Written By
Tom Pewtress
Head of USA and Private Wealth Partner
Written By
Tom Pewtress
Head of USA and Private Wealth Partner
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When Americans relocate overseas, they often experience changes in how they think about income, currency, tax frameworks, and long-term retirement planning. One area that frequently prompts questions is the 401(k) that remains in the United States, even when the individual is no longer living there.
A 401(k) generally stays under U.S. rules, inside the U.S. financial system, regardless of where the account holder resides. For individuals who move abroad, this often leads to practical questions:
This guide provides a neutral, educational overview of what may occur with a 401(k) when an individual moves abroad. It is not personalised advice. Suitability depends on individual circumstances, including the plan’s specific rules, the individual’s tax residency, their country of residence, local tax laws, and long-term retirement priorities.
This guide explains what happens to your 401(k) when you relocate outside the United States, and why servicing rules, tax treatment, and long-term planning considerations may change once you become a non-U.S. resident. After reading this guide, you will understand:
This guide is educational only and is not personalised tax or investment advice.
Short answer: yes.
But the full picture is more nuanced.
There is no IRS rule or federal law requiring a 401(k) to close when the account holder becomes a non-U.S. resident. Moving abroad does not:
Your investments remain invested, and the account remains subject to U.S. retirement plan rules.
However, your provider’s servicing policies may change, because servicing rules are determined by the plan administrator or custodian—not the IRS.
Some—though not all—providers apply additional procedures or limitations when an account holder updates their residential or mailing address to a foreign location. These may include:
These restrictions may not appear immediately. Some account holders experience limited changes after relocating, while others only encounter restrictions when the provider updates its policies or systems.
Providers typically implement these rules due to:
The important point is that while your 401(k) remains legally intact, the practical ability to manage it may change over time.
For most individuals, the answer is no.
You may contribute to a 401(k) only if:
Once you leave the employer:
This is true whether the individual moves overseas or stays in the U.S.
Most expats enter a maintenance-only relationship with their 401(k) after relocation.
Keeping a 401(k) is entirely permissible, but individuals living abroad may encounter practical challenges over time. Below are common considerations.
Plan administrators may apply restrictions for non-U.S. residents, including:
These policies vary significantly by institution and jurisdiction.
Under U.S. rules, non-resident individuals are generally subject to 30% federal withholding on certain distributions from a 401(k), unless a tax treaty specifies a reduced rate and proper documentation is filed.
Key points:
Example (illustrative only):
A $20,000 distribution may result in $6,000 withheld upfront if the individual resides in a non-treaty jurisdiction.
Depending on the individual’s country of residence:
Countries differ widely in how they treat foreign pension withdrawals.
Without a tax treaty, coordinated tax treatment may be limited.
A 401(k) is denominated in USD.
If an individual’s long-term spending needs are in EUR, GBP, AUD, CAD, or another currency, exchange-rate movements can influence actual purchasing power.
Some individuals incorporate currency considerations into their long-term plan once they know where they expect to retire.
Many 401(k) plans offer:
This may or may not suit individuals with international planning needs.
Because employer plans are governed by plan documents and administered by a third-party custodian, the account holder does not control:
For individuals living abroad long-term, this lack of control may become an important consideration.
It is possible to withdraw the entire balance, but this requires caution.
A full withdrawal may result in:
A full withdrawal may be appropriate in certain limited situations but should be carefully evaluated.
Under U.S. law, the transfer of a 401(k) into a foreign pension is treated as a taxable distribution.
This applies to transfers into:
Such transfers generally trigger ordinary income tax and, in some cases, penalties.
When you leave a U.S. employer, the following statutory options apply:
This may be appropriate if:
Possible only if:
This may be used in circumstances where liquidity is needed, but:
An IRA rollover is one option that may offer:
This option is not inherently better—suitability depends on:
Conflict Disclosure (ADV Requirement)
Skybound Wealth USA, LLC may receive advisory fees for managing IRA assets.
This creates a potential conflict of interest.
You are under no obligation to roll over or engage the firm for management services.
A direct rollover typically involves:
When done correctly, a like-for-like direct rollover is generally non-taxable.
For these reasons, indirect rollovers are typically used only in specific situations.
Treaties may influence taxation and withholding.
Withholding generally applies at statutory rates; local treatment varies.
Some countries tax U.S. pension withdrawals; others do not.
Local tax advice is essential.
These examples are hypothetical and are used for illustration only; they do not represent actual clients.
Alex moves to the UAE and later discovers his provider places certain limits on account changes when a foreign address is used.
He evaluates whether to:
Alex compares costs, investment options, and long-term planning needs before making a decision.
Marie plans to retire in France.
She reviews:
She considers whether consolidating into an IRA may help streamline long-term planning.
David has several small employer plans accumulated over different roles.
He explores whether consolidating into an IRA could simplify long-term monitoring and planning.
Skybound Wealth USA provides:
Conflict Disclosure:
Skybound Wealth USA may receive compensation if clients choose to have IRA assets managed by the firm.
You are under no obligation to engage the firm, and all decisions remain solely your own.
If you wish to understand how your 401(k) fits into your broader financial picture, you may schedule a discussion with Skybound Wealth USA to review your individual circumstances and goals.
Suitability depends on provider rules, long-term residency, fees, investment needs, and personal circumstances.
Tom Pewtress is a fee-based fiduciary adviser and Head of USA at Skybound Wealth USA. He helps U.S. citizens, dual-nationals and internationally mobile families manage their financial lives across borders. Tom specialises in U.S. retirement accounts, 401(k) and IRA decisions, Roth strategies, tax-aware investing and long-term planning for globally mobile households.
This material is for general informational purposes only.
It does not constitute investment, legal, tax, or financial advice.
Investment decisions should be based on your personal objectives, financial situation, and tax considerations.
Tax rules vary by jurisdiction and may change over time.
Hypothetical examples are for illustrative purposes only and do not represent actual clients or outcomes.
Past performance does not guarantee future results.
Skybound Wealth USA, LLC is an SEC-registered investment adviser.
Registration does not imply a certain level of skill or training.
Please refer to our Form ADV Part 2A and Form CRS for full disclosures.
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If you are living overseas or planning to move abroad, understanding how your 401(k) fits into your broader financial picture is an important part of long-term planning. A complimentary session with Skybound Wealth USA can help you evaluate the high-level considerations before making decisions.
During this session, we can:
This session is educational and carries no obligation.
Book your complimentary discussion today.
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