401K concern

[me_indian]

Hi all,
I am on L1 Visa and my wife is working too on L2 Visa here. To save on taxes for joint income I am thinking of investing in 401K. I recently read a thread saying that it is not possible to transfer this money in India retirement account if after 3 years I want to go back. Please advice if it is a good option to invest in 401K for period of three years. I have already spent 2 years in US and till now didn't invest in same.
My friends suggested that rather than paying in taxes its a good option. I am concerned about the complexities of handling funds from India for same.

Any suggestions or advice will be helpful.

Thanks

[mahadevan07]

Unlike the PF Scheme in India, the 401K funds are taxable even if you retire in the US after 60 years and then withdraw the money (In India, the money that goes into the PF account is not taxed and on retirement, when you withdraw money from that PF account, there is no tax on that). Only thing you will avoid is the 10% penalty, if you withdraw it past 60 years. But then, its always beneficial even for a short term on 2 conditions (1) Your employer's matching contribution (2) The interest you gain due to investments of your funds available in 401K account. If the sum of #1 and #2 is more than the penalty you owe on account of early withdrawal, you can invest in 401K