Purchase coverage equal to the estimated estate tax liability to protect the asset value for heirs.
2. Withdrawal strategy: For older non-residents from non-treaty countries, it may be mathematically better to withdraw the 401(k), pay the income tax (even 30%), and remove the capital from U.S. jurisdiction—rather than risk 40% estate tax upon death.
3. Treaty planning: If you’re from a treaty country (UK, Canada, Germany), understand how the treaty affects your exemption before making withdrawal decisions.

⚠️ WARNING: The estate tax risk is often overlooked until it’s too late. If you’re a non-resident holding significant U.S. retirement assets and you’re from a non-treaty country (especially India or China), consult an estate planning attorney who understands cross-border issues.

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Practical Challenges: Managing Your 401(k) From Abroad

Even if you’ve planned the tax strategy perfectly, actually managing your 401(k) from another country presents logistical hurdles.

Brokerage Restrictions (FATCA/CRS)

Due to FATCA (Foreign Account Tax Compliance Act) and international reporting requirements, many U.S. financial institutions have stopped servicing non-resident accounts. The compliance costs aren’t worth it for them.

What this means:

• Fidelity, Vanguard, Schwab: Policies vary. Some may restrict accounts with foreign addresses to “liquidation only” status—no new trading, no rebalancing.
• Account closure: In extreme cases, institutions may force-close accounts and mail a check to your last known address. This triggers a fully taxable distribution whether you wanted it or not.

What to Do Before You Leave

1. Verify your custodian’s policy for non-resident accounts before you leave the U.S.
2. Consider rolling over to an “expat-friendly” IRA custodian (Schwab International, Interactive Brokers, or specialized cross-border firms) that will continue servicing your account.
3. Update your address carefully. Changing to a foreign address may trigger restrictions. Some expats maintain a U.S. address (family member, mail forwarding service) for this reason—though this has its own complications.

State Tax Preemption

Good news: Under federal law (P.L. 104-95, the Source Tax Act of 1996), states cannot tax the retirement income of non-residents.

Impact: If you worked in high-tax California but retire to India or a no-income-tax state like Texas, you owe $0 in California state tax on your 401(k) distributions—as long as you’ve firmly established non-resident status.

This 9–13% state tax savings is a significant part of your “exit yield.”

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Totalization Agreements: Avoiding Double Social Security Tax

The U.S. has Social Security Totalization Agreements with about 30 countries, including the UK, Canada, Australia, and Germany.

How They Work

These agreements prevent you from paying social security taxes in both countries simultaneously. If you’re an L-1 transferee sent to the U.S. for less than 5 years, you might remain on your home country’s social security system and be exempt from U.S. FICA taxes (you’ll need a Certificate of Coverage).

Connection to the Roth Mandate

Here’s an interesting implication: If you’re exempt from U.S. FICA under a totalization agreement, you technically have $0 FICA wages. This means you wouldn’t trigger the Section 603 Roth catch-up mandate in 2026—similar to the F-1/J-1 exemption.

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Strategic Checklist for Visa Holders

Before you start—or continue—contributing to your 401(k), work through these considerations:

1. Maximize the match. At minimum, contribute enough to get your full employer match. This is free money with an immediate 50–100% return.
2. Know your limits. Track your total contributions if you change employers mid-year. The $23,500 limit applies to you personally, not per employer.
3. Monitor FICA wages. If you’re over 50 and earning above $145,000, prepare for the 2026 Roth mandate. Consider whether accelerating pre-tax catch-up contributions in 2025 makes sense.
4. Understand your destination’s tax treatment. Before you leave the U.S., research how your home country taxes 401(k) withdrawals and whether a treaty exists.
5. Assess estate tax exposure. If you’re from a non-treaty country and expect to hold significant U.S. retirement assets long-term, consider life insurance or accelerated withdrawal strategies.
6. Verify brokerage policies. Confirm your 401(k) custodian will continue servicing your account after you move abroad. If not, identify an expat-friendly alternative.
7. Plan the timing. Consider whether withdrawing during a “gap year” with low U.S. income could reduce your effective tax rate below the standard 30% withholding.
8. Consult professionals. The intersection of U.S. retirement law, international tax treaties, and estate planning is genuinely complex. A one-time consultation with a cross-border tax specialist is worth the cost.

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Consolidated Limits Reference Table (2025–2026)

Limit Category	IRC Section	2025 Limit	2026 Limit (Projected)	Notes
Employee contribution	§ 402(g)	$23,500	$24,500	Aggregated across all employers
Catch-up (ages 50–59)	§ 414(v)	$7,500	$8,000	Standard catch-up
Super Catch-up (ages 60–63)	§ 414(v)	$11,250	$11,250	Drops back at age 64
Total annual additions	§ 415(c)	$70,000	$72,000	Includes employer contributions; cap for Mega Backdoor
Compensation cap	§ 401(a)(17)	$350,000	$360,000	Limits employer match calculation for high earners
Mandatory Roth threshold	§ 414(v)(7)	N/A (delayed)	>$145,000 FICA wages	Eliminates pre-tax catch-up for high earners

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Final Thoughts

The 401(k) remains the single most powerful wealth-building tool available to foreign nationals working in the United States. The tax savings during accumulation are substantial, and the 2025–2026 limit increases—especially the Super Catch-Up for ages 60–63—create meaningful opportunities to accelerate retirement savings.

But for visa holders, the story doesn’t end with contribution. The real value of your 401(k) depends on how you exit: which country you’re in when you withdraw, whether a favorable tax treaty exists, and whether you’ve planned for the estate tax exposure that catches many non-residents by surprise.

The difference between a well-planned 401(k) exit and an unplanned one can easily be $50,000–$150,000 in taxes. That’s worth some advance planning.

If your situation involves multiple countries, significant account balances, or you’re from a country without a U.S. tax treaty (especially India or China), invest in professional advice before you make withdrawal decisions. The complexity is real, but so are the savings from getting it right.