Retirement accounts abroad are one of the first areas where Americans planning to retire overseas discover that conventional U.S. retirement account management and best practices cease to apply.
A common question we hear is: What should I do with my retirement accounts when moving abroad? The answer is extremely nuanced because there are so many factors that must be considered. However, chief among them all is where you plan to retire. The “where” matters most because retirement accounts that enjoy special tax treatment in the U.S. (e.g., Traditional IRAs, 401(k)s, and Roth IRAs) don’t automatically receive the same treatment in other countries. And to make things even more fun, how different accounts’ treatment typically varies – sometimes drastically – from one country to another.
Why U.S. Retirement Accounts Are Treated Differently Abroad
“Retirement Accounts” Are a U.S.-Specific Concept
In U.S. tax law, retirement accounts like Traditional IRAs and 401(k)s are defined by specific tax code provisions that defer or exempt tax on contributions and growth until distribution (or permanently in the case of Roth accounts). Other countries may not recognize these arrangements as distinct categories of savings. They often see them simply as forms of income or investment when distributions occur.
For example, “tax-deferred” means something to the IRS; it doesn’t automatically mean that another country will respect the special tax treatment granted in the U.S.
A Spanish or Portuguese tax system might (and often does) view certain retirement account distributions as ordinary income the moment they enter the taxpayer’s hands, absent a treaty provision saying otherwise.
The Role of Tax Treaties
Tax treaties are bilateral agreements intended to prevent double taxation and clarify each country’s taxing rights over cross-border income. Most tax treaties allocate which country gets to tax particular types of income (e.g., pensions, dividends, or business profits). This effectively means the tax treaty canoverride certain domestic treatments when a taxpayer qualifies for treaty benefits.
A common element across U.S. income tax treaties is the saving clause, which preserves U.S. taxing rights on certain U.S.-source income even if the treaty would otherwise offer relief.
In practice, that often means Americans abroad still owe U.S. tax on their retirement account distributions if the tax treaty exempts the income tax locally. For example, France is commonly referenced for its favorable treaty provisions, relative to most other countries in Europe; however, just because a retirement distribution is not subject to French income tax, it may still be subject to tax in the U.S., and possibly social tax in France (which is separate from income tax).
Foreign Tax Credits
When all is said and done, even after considering the tax treaty, your 401(k) distributions may be subject to tax in your country of residence. In these cases, the foreign tax you pay can be used as a Foreign Tax Credit to offset the U.S. tax on the distribution.
This is good news because you can rest assured that you are not getting “double-taxed”. However, double taxation is not the only risk you face as an American retiring abroad. Given the high tax rates in some countries, you may pay twice as much tax in Portugal compared to your counterpart who retired in Sarasota, FL. For that reason, it can be highly advantageous to plan your distributions in advance and see how you can decrease your Global Tax Position on your retirement abroad.
The U.S. Retirement Accounts We’re Comparing (and Why)
To compare consistently across countries, it helps to group accounts by how they’re taxed in the U.S.
Tax-Deferred Accounts
- Traditional IRA: Contributions are often tax-deductible; growth is tax-deferred; distributions are taxable in the U.S.
- 401(k): Employer-sponsored tax-deferred retirement plan; similar U.S. treatment to Traditional IRAs upon distribution.
Tax-Free Accounts
- Roth IRA: Contributions are made with after-tax dollars; qualified distributions are generally tax-free in the U.S.
- Roth 401(k): Similar tax-free treatment on qualified distributions in the U.S.
Other Income Sources That Complicate Planning
- Social Security: U.S. retirement benefit taxed in the U.S. and possibly abroad (depending on treaty).
- Public vs. private pensions: Country-specific pensions often have distinct tax treatments.
- Taxable brokerage accounts: Not retirement accounts by definition, but often part of broader expat planning discussions.
It is also helpful to understand that most countries characterize income based on its nature.
In the U.S., we see this take shape in the Ordinary Income Tax bracket system (from 10% to 37%) for all earned income and the Long-Term Capital Gains Tax (either 15% or 20%) for dividends and investments held over one year. Each country has its own name for income with a reduced tax rate (passive tax, savings tax, etc.). From here on out, we will refer to the two categories as ordinary or investment income.
| ORDINARY | INVESTMENT | |
| U.S. | Up to 37% | 15% or 20% |
| Spain | Up to 54% | Up to 30% |
| Italy | Up to 43% | 26% |
| Portugal | Up to 48% | 28% |
| France | Up to 45% | 30% |
Related reading: How to File US Taxes from Abroad: IRS Form 1040
How Each Country Treats U.S. Retirement Accounts
The table below shows how each country generally treats retirement account distributions.
Note: This is not technical advice; outcomes depend on treaty specifics, individual facts, and how local tax authorities interpret distributions. Always consult a professional before acting.
Country-by-Account Treatment*
| Account Type | U.S. | Spain | Italy | Portugal | France |
| Traditional IRA | Taxable upon distribution | Taxed as ordinary income | Taxed as ordinary income | Taxed as ordinary income | Exempt from taxation under Treaty Article 18(1)(b) |
| 401(k) | Taxable upon distribution | Taxed as ordinary income* | Taxed as ordinary income | Taxed as ordinary income | Exempt under Treaty Article 18(1)(a) |
| Roth IRA | Tax-free in the U.S. | Taxed as investment income on portion considered earnings | Taxed as investment income on portion considered earnings | Taxed as investment income on portion considered earnings | Exempt under Treaty Article 18(1)(a) |
| Social Security | Taxable in U.S.** | Taxed as orginary income*** | Taxed as ordinary income.**** | Taxed as ordinary income. | Exempt from taxation under Treaty Article 18(1) |
*Table assumes U.S. taxpayer does not consider special regimes, including but not limited to Beckham, NHR, the Italian 7% tax, etc.
**U.S. citizens are taxed on worldwide income; foreign tax credits may mitigate double taxation.
***Although pensions are explicitly exempt from Spanish taxation under Treaty Article 20(1)(a), Treaty Article 20(1)(b) gives Spain the non-exclusive right on Social Security Benefits. For that reason U.S. Social Security Benefits may be studied to categorize them based on the nature of the individual’s career (i.e., public vs private sector).
****Treaty Article 18(2) grants Italy exclusive right to tax SS Benefits.
It should also be mentioned that this refers to the TAXATION by each country. In *nearly* every case, the exempt income must still be reported on the foreign tax return.
Country-by-Country Overview
Spain — Limited Recognition of U.S. Retirement Accounts
When a U.S. person moves to Spain, tax residents are generally taxed on worldwide income under Spanish domestic law. Absent a treaty provision that overrides this treatment, distributions from U.S. retirement accounts may be taxed as ordinary income upon receipt. Spain’s tax system does not inherently recognize the U.S.-style tax exemptions or deferrals for these accounts.
Spain and the U.S. have a tax treaty that aims to prevent double taxation, but the treaty does not automatically give U.S.-style retirement account treatment for all accounts. Social Security benefits generally remain taxable in the U.S. under treaty rules, but other retirement distributions may still be taxed locally.
Related reading: Selling a Primary Residence Before Moving Abroad: Taxes and Timing
Italy — Similar Structure, Different Nuances
Italy’s tax system classifies worldwide income for tax residents, meaning retirement distributions typically enter taxable income calculations. In general, IRAs and 401(k)s that are not explicitly recognized as pension incomes in Italian law are treated as regular income upon distribution.
Italy and the U.S. also have a tax treaty with provisions for pensions and social security. While the treaty allocates rights to avoid double taxation, Italian residents may still see their retirement distributions taxed locally unless specific treaty provisions apply.
An additional complexity in Italy is that some regions or circumstances might allow for flat tax regimes (e.g., a 7% flat tax on foreign income for qualifying residents in certain areas), but this is often contingent on residency status and other criteria best reviewed in collaboration with an immigration attorney.
Related reading: Moving to Italy as an American
Portugal — More Aggressive Retirement Taxation Than Many Expats Expect
Portugal is often viewed as a tax-friendly destination for retirees and remote workers, particularly among those arriving on the D7 or D8 visas. However, while Portugal’s former NHR regime created broad exemptions for certain types of foreign income, those benefits do not continue to extend to US retirement accounts after NHR ends.
Now that NHR has ended, U.S. taxpayers moving to Portugal face their distributions from traditional IRAs and 401(k)s being treated as ordinary income for Portuguese tax residents. Roth accounts, meanwhile, lose their US tax-free character for Portuguese purposes; those distributions are typically taxed at the local capital gains rate of 28 percent.
For many Americans, this highlights the importance of planning, when possible, before the move
Rather than assuming retirement income will remain tax-advantaged, the focus often becomes how income will be characterized after residency begins, and how to reduce exposure to Portuguese income tax where possible. In practice, this frequently means thinking ahead about pre-move conversions and post-tax positioning, rather than reacting once distributions begin.
The key takeaway: Portugal can still be an excellent destination for US retirees, but retirement planning there is far from automatic. The most effective strategies are almost always pre-residency decisions, not post-move fixes.
France — The Most Favorable Treaty for U.S. Retirement Accounts
France’s income tax treaty with the U.S. includes provisions that are unusually protective of U.S. retirement accounts compared to many other countries. Under this treaty, pensions and retirement account distributions that are taxable in the U.S. are generally not subject to French tax, provided proper claims and documentation are made.
This means that Traditional IRAs and 401(k) distributions can often be exempt from French income tax (while still being taxable in the U.S.). Roth IRAs typically remain tax-free if they’re properly documented. Social Security benefits are also generally taxable in the U.S. rather than in France under treaty rules.
Related reading: Why France Works for American Retirees: A Planning Perspective
Where Taxable Brokerage Accounts & PFICs Fit Into the Picture
It’s worth noting that taxable brokerage accounts are not retirement accounts, but many American expats hold them alongside retirement savings.
In Europe, foreign-domiciled funds (AKA “non-US funds”) in taxable accounts often trigger PFIC (Passive Foreign Investment Company) issues for U.S. tax purposes, which complicates planning and can lead to punitive tax treatment if not handled correctly. PFIC rules are separate from retirement account issues and deserve their own dedicated analysis.
What This Comparison Means for Americans and Future Expats Planning a Move Abroad
Why “Where You Retire” Can Matter More Than “How Much You’ve Saved”
Long-term compounding matters, but unfavorable taxing regimes erode retirement balances faster than many expats expect. Because treaties and domestic laws vary, two Americans with identical accounts could end up with very different post-move outcomes simply because of destination choice.
For example, a retiree moving to France and a retiree moving to Portugal should get completely different advice with respect to each country (except the “plan ahead” part; that’s always the throughline).
–Alex Ingrim, CEO at Liberty Atlantic Advisors
Why Pre-Move Planning Creates Options
Before you establish tax residency abroad, you may consider:
- Rollovers within the U.S. tax code (e.g., converting Traditional IRAs to Roth IRAs) with full awareness of the tax implications.
- Account restructuring while still under U.S. tax jurisdiction.
- Timing distributions or moves to align with treaty eligibility, residency tests, or other planning windows.
Solid planning before departure preserves flexibility and reduces the risk of irrevocable tax consequences.
How to Use This Information
This article is meant to help you think structurally, not to trigger panic. Every individual’s situation involves personal facts and unique considerations:
- Treaties rarely change but may be interpreted over time.
- Local tax law and implementation policies vary.
- Personal retirement timelines and cash flow needs differ.
Coordination across U.S. tax planning, local tax guidance, and investment strategy is critical.
Retiring to Europe? Work with a Professional
For many U.S. expats and soon-to-be expats, the goal isn’t to optimize every dollar at the expense of lifestyle – isn’t that why you’re leaving the U.S.? To be able to relax a tiny bit?
If you’re evaluating how your retirement accounts might behave once you’re living in a particular country, or even if you’d like to understand what the financial tradeoffs might look like to live in one country vs another you’re considering, scheduling a meeting with the right person is going to be the most important first step. Submit the contact form on our website to request a U.S.-only or joint consultation with Rook and a local tax expert (joint calls available for Spain, Portugal, France, and Italy).
Disclaimer
This article attempts to cover a myriad of topics that are complex at a baseline and is intended for educational purposes only. Internet and LLM searches can surface incorrect information and information disseminated on social media is not guaranteed to have been reviewed by a credentialed professional. Moreover, it is an unfortunate reality that many service providers are financially incentivized to provide heartening information that may be well-received, but is fundamentally incorrect. To that point, questions related to how foreign countries treat U.S. retirement accounts can vary drastically depending on who you ask. For example, if a relocation consultant is not also a certified tax professional specializing in serving U.S. people in your target country, it’s best to step back and consider finding another professional who is. As another example, if your local tax advisor isn’t accustomed to working with U.S. people with U.S.-based assets, they may resort to the default treatment based only on local laws, instead of considering the tax treaty, particular case law, and other important sources. That said, while variance in responses underscores the importance of getting a second opinion. In conclusion, this article offers a high-level framework to help you understand how common U.S. retirement accounts may be treated in four popular European destinations: Spain, France, Italy, and Portugal. Specific questions should be directed to a paid consultation, which Rook CPA offers. We also offer paid, joint consultations with our trusted local tax partners (offer available in Spain, France, Italy, and Portugal). For those planning to move abroad, this pre-move tax planning service can be adapted for retirees, too. Please schedule a complimentary call with our Client Relationship Manager to discuss your situation.
References
Tax treaty structure and purpose.
- Financial and Investment Planning for U.S. Expats | Liberty Atlantic
- U.S.–France Tax Treaty summary and implications for retirement income.
- Retirement taxation summary with U.S.–Spain treaty context.
- U.S.–Portugal retirement income treatment under treaty and local tax systems.
- U.S.–Italy treaty overview with pension provisions.
