If you have US 401(k), traditional IRA, or Roth IRA assets and you’re moving abroad — your tax picture changes dramatically. Some countries respect Roth IRA’s US-tax-free status; many don’t. Some treat 401(k) distributions as ‘foreign income’ eligible for reduced rates; others don’t. Here’s the verified 2026 picture.
Last verified: May 26, 2026. Not tax advice.
The core principles
US citizens: Always file US tax on retirement-account distributions. Form 1040 + 1099-R. Withdrawals from traditional 401(k)/IRA are taxed as ordinary income; Roth IRA qualified distributions are tax-free.
The 10% early withdrawal penalty applies pre-age-59½ on traditional accounts (with exceptions: SEPP/72(t), disability, etc.). Living abroad does NOT exempt you from this.
Foreign tax: Depending on country of residence, the FOREIGN country may also tax US retirement distributions — sometimes the US-source distribution gets foreign tax credit, sometimes not.
Country by country
Portugal
Traditional 401(k)/IRA: under US-Portugal treaty Article 20, taxable in Portugal (country of residence). Under IFICI (formerly NHR), foreign pension income was historically exempt for 10 years. IFICI’s treatment of US retirement distributions is narrower than NHR was — verify with Portuguese CPA.
Roth IRA: Portugal does NOT automatically respect US tax-free status. Distributions may be taxed as ‘foreign income’ at 28% or under IFICI as exempt. Roth conversions BEFORE Portuguese tax residency are cleaner.
Spain
Treaty Article 20: pensions taxable in country of residence (Spain) IF you’re a Spanish tax resident. Standard Spanish tax 19-47% applies. Beckham Law: doesn’t help with pension income since it’s foreign-source which gets exempted, but only if you qualify for Beckham.
Roth IRA: not specifically recognized by Spanish tax. Generally treated as taxable on distribution.
France
Treaty Article 18: pensions from prior US public/private employment taxable only in US (special France-US carveout). This is more favorable than most treaties. Means traditional 401(k)/IRA distributions to French residents are US-taxable only, not French-taxable.
Roth IRA: France generally respects the tax-free nature. One of the best EU countries for Roth holders.
United Kingdom
UK-US treaty: pension distributions taxable in country of residence. UK has a 25% pension tax-free lump-sum allowance for UK-domiciled people on UK pensions — does NOT extend to US 401(k)/IRA. UK taxes traditional 401(k) at standard income rates (20-45%).
Roth IRA: UK generally taxes distributions despite US tax-free status (HMRC view). Some treaty arguments for partial exemption — talk to UK-US cross-border CPA.
Mexico
US-Mexico treaty: pensions taxable in country of residence (Mexico). Mexican tax progressive 1.92-35%. US 10% early-withdrawal penalty still applies pre-59½.
Roth IRA: Mexico generally taxes despite US-tax-free status (no recognition of Roth as a class).
Panama, Costa Rica, Paraguay, Uruguay (territorial)
US retirement distributions are foreign-source income from these countries’ perspective — typically NOT taxed by them. You pay US tax (since US citizens are taxed worldwide), and that’s it. This makes territorial-tax Latin American countries some of the most favorable for US retirees holding traditional 401(k)/IRA.
Roth IRA: respected in territorial countries — no foreign tax on what’s US-tax-free.
UAE
Zero personal income tax. US retirement distributions: pay US tax only, zero UAE tax. Best treatment of any country, BUT you need UAE tax residency (Golden Visa or similar).
Pre-move planning checklist
1. Roth conversions BEFORE moving. If you’re planning to convert traditional → Roth, do it while still a US tax resident in a no-state-income-tax state (TX, FL). Locking in conversion before foreign-tax-residency simplifies treatment.
2. Reposition assets if needed. If you’ll be in a country that taxes US-source dividends/interest, consider rebalancing toward growth-focused index funds (less yield) in retirement accounts.
3. Take SEPP/72(t) elections BEFORE leaving. If you’ll need early withdrawals and want to avoid 10% penalty, set up 72(t) substantially equal periodic payments before establishing foreign residency.
4. Update beneficiary designations. Foreign-resident beneficiaries can complicate IRA inheritance. Consider US-resident beneficiaries (spouse if applicable, charitable, trust).
5. Document basis carefully. Post-tax 401(k) contributions, Roth basis, after-tax basis — all matter when foreign tax authorities try to characterize distributions. Keep records.
Mechanics of taking distributions abroad
Custodian considerations: Some IRA custodians close accounts for foreign-resident clients (Vanguard has tightened post-2020). Fidelity + Schwab are more lenient. Charles Schwab International can sometimes hold IRAs for non-US residents but with limited investment options.
Withholding: US default withholding on traditional 401(k)/IRA distributions to non-resident aliens is 30% (statutory) reduced by treaty. For US citizens abroad: US withholding follows W-4P election; you can opt out and pay quarterly estimates.
Reporting: Form 1099-R from custodian. Report on Form 1040 line 4-5 (IRA/pension/annuity income). FBAR + Form 8938 may apply if you’ve rolled IRA assets to foreign accounts (rare and usually inadvisable).
FAQ
Should I roll my 401(k) into IRA before moving abroad?
Generally yes — IRA gives more flexibility (custodian choice, investment options, distribution control). Some 401(k) plans force payout upon employment termination + complicate distributions for non-US residents. Roll into IRA at Fidelity or Schwab before moving.
Roth IRA — is it worth it if my new country taxes it?
Depends. If you’ll spend a significant retirement in the US: yes, Roth’s still valuable. If you’ll spend it in a Roth-friendly country (France, territorial-tax LATAM, UAE): yes. If you’ll spend it in a Roth-unfriendly country (UK, Spain, much of EU, Mexico): the value drops, but it’s still tax-free in US. Conversion math depends on your specific bracket trajectory.
Are there countries that DON’T tax US retirement distributions at all?
UAE (0% personal tax). Bahamas, Bermuda, Cayman (0% personal tax). Most territorial-tax countries treat US-source income as exempt: Panama, Costa Rica, Paraguay, Uruguay (during 11-year holiday), Cyprus (non-dom), Singapore (foreign income unless remitted in some cases). Always verify country-specific.
Related: FEIE 2026 · US-Portugal tax treaty.
✓ Last verified: May 26, 2026. Tax + banking content is general information, not advice. Talk to a licensed cross-border CPA or attorney for your specific situation.