The short answer
Nothing in US law requires you to close an IRA or a 401(k) because you moved to Mexico, Portugal, or the Philippines. A traditional or Roth IRA is yours regardless of where you live, and an employer plan is governed by the plan’s own rules, which almost never require a former employee to leave because of a foreign address. Required minimum distributions continue on the same schedule. The account is still a US account, still reported to the IRS, and still governed by US securities rules.
What does change is practical. The custodian — the brokerage or fund company that holds the IRA — may have a policy against non-resident customers. Your employer’s plan may force out very small balances. And the people who make money when retirement accounts move will have opinions about what you should do with yours.
The IRA: yours to keep, but the custodian may not keep you
An IRA lives at a custodian. If the custodian decides it no longer serves residents of your country, the answer is not to close the IRA and take a distribution — that is a taxable event, and if you are under 59½ it usually comes with a penalty on top. The answer is a trustee-to-trustee transfer to a custodian whose current policy accepts a US citizen at your address. The money never touches your hands and nothing is taxed.
Policies vary by firm and by country of residence, and they change. Ask any prospective custodian, in writing, whether it will open and maintain an IRA for a US citizen residing in your specific country, and keep the answer. Give the real address; a borrowed US address is a misstatement on account paperwork and a reason for the firm to close the account later on its own timetable.
New contributions are a tax question, not a securities one: whether you can contribute depends on whether you have compensation that is not excluded from US tax. One caution that applies to every paragraph here: we are securities litigators, not tax advisors. Anything involving your US return, the foreign earned income exclusion, or how a sale is taxed belongs with a CPA who handles expats.
The 401(k): the plan sets the rules
Most employer plans let former employees leave their balance in the plan indefinitely, subject to a small-balance rule: balances under a threshold (currently in the low thousands of dollars — check your plan) can be forced out into an IRA or paid out. Above that, staying put is a legitimate option, and often a good one. Plan investments are frequently cheaper than retail products, the plan has a fiduciary watching the lineup, and a plan is not a brokerage that can decide it dislikes your address.
Read the summary plan description or call the plan administrator and ask two questions: can I remain in the plan as a non-resident, and what happens to distributions at a foreign address. Write down the answers and who gave them.
What brokers get wrong — or get wrong on purpose
The month you retire and the month you move abroad are the two most profitable moments in your financial life for the people selling you things. The following statements are commonly made to Americans preparing to leave, and each one is either false or a half-truth with a sales pitch attached.
- “You have to roll your 401(k) into an IRA before you move.” You do not. Whether you should is a comparison of fees, investments, and services — and since June 30, 2020, Regulation Best Interest requires a broker who recommends a rollover to have a reasonable basis for it, considering the alternative of leaving the money where it is.
- “You have to close the IRA because you will be a non-resident.” No. You may need a different custodian. That is a transfer, not a closure.
- “Cash out now and avoid the complications.” A full distribution of a traditional IRA is taxed as income in the year you take it. It is the most expensive possible way to simplify.
- “An annuity inside the IRA is the only product that works abroad.” An annuity inside an IRA gives you tax deferral you already have, in exchange for a surrender schedule that can run seven to ten years and fees that can exceed 2 percent a year. It works for the seller.
- “Move it to our international platform.” Ask what the advisory fee is, what the fund expenses are underneath it, and what it costs to leave. Get the answers in writing.
What a rollover recommendation has to meet
A recommendation to move money out of an employer plan is one of the most closely regulated recommendations a broker can make. Under Regulation Best Interest, the broker must consider your alternatives — including staying in the plan — and the costs, services, and protections of each, and must have a reasonable basis to believe the rollover is in your interest, not the firm’s. FINRA Rule 2111 applies to the products bought with the rollover money, and FINRA has for years listed rollovers among its supervisory priorities.
The practical consequence: if a broker recommended a rollover without any comparison to the plan, and the money went into a variable annuity, a proprietary managed account with layered fees, or illiquid products like non-traded REITs, the recommendation itself can be the basis of a claim — separately from how the products performed.
A short checklist before you leave
Do this in the order written, and do it before you change your address anywhere.
- Confirm in writing that your IRA custodian will keep you at your new address; if not, arrange a trustee-to-trustee transfer before you move.
- Ask your 401(k) plan administrator whether you can stay and how distributions are handled abroad.
- Decline any rollover, annuity, or platform pitch that you cannot compare on paper to leaving things as they are.
- Download every statement, plan document, and account application while you still have easy access.
- Set up two-factor authentication that works with a non-US phone number, or an authenticator app, before you go.
Key takeaways
If you remember six things
- US law does not require you to close an IRA or leave a 401(k) because you moved abroad.
- If the custodian will not keep you, transfer trustee-to-trustee — never take a distribution to “simplify.”
- Most plans let former employees stay; check the small-balance force-out rule for your plan.
- A rollover recommendation must compare leaving the money in the plan — Regulation Best Interest requires it.
- An annuity inside an IRA duplicates tax deferral you already have, at the cost of surrender charges and fees.
- For anything about tax — contributions, distributions, penalties — talk to an expat CPA, not a securities lawyer.
Questions
Asked most often
My IRA custodian says it will close my account because I live abroad. Do I lose the IRA?
No. Arrange a trustee-to-trustee transfer to a custodian whose policy accepts a US citizen at your address. The IRA moves intact and nothing is taxed. Do not accept a check.
Was it wrong for my broker to recommend rolling my 401(k) into an IRA before I moved?
Not automatically. It is wrong if there was no reasonable basis for it — no comparison to staying in the plan, or a rollover into products with higher fees, surrender charges, or illiquidity that did not fit a retiree. That is a question a securities attorney can answer from the paperwork, for free.
Can I still contribute to my IRA from abroad?
That depends on whether you have compensation that is taxable in the United States after any exclusions — a tax question. We are securities litigators, not tax advisors; ask a CPA who works with expats.