Your 401(k) and IRA When You Move Abroad (2026)
Key takeaways
- You can keep your 401(k) and IRA when you emigrate; there is no requirement to withdraw or transfer them out of the US.
- US citizens and green-card holders abroad stay US persons: traditional distributions are taxed as ordinary income and the 10% early-withdrawal penalty before age 59½ still applies (IRS).
- Non-resident aliens are generally subject to 30% withholding on US retirement distributions; a treaty plus Form W-8BEN can reduce or eliminate it.
- Because of a 2020 change, you generally cannot waive federal withholding on periodic or non-periodic payments delivered to an address outside the US.
- Required minimum distributions (RMDs) from age 73 apply wherever you live; Roth IRAs have no RMDs during the owner’s lifetime.
- The FEIE does not shelter retirement income (it is not earned income); the Foreign Tax Credit is the usual tool to avoid double taxation.
- Your host country may tax growth or distributions differently — and some countries do not recognise the Roth’s tax-free status unless a treaty says so.
You can keep the accounts — but tell your provider you’re moving
Emigrating does not trigger a taxable event or a forced payout. Your 401(k) can stay with your former employer’s plan or roll over to an IRA, and your IRA continues to grow tax-deferred (or tax-free for a Roth). The practical wrinkle is at the brokerage: some US custodians restrict what non-resident account holders can do — they may block new purchases, freeze the account, or decline to open a new IRA once you have a foreign address. Confirm your provider’s policy before you leave, and keep a US mailing address and phone contact where you legitimately can.
How distributions are taxed: citizens vs non-resident aliens
The tax treatment turns on your US status, not merely your location.
US citizens and green-card holders remain subject to US tax on worldwide income (see our companion guide on US taxes abroad). Distributions from a traditional 401(k) or IRA are taxed as ordinary income at your regular rates, and qualified Roth distributions remain tax-free. The federal rules that apply at home apply overseas.
Non-resident aliens — for example, a foreign national who worked in the US and then left, or a former green-card holder who has abandoned that status — are treated differently. US-source pension and retirement-plan distributions are generally subject to a flat 30% withholding tax, described in Publication 515 and Publication 519, US Tax Guide for Aliens. That 30% can be reduced — sometimes to zero — by an income tax treaty, which you claim by giving the payer Form W-8BEN.
The early-withdrawal penalty and RMDs still follow you
For US citizens and residents, the 10% additional tax on early distributions taken before age 59½ applies exactly as it would in the US, subject to the usual exceptions (IRS early-distribution rules). Likewise, required minimum distributions must begin at age 73 for traditional 401(k)s and IRAs no matter where you live; missing an RMD triggers an excise tax. Roth IRAs are not subject to lifetime RMDs. See the IRS RMD FAQs.
Withholding when you have a foreign address
A frequently missed rule: under changes effective from 2020, you generally cannot elect out of federal income tax withholding on pension and annuity payments if they are delivered to you outside the United States, or to a financial institution or other person outside the US. In practice this means withholding is mandatory on distributions to a foreign address, and you reconcile the actual tax when you file. The mechanics are set out in the instructions to Form W-4P (periodic payments) and Form W-4R (non-periodic payments). For non-resident aliens the payer uses Form W-8BEN and the 30%/treaty framework instead.
Tax treaties: avoiding double taxation
Because both the US and your new country may claim the right to tax a distribution, US income tax treaties are central to planning. Many treaties assign the primary right to tax private pensions and retirement accounts to the country of residence, and some contain specific provisions recognising the character of a distribution. A handful of newer treaties (for example, the US–UK treaty) explicitly address Roth-type accounts and can preserve tax-free treatment. Read the specific treaty and its technical explanation, and take advice, because the wording varies widely from country to country.
The FEIE won’t help — use the Foreign Tax Credit
Retirement distributions are not “earned income”, so the Foreign Earned Income Exclusion cannot shelter them. Where your host country taxes the distribution and the US also taxes it, the Foreign Tax Credit (Form 1116) is the usual mechanism to prevent double taxation, crediting foreign tax against your US liability on the same income. Timing mismatches can still arise if the two countries tax the income in different years, which is another reason to coordinate withdrawals deliberately.
Watch how your host country treats the account
US tax rules are only half the picture. Some countries tax the annual growth inside a US retirement account rather than only the distributions; others may not recognise the Roth as tax-free and could tax withdrawals that the US treats as exempt; and reporting of foreign (from their perspective, US) accounts may be required locally. Before taking any large distribution, confirm the local treatment and whether a treaty overrides it. Coordinating the year and size of withdrawals with your residency status can materially change the total tax you pay.
Contributing and consolidating from abroad
Living overseas also affects new contributions. To contribute to an IRA you need taxable compensation, and income you exclude under the Foreign Earned Income Exclusion does not count — so an expat who excludes all of their salary may have no eligible compensation left to fund an IRA that year. Using the Foreign Tax Credit instead of the FEIE can preserve contribution room, which is one more reason to model both. On the logistics side, it is often worth consolidating old 401(k)s into a single IRA before you leave, while you still have an easy US address and full account access; rolling a 401(k) to an IRA is not a taxable event when done as a direct rollover. See the IRS rollover rules and the IRA contribution rules.
How Flyto can help
Flyto moves households from the US to Europe and worldwide, door-to-door — packing, international shipping, customs and delivery. We get your home to your new country while you and your cross-border tax adviser handle the account and treaty planning above; get a quote.
Frequently asked questions
Do I have to cash out my 401(k) or IRA when I move abroad?
No. There is no requirement to withdraw or move the account out of the US. It stays invested and continues to grow tax-deferred (or tax-free for a Roth), though some brokerages restrict non-resident accounts.
How are my withdrawals taxed once I live overseas?
If you remain a US citizen or green-card holder, distributions are taxed as ordinary income as usual. If you are a non-resident alien, US-source distributions are generally subject to 30% withholding unless a treaty reduces it, per IRS Publication 515.
Does the 10% early-withdrawal penalty still apply abroad?
Yes. For US citizens and residents the 10% additional tax on distributions before age 59½ applies wherever you live, subject to the usual exceptions.
Can I stop US tax being withheld if I have a foreign address?
Generally no. You usually cannot waive withholding on pension or annuity payments delivered outside the US; see the instructions to Form W-4P. Non-resident aliens use Form W-8BEN to claim treaty rates.
Do required minimum distributions still apply?
Yes. RMDs from traditional 401(k)s and IRAs must begin at age 73 regardless of where you live; Roth IRAs have no lifetime RMDs. See the IRS RMD FAQs.
Will my new country tax my US retirement account too?
It may. Treatment varies and some countries do not recognise the Roth’s tax-free status. A relevant tax treaty often determines which country taxes the distribution; take local advice.
Sources
- IRS — Publication 519, US Tax Guide for Aliens
- IRS — Publication 515, Withholding of Tax on Nonresident Aliens
- IRS — Tax on Early Distributions (10% penalty)
- IRS — Required Minimum Distributions FAQs
- IRS — Form W-8BEN (treaty benefits for foreign persons)
- IRS — Form W-4P (withholding on periodic pension payments)
- IRS — Form W-4R (withholding on non-periodic payments)
- IRS — United States Income Tax Treaties A to Z
- IRS — Form 1116 (Foreign Tax Credit)
- IRS — Retirement Plans (overview)