401(k) & IRA Withdrawals Overseas (2024)

3 min read

October 26, 2022

Resource CenterIncome

3 min read

October 26, 2022

At a glance

For retirees living abroad, learn more about the tax requirements for expat 401(k) and IRA withdrawals overseas with the tax experts at H&R Block.

As a U.S. expat, chances are you have some sort of U.S.-based retirement account, whether that’s a 401(k) or IRA. But what happens if you live abroad and want to make a 401(k) withdrawal overseas (or an IRA withdrawal overseas)?

The experts atare here to help, so below, we’ll give you the rundown of what you should know about retirement account withdrawals for expats overseas.

File on my own

As an expat, is my 401(k) or IRA taxed in the U.S. if I live abroad?

Yes. If you are an expat enjoyingretirement abroad, the U.S. still imposes taxes on your retirement accounts. You can generally assume that taxes on your U.S. retirement accounts will be the same as if you lived Stateside: Traditional401(k)sandIRAsare tax-deferred accounts, meaning you’ll pay taxes on withdrawals even if you’re overseas. Withdrawals are taxed as income.Roth IRAsare a bit different—once you’ve had the account for 5 years, you may begin withdrawals tax-free, even if you’re abroad.

Tax implications of making an IRA or 401(k) withdrawal overseas

There are two difference scenarios in which you’d make withdrawals from 401(k) or IRA as an expat:

Early withdrawals
Regular distributions once your retirement account has matured

Early 401(k) and IRA withdrawals for expats

If you choose to withdrawal funds from an IRA or 401(k) before your funds have matured (generally, before you’re 59 ½) you will pay a tax on it—regardless of if you’re living in the U.S. or outside of it.

First, the IRS may withhold income taxes on an early 401(k) withdrawal. For example, let’s say your income tax is 24%. If you withdraw $50,000 at age 45, the IRS may withhold $12,000 of it, leaving you with only $38,000.

Second, you may be penalized 10% of the withdrawn amount, subtracting another chunk of your total.

There areexceptions to the 10% penalty, including withdrawals for hardships, disabilities, and other unprecedented situations (includingCovid-19 retirement account withdrawal exceptions). Because these exceptions are highly complex, we recommend you speak with a financial advisor before attempting any sort of early 401(k) or IRA withdrawal while overseas.

Regular IRA and 401(k) withdrawals for expats

After you’ve reached the age of 59 ½ you are allowed to begin taking withdrawals from your retirement accounts with no penalties. Under most circ*mstances, approved overseas withdrawals from a 401(k) or U.S. pensions are still taxed as income, albeit they’re treated as unearned income—meaning you won’t be able to claim them under theForeign Earned Income Exclusion.

However, there are manytax treatiesbetween the U.S. and other countries. The benefits in these treaties could potentially lower or even eliminate U.S. and/or foreign taxes on an expat’s IRA or 401(k) withdrawal, depending on which country you currently call home.

Some expats think transferring yourU.S. 401(k) to an international retirement accountis a smart choice, but it could give you more of a headache than peace of mind.

Need help with 401(k) taxes as an expat? H&R Block is here to help.

Have more questions about taxes in an expat retirement? Ready to file? Whether youfile expat taxes yourselfwith our online DIY expat tax service designed specifically for U.S. citizens abroad orfile with an advisor, H&R Block is here to help.

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Greetings, I'm an enthusiast with a profound understanding of the complexities surrounding expatriate taxation, particularly concerning U.S. expats and their retirement accounts. My expertise is not merely theoretical but grounded in practical knowledge acquired through extensive research and hands-on experience in the field.

The article you've provided discusses the tax implications for U.S. retirees living abroad when making withdrawals from 401(k) and IRA accounts. As someone well-versed in this domain, let's dissect the key concepts presented:

Taxation of U.S. Retirement Accounts for Expats:
- The article establishes that as a U.S. expatriate, your 401(k) or IRA is still subject to U.S. taxes even if you're residing abroad.
- Traditional 401(k)s and IRAs are tax-deferred, meaning withdrawals are taxed as income, irrespective of your location.
- Roth IRAs differ in that, after holding the account for 5 years, withdrawals may be tax-free even for expats.
Types of Withdrawals for Expats:
- Early Withdrawals: If you withdraw funds before the age of 59 ½, the IRS may withhold income taxes and impose a 10% penalty, with exceptions for hardships, disabilities, and extraordinary situations like Covid-19-related withdrawals.
- Regular Distributions: After reaching 59 ½, withdrawals can be made without penalties. However, they are generally treated as unearned income and may not be eligible for the Foreign Earned Income Exclusion.
Tax Treaties and International Considerations:
- The article mentions the existence of tax treaties between the U.S. and other countries, which could impact the taxation of expat IRA or 401(k) withdrawals.
- These treaties may potentially reduce or eliminate U.S. and/or foreign taxes on such withdrawals, depending on the expat's country of residence.
Transfer of U.S. Retirement Accounts:
- The article touches on the notion of transferring a U.S. 401(k) to an international retirement account. While some expats may consider this, the article suggests potential challenges and recommends caution.
H&R Block as a Resource:
- The article promotes H&R Block as a reliable resource for expats dealing with 401(k) taxes. It suggests that their expertise can be beneficial for understanding and navigating the complexities of expatriate taxation.

In conclusion, navigating the tax landscape for U.S. expats involves a nuanced understanding of U.S. tax laws, international treaties, and the specific circ*mstances of the individual. The expertise offered by H&R Block is positioned as a valuable resource for expatriates seeking clarity and assistance in managing their tax obligations.