First - sorry for using the word 'investing'. When it comes to 401k, right word is 'saving'. People who work in US, should start saving in 401k plans. But I have heard people working in US through India based vendors like TCS, Infy, CTS etc. skipping this. Their reasoning seems to be "I will go back to India, so 401k is not a good option". I want to use an example and show why that is not true. Please note that I am talking only about people in TCS, infy, CTS who have plans to go back to India. For people planning to settle in US, investing in 401k should be a no brainer and so don't need convincing . Problems most of them list as reason for not investing in 401k: 1. If I return to India and I take money out of 401k, I have to pay fine of 10% 2. I have to pay tax when I take money out before I am in 60s. I will use an example and show you both points are invalid. Assume Ms. A makes $100,000 in an year (this is easy for calc. You can use your actual salary). Assumption 2: Company matches up to 3% gross for contribution to 401k. (Some companies match 3% if you contribute 6%. ) Our Ms. A decides to contribute to take advantage of company match and nothing more. So contributes $3000 (3% of 100,000) in year 1. Company matches it by another $3000. Total in 401k plan is $6000, assuming no stock market gains. Her total gain for investing 3000 is $3000 from company match plus $300 in tax savings totaling to #3,300. Remember she put in only $3000 into 401k plan. But now her 401k has a balance of $6000 plus she has tax savings of $300. In year 2, Ms. A decides to go back to India. Assume she left to India in early January. Now what happens if she withdraws from 401k plan? she takes out full $6000. She has to pay a fine of 10% which is $600. Remaining $5400. This $5400 is considered as part of income and is taxed. But since her total income for year 2 is only $5400, it will not come under tax brackets that needs to pay tax. So, by investing only $3000, you get $5400 in hand plus another $300 in tax savings. Now, you might ask, what if Ms. A left to India in December of Year 2, with lot of salary income. Then I suggest she waits till next Jan and takes the money out, so that this $5400 becomes income of next year when there are no other income. Hope this helps you in making the right decision for saving in 401k.