What Happens to Your 401(k) and Roth IRA When You Move Abroad

Your 401(k), traditional IRA, Roth IRA, 403(b), TSP, and any other US-based retirement account remains exactly where it is when you move abroad. You don't need to close them, transfer them, or liquidate them. The custodian (Vanguard, Fidelity, Charles Schwab, etc.) continues to hold your investments, and the accounts continue to grow tax-deferred (or tax-free, in the case of a Roth) under US law.

This is not like your health insurance, which stops working the moment you leave. Your retirement accounts don't care where you sleep. They're governed by US tax law, held at US institutions, and denominated in US dollars.

That said, several things change when you move:

• Your ability to contribute may be affected (especially for Roth IRAs)
• Your withdrawals will be taxed differently depending on where you live
• You'll have new reporting obligations to the IRS
• Your host country may have its own opinions about your retirement accounts
• Your brokerage may restrict your account access based on your foreign address

Let's take these one at a time.

The Roth IRA is the American expat's favorite headache. It's the best retirement account in the US tax code — contributions are post-tax, growth is tax-free, and qualified withdrawals are completely tax-free. But moving abroad can make new contributions impossible.

Here's why: To contribute to a Roth IRA, you need taxable compensation (earned income). The 2025 contribution limit is $7,000 ($8,000 if you're 50+), and your modified adjusted gross income (MAGI) must be below $161,000 for single filers or $240,000 for married filing jointly.

The problem is the Foreign Earned Income Exclusion (FEIE). If you use the FEIE to exclude all your foreign earned income from US taxation, you may have zero taxable compensation on your US return. Zero taxable compensation means zero Roth IRA contribution eligibility. You can't contribute to a Roth if the IRS sees no earned income.

Example: Sarah earns $90,000 working remotely from Lisbon. She claims the FEIE and excludes the full $90,000 from US income. Her taxable earned income on her US return: $0. Roth IRA contribution allowed: $0.

The workaround: Exclude less than your full foreign earned income. If Sarah excludes only $83,000 of her $90,000 and reports $7,000 as taxable earned income, she can contribute $7,000 to her Roth. She'll pay US federal income tax on that $7,000 (roughly $800-1,100 depending on other deductions), but she preserves her Roth contribution eligibility. Over 20 years, $7,000/year growing tax-free at 7% becomes approximately $287,000. That's worth the $800 annual tax cost.

Alternative: Use the Foreign Tax Credit instead of the FEIE. If you use the FTC, your foreign earned income remains on your US return (it's not excluded — instead, you get a credit for foreign taxes paid). This preserves your taxable earned income and Roth eligibility. In high-tax countries, the FTC often eliminates your US liability anyway, AND you keep Roth access. This is a major reason some expat tax professionals recommend the FTC over the FEIE for certain clients.

The mega backdoor Roth: If your employer offers an after-tax 401(k) and in-plan Roth conversion, you may be able to do a mega backdoor Roth conversion of up to $69,000/year (the 2025 total 401(k) contribution limit including employer contributions). This works regardless of the FEIE because the contributions come through payroll. Not all plans offer this, but if yours does, it's the single best retirement savings move available to high-earning expats.

When you withdraw from a traditional 401(k) or IRA while living abroad, the US taxes the withdrawal as ordinary income — same as if you were living in Ohio. The custodian will typically withhold 20% for federal taxes on 401(k) distributions and 10% on IRA distributions (you can adjust IRA withholding).

But here's where it gets interesting: your host country may also want to tax that withdrawal. Whether they can depends on the tax treaty between the US and your country of residence.

Countries that generally DON'T tax your US retirement withdrawals (per tax treaty):

• Canada: Under the US-Canada tax treaty, 401(k) and IRA distributions are generally taxable only in the US. Canada respects the tax-deferred nature of these accounts.
• UK: Similar treaty provision. UK generally defers to US taxation of US pension distributions.
• Germany: The US-Germany treaty assigns primary taxation rights on private pensions to the country of residence (Germany), but provides for a credit to avoid double taxation.

Countries that DO tax your US retirement withdrawals:

• France: France taxes worldwide income for residents and will tax your 401(k)/IRA distributions as foreign pension income. You claim a Foreign Tax Credit on one return or the other to avoid double taxation.
• Australia: Treats foreign pension lump sums as assessable income for tax residents.
• Most countries without a US tax treaty: Mexico, Thailand, Philippines, Costa Rica, Panama, Ecuador, Colombia — these countries don't have comprehensive tax treaties with the US (Mexico has one, but it's limited). In practice, many of these countries either don't effectively tax foreign pension income or tax it at favorable rates.

The Roth IRA abroad — the other problem: The Roth's tax-free withdrawal status is a US tax code feature. Your host country may not recognize it. From France's perspective, your Roth IRA is just another investment account, and withdrawals are income. The US-France tax treaty doesn't specifically protect the Roth's tax-free status.

This is one of the most painful aspects of expat retirement planning. You spent decades paying tax upfront on Roth contributions, counting on tax-free withdrawals. Then you move to a country that taxes the withdrawals anyway.

Countries that generally respect Roth IRA tax-free status:

• Canada (under the US-Canada tax treaty, if you make a one-time election)
• UK (generally defers to US treatment)

Countries that likely tax Roth withdrawals:

• France, Germany, Australia, Japan, and most others

Strategy: If you hold significant Roth assets and plan to move to a country that taxes Roth withdrawals, consider doing large Roth conversions or withdrawals BEFORE establishing tax residency abroad. Once you're in the new country's tax system, those tax-free withdrawals may no longer be free.

FATCA — the Foreign Account Tax Compliance Act — is a 2010 law that fundamentally changed life for Americans abroad. It has two sides: what foreign banks must report about you, and what you must report about your foreign accounts.

What FATCA does to foreign banks: FATCA requires foreign financial institutions (FFIs) to report accounts held by US persons to the IRS. Banks that don't comply face a 30% withholding tax on their US-source income. This gave foreign banks a powerful incentive to either comply or simply refuse American customers.

The practical impact: some foreign banks, particularly smaller ones and fintechs, won't open accounts for Americans. Others require additional paperwork. The large banks in most major countries have signed FATCA agreements and will serve Americans, but the process is more cumbersome than for other nationalities.

Your FATCA reporting obligation (Form 8938): If you live abroad and your foreign financial assets exceed certain thresholds, you must file Form 8938 (Statement of Specified Foreign Financial Assets) with your tax return. The thresholds for Americans living abroad:

• Single filer: $200,000 on the last day of the year, OR $300,000 at any point during the year
• Married filing jointly: $400,000 on the last day of the year, OR $600,000 at any point during the year

These thresholds are higher than for Americans living in the US ($50,000/$75,000 single, $100,000/$150,000 married), which is a small mercy.

What counts as a "specified foreign financial asset":

• Foreign bank accounts (checking, savings, fixed deposits)
• Foreign investment accounts (brokerage, mutual funds)
• Foreign stocks and securities held directly (not through a US brokerage)
• Interests in foreign trusts and estates
• Foreign pension plans and retirement accounts
• Foreign life insurance with cash value

What does NOT count:

• Your US retirement accounts (401(k), IRA, Roth) — these are US accounts
• Foreign real estate held directly (the property itself isn't a financial asset, though a mortgage note from a foreign bank might be)
• US-held investments in foreign companies (those are held at US brokerages)

Penalties for non-compliance: $10,000 for failure to file, with additional penalties up to $50,000 for continued non-filing after IRS notice. Plus, the statute of limitations doesn't begin to run on any tax return that should have included Form 8938 — meaning the IRS can audit those years indefinitely.

FATCA is separate from FBAR reporting. You may need to file both.

The FBAR (Foreign Bank Account Report, officially FinCEN Form 114) predates FATCA by decades and has a much lower reporting threshold.

The rule: If the aggregate value of all your foreign financial accounts exceeds $10,000 at any point during the calendar year — even for a single day — you must file an FBAR. That's $10,000 total across all accounts, not $10,000 per account.

What counts:

• Foreign bank accounts (checking, savings, money market)
• Foreign securities accounts
• Foreign mutual fund accounts
• Any other account maintained with a foreign financial institution
• Accounts where you have signature authority, even if you don't own them (e.g., a company account you can sign checks on)

How to file: Electronically through the BSA E-Filing System at bsaefiling.fincen.treas.gov. The deadline is April 15, with an automatic extension to October 15 (no form needed for the extension).

FBAR vs. FATCA — the differences:

• FBAR threshold: $10,000 aggregate. FATCA threshold: $200,000/$300,000 (single, abroad)
• FBAR: filed with FinCEN (Treasury). FATCA: filed with IRS (attached to tax return)
• FBAR: covers accounts you have signature authority over. FATCA: covers assets you own
• FBAR: no income tax return required. FATCA: filed with your 1040
• Both: severe penalties for non-compliance

In practice, most expats file both. You exceed the $10,000 FBAR threshold the moment you have a meaningful foreign bank account (which is almost immediately after moving abroad). Whether you also need Form 8938 depends on whether your total foreign financial assets exceed the FATCA thresholds.

Penalties: Willful FBAR violations carry penalties up to $100,000 or 50% of the account balance per violation (whichever is greater). Non-willful violations carry penalties up to $10,000 per account per year. The IRS has been aggressive about FBAR enforcement, and these penalties have been upheld in court. Don't mess this up.

The Streamlined Procedures: If you've been living abroad and didn't know about FBAR/FATCA filing requirements (a common situation), the IRS offers the Streamlined Filing Compliance Procedures. You file the last 3 years of tax returns and the last 6 years of FBARs, certify that your non-compliance was non-willful, and generally avoid penalties. This is a lifeline for people who genuinely didn't know. It's not a get-out-of-jail card for people who knew and ignored the requirement.

PFIC stands for Passive Foreign Investment Company, and it is the single most punishing tax regime in the US tax code for individual investors. If you're an American living abroad and you invest in a foreign mutual fund, a foreign ETF, or almost any pooled foreign investment vehicle, you're probably holding a PFIC. And the tax consequences are brutal.

What's a PFIC? A foreign corporation is a PFIC if either:

1. 75% or more of its gross income is passive (investment income), OR
2. 50% or more of its assets produce or are held for producing passive income

This captures virtually every foreign mutual fund, foreign ETF, and foreign investment trust. The European index fund your German bank recommends? PFIC. The Irish-domiciled ETF that's tax-efficient for Europeans? PFIC for Americans. The Thai mutual fund your local bank suggests? PFIC.

Why PFICs are devastating: Under the default PFIC tax regime (Section 1291), when you sell a PFIC or receive an "excess distribution":

1. The gain is allocated ratably across your entire holding period
2. The portion allocated to prior years is taxed at the highest marginal rate in effect for each year (currently 37%)
3. An interest charge is assessed on the prior-year tax amounts, as if you had owed the tax in those prior years
4. No preferential capital gains rate applies — even if you held for decades, there's no long-term capital gains treatment

The result: effective tax rates of 50-70% are common on PFIC gains. It's designed to be punitive — Congress created the PFIC rules specifically to discourage Americans from using foreign funds to defer US tax.

The QEF and Mark-to-Market elections: Two alternative regimes can mitigate the PFIC pain:

• QEF (Qualifying Electing Fund): You include your share of the PFIC's income annually, as if it were a pass-through entity. This avoids the punitive taxation but requires the PFIC to provide you with a "PFIC Annual Information Statement" — which most foreign funds won't do for individual American investors.
• Mark-to-Market: You recognize gains or losses annually based on the fund's market value change. This avoids the interest charge and highest-rate allocation but means you're taxed on unrealized gains every year.

The practical solution: DON'T invest in foreign funds. Seriously. As an American abroad, keep your investments at US brokerages in US-domiciled funds. A Vanguard Total Stock Market Index Fund held at a US brokerage is not a PFIC. An HSBC global equity fund offered by your UK bank is. The tax difference can be tens of thousands of dollars over a career.

The only exception: employer-mandated foreign pension plans, which are technically PFICs but are sometimes protected by tax treaties. More on this in the next section.

If you work for a foreign employer abroad, they'll likely enroll you in a local pension or provident fund. This creates a genuinely complex tax situation.

The problem: Most foreign pension plans are either:

• PFICs (see above), triggering punitive US taxation on gains
• Foreign trusts, requiring complex Form 3520/3520-A reporting
• Both

Tax treaty relief: Some US tax treaties specifically address foreign pension plans. The US-UK treaty, for example, allows Americans to defer US taxation on UK pension contributions and growth until distributions are taken — mirroring the US treatment of 401(k)s. The US-Canada treaty provides similar treatment for Canadian RRSPs and RPPs (you must make a one-time election on Form 8891).

But many treaties don't address pensions at all, or address them ambiguously. The US-France treaty is notoriously unclear on French pension funds. The US-Germany treaty covers state pensions but not always private ones.

Countries with relatively clear pension treaty provisions:

• UK (good treaty coverage for workplace pensions)
• Canada (RRSP/RPP covered with election)
• Netherlands (generally covered under the US-NL treaty)
• Switzerland (pillar system addressed, but complex)
• Australia (superannuation treatment debated — ATO and IRS have different interpretations)

Countries with limited or no pension treaty coverage:

• Mexico, Thailand, Philippines, Costa Rica, Panama, Ecuador, Colombia — limited or no applicable treaties
• Japan — treaty exists but pension treatment is complex
• South Korea — treaty provisions exist but are narrow

What to do: If your foreign employer automatically enrolls you in a pension plan:

1. Determine whether the plan is a PFIC and/or a foreign trust
2. Check the applicable tax treaty for specific pension provisions
3. If the treaty provides deferral, make the appropriate election on your US return
4. If no treaty protection exists, you may need to report annual income from the plan on your US return — even if you can't access the money yet
5. Keep impeccable records of contributions, employer matches, and investment gains

This is one area where a tax professional isn't optional — it's essential. Getting foreign pension reporting wrong can trigger PFIC penalties, trust penalties, and FBAR/FATCA penalties simultaneously.

Here's a problem nobody warns you about until it happens: you update your address with your US brokerage to your new foreign address, and they freeze your account. Or restrict trading. Or force you into a limited set of investment options.

Why this happens: US brokerages are regulated by FINRA and the SEC. When you move abroad, your brokerage may determine that they're not licensed to serve clients in your new country of residence. Securities regulations vary by country, and a broker licensed in the US may need separate licensing to provide investment services to someone residing in, say, Germany or Japan.

Brokerages that are generally expat-friendly:

• Charles Schwab International: The gold standard for American expats. Schwab explicitly serves Americans abroad and has dedicated international support. They may restrict certain complex options trading but generally maintain full account access.
• Interactive Brokers: Operates globally and is one of the few brokerages comfortable with clients in nearly any country. More complex interface but excellent for experienced investors.
• Fidelity: Generally accommodating for expats but may restrict certain services. Call them before you move to discuss your situation.

Brokerages that may cause problems:

• Vanguard: Has a history of restricting accounts when clients report foreign addresses. They may prevent new purchases, limit you to money market funds, or request you transfer your account elsewhere. Vanguard's position has softened in recent years, but experiences vary.
• TD Ameritrade / E*Trade / Merrill Lynch: Policies vary and change frequently. Contact them before updating your address.

The address workaround: Some expats maintain a US address (family member's home, mail forwarding service like US Global Mail) on their brokerage accounts. This technically violates the brokerage's terms of service, and if they discover your true residence, they may freeze the account. It's a calculated risk that many expats take. We're not recommending it — we're acknowledging the reality.

The better approach:

1. Before you move, call every US financial institution where you have accounts. Tell them your plans. Ask what will change.
2. Consolidate accounts at an expat-friendly brokerage (Schwab or Interactive Brokers) before you leave.
3. Make any trades or rebalancing moves you've been planning while you still have full access.
4. Download and save all tax documents, statements, and account records.
5. Set up a US mailing address for important correspondence.

Do this before your move, not after. Untangling a frozen brokerage account from abroad — with time zone differences, hold times, and potential compliance reviews — is a special kind of misery.

The intersection of US tax law, foreign tax law, retirement accounts, reporting requirements, and investment restrictions is genuinely complex. Most Americans abroad need professional help — but not from just any financial advisor.

What you need: A financial advisor or CPA who specifically serves American expats. This is a niche specialty, and generalists — even good ones — will miss critical issues like PFIC exposure, FBAR requirements, or Roth IRA contribution strategies.

Types of professionals:

• Expat tax CPAs: Handle your US (and sometimes foreign) tax filing, including FEIE/FTC optimization, FBAR/FATCA reporting, and tax treaty analysis. Cost: $500-2,500/year depending on complexity.

  • Greenback Expat Tax Services: One of the largest expat-only tax firms. Flat-fee pricing starting around $500 for straightforward returns.
  • Bright!Tax: Similar model to Greenback. Good technology platform.
  • Taxes for Expats (now part of Greenback): Long-established firm.

• Expat financial planners: Handle investment management, retirement planning, and overall financial strategy for Americans abroad. Look for CFP or CFA designations plus demonstrated expat experience.

  • Thun Financial Advisors: Zurich-based, fee-only, specializing in American expats. Founded by expats.
  • Beacon Financial Education: Fee-only planning for Americans abroad.
  • Harrison Brook: European-based, serves American expats, but verify their US regulatory status.

• International tax attorneys: For complex situations — renunciation considerations, foreign trust structures, PFIC negotiations with the IRS, or multi-country tax optimization. Cost: $300-800/hour. You won't need one every year, but you might need one once.

Red flags in an advisor:

• They recommend investing in foreign-domiciled funds (PFIC trap)
• They're unfamiliar with FBAR/FATCA requirements
• They suggest using your US address to avoid reporting obligations
• They don't ask about your specific country of residence and its tax treaty with the US
• They charge AUM (assets under management) fees without providing tax planning (you're paying for investment management AND need to hire a separate tax person)

The ideal setup for most expats:

1. An expat CPA for annual tax filing: $500-1,500/year
2. A fee-only financial planner (not commission-based) for investment and retirement strategy: $1,500-3,000/year or a flat project fee
3. All investments held at a US brokerage (Schwab or Interactive Brokers) in US-domiciled index funds
4. A local accountant in your country of residence for foreign tax filing: varies by country, typically $300-1,000/year

Total annual cost: $2,300-5,500. Sounds like a lot until you consider that one PFIC mistake, one missed FBAR, or one suboptimal FEIE/FTC decision can cost $10,000-50,000+ in unnecessary taxes and penalties.

Before you move:

1. Consolidate US brokerage accounts at an expat-friendly institution (Charles Schwab International or Interactive Brokers). Do this 2-3 months before your move while you have full account access and a US address.

2. Purge any foreign-domiciled funds from your portfolio. Replace them with US-domiciled equivalents. That Irish-domiciled Vanguard FTSE All-World ETF (VWRL) needs to become its US-domiciled cousin (VT). Do this before you establish tax residency abroad.

3. Model your FEIE vs. FTC decision for the first year. If preserving Roth IRA contributions matters to you, the FTC may be the better choice even if the FEIE is simpler.

4. Do a Roth conversion if it makes sense. If you'll have a low-income year during your move (partial-year earnings), converting traditional IRA funds to Roth while you're in a low bracket can save significant taxes over decades.

5. Max out all retirement contributions before you leave, especially if your new situation will limit future contributions (e.g., no 401(k) access as a freelancer abroad).

After you move:

6. Set up your FBAR tracking system from day one. Every foreign account, every balance, every day. A simple spreadsheet works. The moment your aggregate foreign balances exceed $10,000 at any point in the year, you have an FBAR filing obligation.

7. Hire an expat CPA before your first tax filing deadline. Don't wait until April. The first-year return is the most complex because it involves partial-year calculations, FEIE elections, and potentially both domestic and foreign income.

8. Understand your host country's treatment of US retirement accounts. Does the tax treaty protect your 401(k)/IRA from local taxation? Does your host country recognize the Roth's tax-free status? If not, adjust your withdrawal strategy accordingly.

9. Don't invest locally unless you fully understand the PFIC implications. Your foreign bank's wealth manager will enthusiastically recommend local funds. Smile, nod, and keep your money at Schwab.

10. Review annually. Tax treaties change. Your income changes. Your residency status may change. The FEIE threshold adjusts for inflation. What worked in year one may not be optimal in year three. An annual review with your expat CPA is worth every dollar.

Your retirement accounts are the product of decades of discipline and compound growth. Moving abroad doesn't have to jeopardize them — but it does require a level of planning and reporting that most domestic financial advisors never encounter. The rules are navigable. They're just not simple. Get the right help, follow the reporting requirements, and your nest egg will be waiting for you no matter where in the world you decide to crack it open.