Whether or not you intend to retire abroad, one thing is certain: how you save for retirement today has a direct impact on the lifestyle you can enjoy tomorrow. For U.S. citizens and Green Card holders living overseas, retirement accounts for expats require careful planning, not least because cross-border tax rules can quickly complicate even straightforward savings strategies.
At Blacktower Financial Management, we work with globally mobile professionals, entrepreneurs, and retirees every day. Many of them face the same questions: Can I still contribute to my IRA if I live abroad? What happens to my 401(k) if I relocate? Will the Foreign Earned Income Exclusion affect my ability to save? These are not theoretical concerns—they’re issues that, if overlooked, can leave you facing unnecessary tax bills, penalties, or missed opportunities.
In this guide, we outline the essentials of U.S. retirement accounts for expats in 2025 and highlight the planning considerations that make professional cross-border advice so valuable.
Why Retirement Planning Matters for Expats
Retirement today is more than just slowing down. For many, it is a chapter filled with travel, family time, and long-awaited adventures. Some aim to reach that stage earlier than average, inspired by the Financial Independence, Retire Early (FIRE) movement. Others simply want the freedom to live abroad without financial stress.
Whatever your vision, building financial security means maximising the opportunities available under U.S. tax law while also navigating the rules of your chosen country of residence. That balancing act requires forward-looking planning.
Key Updates for U.S. Retirement Accounts in 2025
Several changes in recent years affect Americans abroad:
- Higher contribution limits: In 2025, the 401(k) contribution limit is $23,500, while the IRA limit is $7,000 ($8,000 for those aged 50+). SEP and SIMPLE IRAs allow significantly higher contributions, making them attractive for expats who are self-employed or run small businesses abroad.
- Foreign Earned Income Exclusion (FEIE): The FEIE increases to $130,000 in 2025. Expats relying on this exclusion may find themselves unable to make IRA contributions unless they earn more than the FEIE threshold.
- Catch-up contributions: From 2025, individuals aged 60–63 benefit from higher catch-up allowances in 401(k) plans, giving late-stage savers more flexibility.
- Backdoor Roth strategy: High-income expats can still consider converting a Traditional IRA to a Roth IRA to bypass Roth contribution income limits.
Understanding IRA Options for Expats
An Individual Retirement Arrangement (IRA) is one of the most flexible retirement savings tools available to Americans. The four main IRA types are:
- Traditional IRA – Contributions are tax-deductible, withdrawals are taxable.
- Roth IRA – Contributions are made post-tax, withdrawals are tax-free.
- SEP IRA – Designed for self-employed individuals or business owners; allows high contributions.
- SIMPLE IRA – For businesses with fewer than 100 employees; employer and employee both contribute.
Contribution and Tax Rules
- Traditional, SEP, and SIMPLE contributions reduce current U.S. taxable income, but withdrawals are taxed later.
- Roth contributions are after-tax, but qualified withdrawals are tax-free.
- Early withdrawals from Traditional, SEP, or SIMPLE IRAs generally attract a 10% penalty. Roth contributions (but not growth) can be withdrawn without penalty.
- In 2025, SEP IRAs allow contributions up to $70,000, SIMPLE IRAs up to $16,500, while Traditional and Roth IRAs are capped at $7,000.
For expats, two key issues stand out:
- The FEIE and earned income rule – If you exclude all of your foreign income under the FEIE, the IRS considers you to have “zero” earned income. That means you may be ineligible to make IRA contributions. Contributing in error can trigger a 6% penalty on excess contributions.
- Roth IRA income limits – In 2025, single filers with a Modified Adjusted Gross Income (MAGI) over $161,000, or joint filers over $240,000, cannot contribute directly to a Roth. Expats often fall into this trap if they forget to add excluded foreign income back into their MAGI calculation.
What About 401(k) Plans?
A 401(k) remains one of the most effective retirement savings vehicles, with higher contribution limits and the potential for employer matching.
- Limits: $23,500 in 2025, plus catch-ups for over-50s.
- Employer match: Effectively free money that accelerates savings.
- Restrictions: Generally, you need to be working for a U.S. employer offering a 401(k) plan. Many expats working abroad for non-U.S. companies lose access.
If you have a 401(k) from a previous employer, you may face decisions about rolling it over into an IRA or leaving it where it is. Each choice has tax and compliance implications, particularly if you are now tax resident outside the U.S.
Why Cross-Border Advice Matters
The Internal Revenue Service applies strict rules on contributions, withdrawals, and reporting for retirement accounts. At the same time, your country of residence may treat the same accounts very differently—sometimes taxing them even when the U.S. does not. Without coordinated planning, it is easy to fall into double taxation or miss tax-efficient opportunities.
For example:
- A Roth IRA may be tax-free in the U.S. but not recognised as such abroad.
- Employer 401(k) matches may be treated as taxable benefits in your host country.
- Estate planning becomes more complex when retirement accounts form part of your taxable estate in multiple jurisdictions.
Blacktower’s wealth management specialists help expats structure their finances with both U.S. and overseas tax laws in mind, ensuring compliance while protecting long-term wealth.
Building a Comfortable Retirement Abroad
Ultimately, retirement planning is not about accounts or acronyms. It is about securing the lifestyle you want. For some, that means retiring early. For others, it means making sure grandchildren can visit, or that healthcare costs are covered later in life.
By taking advice early, expats can:
- Maximise eligible contributions while abroad.
- Avoid penalties linked to FEIE or excess contributions.
- Implement tax-efficient rollover or conversion strategies.
- Align retirement savings with estate planning goals.
How Blacktower Can Help
Since 1986, Blacktower has provided cross-border financial planning for expatriates across Europe, the U.S., the Caribbean, and beyond. Our advisers understand both the technical rules of retirement accounts and the practical realities of life abroad.
If you are a U.S. citizen living overseas—or planning to retire abroad—speak to our team. We can help you review your retirement accounts, assess rollover options, and help make sure your savings strategy is aligned with both your U.S. obligations and your host country’s tax regime.
📞 Contact Blacktower today to arrange a confidential consultation and start planning a retirement that works for you, wherever you choose to live.
Site Sources – https://www.dol.gov/general/topic/retirement
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.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser 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.
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.