This question is somewhat related to this one.

I'm a non-US person (mid 30s) currently living and working in Europe. Previously, I lived and worked in the US (Massachusetts) for >3 years. In order to save for retirement, I entered in my employer's 401(k), where a modest amount (~10k) now sits.

Having left the US (with no plans to return), I'm trying to get a sense of my options handling this account, and the fiscal consequences of each option. An important consideration is that I've built up retirement savings (and paid income taxes) in several countries over the years, and more countries may follow. So beside thinking about the bottom line, the administrative burden of having retirement savings and potentially filing taxes in multiple countries is an important factor. Here's what I've pieced together so far:

Option 1: leave the money where it is until retirement age. I think this means no annual US taxes would have to be filed between now and retirement, although I might need to list the 401(k) funds in my annual returns in my country of residence. After retirement, I'll need to start paying income tax on the distributions. However, I'm not sure whether this tax would be levied by the US, my country of residence (or both, but then a tax treaty would presumably kick in to avoid double taxation). Regardless, I suspect I'd have to file US federal and maybe even state tax returns for as long as I take distributions.

Option 2: take out all the money and place it in a retirement account in my country of residence. This would result in a 10% penalty and I'd pay income tax in the US and/or my country of residence (again, hoping that a tax treaty prevents double taxation). After filing US taxes for the year of withdrawal, I'd be free from all US fiscal matters. However, the country of residence would likely add another round of taxation when it's distribution time, meaning that there's still double taxation.

Option 3: "roll over" the funds to a similar deferred taxation solution in my country of residence. This seems ideal as it would allow me to consolidate funds in one place, but the interwebs indicate limited options for a true international roll-over that retains tax benefits. But not sure.

I've also seen mentions of ways to avoid the 10% penalty in certain cases when cashing out (option 2) but without being specific about the requirements.

I'm not asking for advice on what option to pick. Rather I'd like to know:

  • How accurate is the above account? Am I missing important details?
  • Is there an altogether different option I haven't considered?
  • Option 4: Convert the 401k to a Roth 401k, pay the taxes, and let it grow tax free. I'm not saying it is a good idea (though probably better than option 1) and I have no idea how taxes would work, but throwing it out there as another option...
    – minou
    Jan 3, 2019 at 14:04
  • What country are you in? Tax treaties may give you some options that would not otherwise be available. For example, the US - Dutch tax treaty deals with this sort of situation although it's been a while since I read about how it is handled.
    – Eric
    Jan 7, 2019 at 18:45
  • Germany, plans to go to UK, Dutch citizenship. If there are ways to figure out which of these offer the best deal while I'm a resident there I'm happy to take that into account :)
    – mrroy
    Jan 8, 2019 at 19:32

2 Answers 2


10k is a very small amount in this context and you are wasting your time agonizing over it. You've made a mistake buying into a plan meant for people who will spend many decades working in the US, when you have no plans to remain that long, but what's done is done. Lucky for you the amount you sunk in is very small, not even half a year's paychecks. I would withdraw right away, and consider the fee as the cost of that mistake. If your employer matched your contributions you may even still be in the black after the fee.

You will probably not get much in terms of tax savings as a non-US person. Even if you did, how much would you save on taxes from only 10k? Pennies. The taxes would also be complicated to file for a foreigner, would you be able to do it without having to pay a CPA? CPA wouldn't be cheap either for such an unusual situation. Moreover, there might be fees for actually taking the money out (international transfer) when you do retire.

Option 3 sounds nice, but it also sounds like a fantasy. Especially with only 10k, I doubt you would find anyone to do it who wouldn't charge you far too much. If you do find a good deal, by all means go ahead.

For option 2, the US generally couldn't care less if you get double taxed in the sense of other countries taxing you after the US taxed you already. This is a very common gripe for many US expats. Most other countries will have various tax exemptions for people living abroad who already pay tax there, not the US. Luckily, you've only sunk 10k into the 401(k). The 10% fee is $1000. So you're looking at a bunch of headache and hassle, and probably fees paid to middlemen, to save yourself $1k, and even then you'll have to wait many long years to get your 10k back. I seriously doubt it will be worth your while. But it will at least be easy to withdraw it now and close the book on this, rather than hunting down ancient paperwork who knows how many years down the line.

  • thanks for your candid response... :) with the benefit of hindsight I agree it was a mistake. but in my defense, when I came to the US I had no idea how long I'd be staying (could have turned out much longer), while I definitely wouldn't be building up retirement savings elsewhere. add to that shiny employer booklets in an unfamiliar fiscal setting, and you essentially just gamble it's better to participate than not. hopefully others can learn from my mistake.
    – mrroy
    Jan 3, 2019 at 10:31
  • @mrroy I don't blame you, I think it's a bad system. But the point is that in your situation, 401(k) or similar retirement plans are a very bad idea, so IMO the sooner you get out of it the better.
    – Money Ann
    Jan 3, 2019 at 21:43
  • The US does have deductions related to income earned overseas and taxed elsewhere. This case is different, because the source of the funds is in the US, so taxation elsewhere will come after, not before, the US government takes its cut.
    – Ben Voigt
    Jul 22, 2019 at 18:50

To answer your question, Options #1 and #2 are your only realistic options. Option #3 is not an option that I've ever known being successfully used, since that would require the IRS to let you withdraw the funds to another country before taxing them and presumably paying taxes 30-40 years in the future. There might be a tax treaty somewhere that allows this, but it would seem out of character for US tax laws.

A US tax professional with experience in these issues might be able to point out other options, likely depending on your new country of residence, but even those are likely to be limited to specific scenarios you may or may not qualify for.

As for whether to use option #1 or #2, it depends on your tolerance to maintaining separate accounts, but for $10,000, I would consider it keeping it at least until you are 59.5 years old. There's realistically not that many forms to fill out, and $1,000 is not sofa change for most people. You could also strategically withdraw on a low-income year, further increasing your savings over Option #2.

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