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What are the rules for Roth IRAs when someone leaves the USA and becomes a resident of another country before the age of 59 1/2?

  • Does the Roth IRA account need to be closed and the funds withdrawn upon departure from the USA, or can the account be kept and funds withdrawn after 59 1/2?
  • Is there a tax penalty for the Roth IRA when becoming a nonresident?
  • Can you still add funds to the Roth IRA when you are a nonresident?
  • Does it matter which country you are moving to?
  • Does it matter if you are a citizen of the USA or if you are a resident alien of the USA when you leave? Does the type of visa that you have for USA residency matter?
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There's no difference between citizens/resident aliens and nonresident aliens with respect to the rules for IRAs.

However, if you are a nonresident alien and you have no income connected to the US, and thus have no income taxable in the US, and that has some practical consequences:

  • You cannot contribute more than your US-taxable income for a given year. If you have no income taxable in the US, that means your contribution limit is 0, i.e. you cannot contribute.
  • Early withdrawals of earnings in Roth IRA are taxable (i.e. it is added to ordinary income on your tax return). Since income is taxed progressively according to tax brackets, the withdrawal added on top will be effectively taxed at your marginal tax rate. If you have no other taxable income in the US, this this will be added on top of "nothing", and will either not be taxed (if it falls within the exemption) or taxed at the lowest bracket.
  • Doesn't the US tax its citizens' income no matter where it's earned? I don't know the details but I thought the US was fairly unique in this regard. – briantist May 22 '16 at 18:19
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    @briantist: Pretty much all countries tax its residents' income no matter where it's earned. The US also tax its nonresident citizens' income no matter where it's earned. That's the unique part. I am not sure why you are bringing this up; I didn't say anything about that. – user102008 May 23 '16 at 1:13
  • ah thanks for clarifying. I was bringing it up because you mentioned having no taxable income in the US, I was thinking wouldn't any income be taxable in the US? – briantist May 23 '16 at 1:51
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    @briantist: I said nonresident alien – user102008 May 23 '16 at 3:12
  • oh I see now, got it – briantist May 23 '16 at 3:18

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