IRA and 401(k) Rules for Americans Living Abroad
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
U.S. retirement accounts held abroad — IRAs and employer 401(k) plans belonging to a citizen or green-card holder living outside the United States — keep their U.S. tax treatment, but moving abroad changes what you can contribute, how income limits are tested, and whether the country you live in recognizes the account at all.
On this page
- Can I contribute to an IRA while living abroad?
- How does the Roth IRA income limit work abroad?
- Can I keep contributing to my 401(k)?
- How does my new country tax my U.S. retirement account?
- What about withdrawals and rollovers from abroad?
- Do I report my IRA or 401(k) on the FBAR?
- Frequently asked questions
- Next step
Can I contribute to an IRA while living abroad?
Only with compensation that the U.S. actually taxes. IRA contributions require earned income, and income you exclude under the foreign earned income exclusion doesn't count. An expat who excludes an entire salary has zero compensation for IRA purposes and cannot contribute — a contribution made anyway is an excess contribution with an annual penalty until withdrawn. Expats who use the foreign tax credit instead keep their wages in income and can contribute normally; those who exclude only part of their wages can contribute up to the unexcluded part.
How does the Roth IRA income limit work abroad?
Roth eligibility phases out above a modified adjusted gross income threshold, and that definition adds excluded foreign income back. So an expat excluding a large salary can be over the Roth limit despite a low taxable income — while simultaneously having no compensation to contribute. The combination traps many high earners abroad: too much income for a Roth, too little taxable compensation for anything. The foreign tax credit route avoids both problems.
Can I keep contributing to my 401(k)?
If you're still on a U.S. employer's payroll, yes — 401(k) contributions are payroll deductions and don't depend on the IRA compensation rules, though the interaction with the exclusion still deserves a look. If you left the employer, the account stays but contributions stop. Some plan administrators and brokerages restrict or close accounts for owners with foreign addresses; find out before you move and, if needed, roll to a provider that accepts expats.
How does my new country tax my U.S. retirement account?
This is where expats get hurt. Most countries don't automatically recognize U.S. tax deferral. Depending on the treaty, the country where you live may:
- recognize the account and tax only withdrawals (common in treaty countries with a pension article covering U.S. plans);
- tax the growth inside the account each year as ordinary investment income;
- treat a Roth IRA as a taxable account, ignoring its U.S. tax-free status — several countries do.
Where there is no treaty, the local default applies. This single question can decide whether to convert, withdraw, or leave an account alone before you move.
What about withdrawals and rollovers from abroad?
Withdrawals are taxable U.S. income as usual, reported on your return wherever you live; early-withdrawal penalties still apply. The country you live in may tax the same withdrawal, with the treaty deciding who has first claim and the credit cleaning up the rest. Roth conversions are U.S. taxable events too, and a conversion done while abroad can be taxed locally as a distribution — check before converting. Required minimum distributions continue on schedule regardless of residence.
Do I report my IRA or 401(k) on the FBAR?
No. U.S. accounts aren't foreign accounts. They don't go on Form 8938 either. But the country you live in may require you to report foreign (to them) accounts — including your U.S. retirement plans — on its own forms.
Frequently asked questions
I excluded all my income. Can I contribute to a spousal IRA for my non-working spouse?
No — a spousal IRA relies on the working spouse's taxable compensation, which is zero after a full exclusion.
Should I switch from the exclusion to the credit just to keep funding an IRA?
Sometimes, especially in a high-tax country where the credit already covers the U.S. tax. Revoking the exclusion locks you out of it for five years, so model it first.
My brokerage says it's closing my account because I live abroad. What do I do?
Roll the account to a custodian that accepts foreign addresses before the deadline they give you; a forced distribution would be taxable.
Will the IRS tax my local retirement plan the way my country taxes my IRA?
That's the mirror image, and often yes — foreign plans without treaty protection are taxed currently by the U.S. The two problems come as a pair.
Next step
Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. If you're moving abroad with U.S. retirement accounts — or already did — our U.S. Tax Desk can map how both countries will treat them before you contribute, convert, or withdraw. See pricing or book a free fit call.
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