Leaving the U.S.? What Expats Need to Know About 401(k)s, IRAs and Cross-Border Tax Planning

Planning a Move Abroad? Your Retirement Accounts Might Not Travel as Easily as You Think

Are you thinking about leaving the U.S.? Perhaps you’ve lived there your entire life, or maybe you moved there for work or study and now crave a change of scenery. Or have you already made the move?

Moving abroad is a thrilling prospect – the idea of packing up, leaving everything familiar behind, and starting fresh in a new country.

But while the lifestyle change may be exciting, the financial consequences of moving abroad—especially with U.S. retirement accounts—can be complex and costly without proper planning.

At Blacktower Financial Management, we specialize in helping U.S.-connected individuals—citizens and long-term residents—navigate the challenges of managing wealth across borders. And when it comes to pensions like 401(k)s and IRAs, the decisions you make now could significantly affect your financial future.

The Hidden Risks of Moving Abroad

Without professional guidance, you may face:

• Double taxation on retirement withdrawals
• Limited account access once your address changes
• Currency risk when spending outside of USD
• Restricted service from U.S. brokerage firms
• Estate complications for non-U.S. beneficiaries

Let’s explore how these issues impact U.S. retirement accounts and what you can do to mitigate the risks.

The Problem of Portability: Can You Take It with You?

U.S. retirement accounts such as 401(k)s and Individual Retirement Accounts (IRAs) are governed by IRS regulations. Unlike cash in a bank account, they cannot be transferred into a foreign pension scheme without triggering a taxable event.

And that’s not the only challenge.

• Many 401(k) providers only allow withdrawals to U.S. bank accounts. If you’ve closed your U.S. accounts, you could be issued a cheque sent overseas—often without notice.
• Some brokerage firms may freeze or close accounts when they detect a foreign residency address.
• You may be prohibited from trading or managing investments, depending on your new country’s regulations.

And even if your account stays open, your funds are still in U.S. dollars, so you’re exposed to foreign exchange (FX) fluctuations when spending or transferring locally.

Taxation: It’s More Complex Than You Think

One of the most frequently asked questions from expats is:

“How will my 401(k) or IRA be taxed when I move abroad?”

Here’s the critical point: The U.S. taxes its citizens and long-term green card holders on their worldwide income—no matter where they live. That includes income from retirement accounts.

If you hold a green card and have been a lawful permanent resident for eight years or more, renouncing your status can even trigger expatriation tax—known as the exit tax.

Remaining a U.S. citizen or green card holder means you must continue to file U.S. tax returns for life. But this may expose you to double taxation, especially if your new country also taxes U.S. retirement withdrawals.

While the U.S. has Double Taxation Agreements (DTAs) with many countries—including the UK, Portugal, France, and Germany—benefits vary and must often be claimed via paperwork-heavy processes.

Even with a treaty, U.S. custodians may apply automatic 20–30% withholding tax on distributions made to foreign residents. This tax is often reclaimable—but doing so usually requires the help of a qualified adviser or tax professional.

Some countries also fail to recognise 401(k)s and IRAs as tax-deferred vehicles, instead treating them like standard investment accounts and taxing withdrawals as local income.

What Happens to Your U.S. Assets When You Die Abroad?

Estate planning becomes even more complicated when you’re living overseas.

If your beneficiaries are not U.S. citizens or green card holders:

• Inherited accounts may be closed and paid out as lump sums, triggering U.S. withholding tax
• Some providers refuse to establish inherited or spousal rollover IRAs for non-U.S. residents
• The U.S. estate tax threshold for non-residents is just $60,000 in U.S.-situs assets (including IRAs/401(k)s), after which 40% tax may apply unless treaty protections exist

To receive the inheritance, beneficiaries may also need to apply for a U.S. Taxpayer Identification Number (TIN)—a process that adds administrative burden and delay at an already difficult time.

Avoid the Pitfalls: Work with Cross-Border professionals

Retiring or relocating abroad is a life-enhancing decision—but when U.S.-connected pensions, brokerage accounts, and estate considerations are involved, you’ll need help from professionals who understand the cross-border landscape.

At Blacktower Financial Management, we provide:
✅ Personalised pension advice for U.S. expats and green card holders
✅ IRA and 401(k) consolidation strategies
✅ Tax efficiency planning based on your country of residence
✅ Guidance on withholding tax recovery and currency strategy
✅ Cross-border estate planning for your beneficiaries
✅ Global wealth structuring tailored to your goals

📞 Planning to leave the U.S. or already abroad? Let us help.

Your U.S.-based assets don’t automatically adapt to your new life—but your financial strategy can.

Speak to a qualified Blacktower adviser today and take control of your retirement and estate planning across borders. Get in touch now

Disclaimer: This article is for informational purposes only. Investment advice and investment advisory services offered and provided through Blacktower Financial Management US, LLC. This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, tax advice, tax recommendations, investment recommendations or investment research. You should seek advice from a professional before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.