Deciding what to do with your American retirement accounts when living in Europe requires careful consideration. There's no one-size-fits-all answer, as the best option depends on your specific situation, goals, and risk tolerance. Here are some key factors to consider:
Type of Account:
- 401(k): You can usually leave your 401(k) with your current custodian, but you might lose access to employer-sponsored investment options and incur additional fees as a non-resident. Rolling over to an IRA is in most cases interesting as you'll be able to choose from a wider range of investment options and have a clearer view on the overal cost structure. Makes sure you find a custodian that allows foreign addresses.
- Traditional IRA: Similar to a 401(k), you can keep your IRA or consider rolling it over to a specific foreign retirement plan or even another IRA that allows non-resident investors.
- Roth IRA: Unlike traditional IRAs, contributions to Roth IRAs are made with after-tax dollars, so qualified withdrawals in retirement are typically tax-free. You can generally maintain your Roth IRA even abroad, but tax treaties and local regulations might impact withdrawals.
Tax Implications:
- US Taxes: You may still be subject to US income taxes on distributions from your retirement accounts, regardless of your residency status.
- Foreign Taxes: Your European country of residence might also levy taxes on withdrawals from your US accounts.
- Double Taxation Treaties: Check if any tax treaties exist between the US and your European country to potentially avoid double taxation.
Here are some potential courses of action:
- Leave Funds in US Accounts: This might be simplest, but consider tax implications and investment limitations.
- Rollover to a Foreign Plan: Some European countries offer retirement plans for foreign residents, but research compatibility and tax consequences.
- Rollover to a US IRA: Explore IRAs designed for non-resident investors, ensuring compatibility with your situation.
- Withdraw Funds: Understand tax penalties and potential impact on your retirement plans.
Additional Considerations:
- Age and Retirement Plans: Your age and retirement plans in Europe influence your decision. Accessing US accounts before retirement age typically incurs penalties.
Remember, this information is for general awareness only and not a substitute for professional financial advice. Consulting a qualified advisor tailored to your unique circumstances is crucial before making any decisions regarding your retirement accounts.