By Jonathan Laws, ACA, Ch.FCSI, Senior Adviser at Cameron James USA.
Quick answer. Moving abroad does not close your IRA or change its US tax treatment. What changes is who can contribute, whether the tax free status of a Roth IRA is recognized by your country of residence, and how any distribution is taxed once it leaves the US system. A Traditional IRA defers tax until withdrawal. A Roth IRA is funded with money you have already paid US tax on, and it grows tax free in the US, subject to the five year rule and age 59.5. For most US expats, the right choice turns on your country of residence, your treaty position, and whether the Foreign Earned Income Exclusion has reduced your eligible compensation for the year. If you are rolling over a 401(k) from a former US employer, see our companion guide on 401(k) options for US expats first. Whether you are in Portugal, France, Spain, the UAE, or elsewhere, take cross border advice before you contribute, convert, or draw.
An IRA is one of the most flexible retirement accounts available to Americans, and one of the most commonly misunderstood once you move abroad. Unlike a 401(k), which is tied to a specific US employer, an IRA is yours to open, fund, and manage independently. That makes it the natural home for a 401(k) left behind with a former US employer, and a standalone savings vehicle in its own right for US expats who want to keep building US retirement assets while living overseas.
This guide covers the Traditional versus Roth decision for US expats, who remains eligible to contribute once living abroad, how the Foreign Earned Income Exclusion interacts with that eligibility, how your country of residence treats IRA distributions and Roth conversions, Required Minimum Distributions, and the process for rolling a 401(k) into an IRA if you have not already done so.
Cameron James USA is a cross border financial planning firm. Our advisers hold individual authorization with the US Securities and Exchange Commission (SEC) through Beacon Global Advisor Network, LLC (CRD 288833), and we advise US expats and other US persons living internationally on IRA and 401(k) planning, and cross border retirement strategy.
Companion guide. If you still hold a 401(k) with a former US employer, our guide to 401(k) options for US expats covers your four options, the 30 percent non-resident withholding trap, and the direct rollover process in detail. This guide picks up once your money is in, or heading into, an IRA.
If you live in the UK, our dedicated UK rollover guide covers 401(k) to IRA rollovers, and Traditional and Roth IRA treatment, for UK residents in full detail.
On this page
- Traditional versus Roth IRA: the core decision
- Who can contribute to an IRA as a US expat
- The Foreign Earned Income Exclusion and your eligibility
- How your country of residence treats your IRA
- The Roth conversion decision abroad
- Required Minimum Distributions and the Traditional IRA
- Rolling a 401(k) into an IRA
- Frequently asked questions
Your IRA choice should follow where you live
We factor your residence, treaty position, and Roth recognition into one plan. Cameron James USA is fee based, takes no commission, and every adviser holds individual SEC authorization.
Traditional vs Roth IRA: The Core Decision
If you are opening a new IRA, converting an existing one, or deciding where to roll a 401(k), the Traditional versus Roth decision is the starting point. The mechanics are the same for US expats as for US residents. What changes is the cross border layer on top: whether your country of residence recognizes the tax free status of the Roth, and whether the Foreign Earned Income Exclusion affects your ability to contribute at all.
| Traditional IRA | Roth IRA | |
|---|---|---|
| Tax on contribution | May be deductible, depending on income and workplace plan coverage. | None. Contributions are made with after-tax dollars. |
| Tax on growth | Tax deferred until withdrawal. | Tax free in the US, subject to the five year rule and age 59.5. |
| Tax on withdrawals (US) | Taxed as ordinary income. | Tax free for qualifying distributions. |
| Contribution eligibility | No income limit to contribute, though the deduction phases out if you or your spouse is covered by a workplace plan. | Direct contributions phase out at higher income levels. Above the phase-out, a backdoor Roth may still be possible. |
| Required Minimum Distributions | Yes, from age 73. | No RMDs during your lifetime. |
| Cross border tax treatment | Most tax treaties recognize tax deferral. | Treaty recognition of Roth tax free status varies by country. Always verify. |
| Best suited to | Those expecting a lower tax rate in retirement, or wanting to defer the decision. | Those with higher future tax rates, a long retirement horizon, or planning to retire in the US. |
There is no universal answer. A US expat in a non-treaty jurisdiction such as the UAE, where there is no local income tax to compete with the US tax free status of the Roth, is often in a genuinely simpler position than a US expat in a country where Roth recognition is uncertain. The country you live in is not a footnote to this decision. It is a core input.
A Note From Jonathan Laws
Who Can Contribute to an IRA as a US Expat?
You can contribute to a Traditional or Roth IRA as a US expat under the same basic rule that applies to US residents: you need US taxable earned income at least equal to the amount you contribute. Earned income means wages, salary, or self employment income. It does not include pension income, rental income, investment income, or foreign earned income that has been fully excluded from your US return.
For 2025, the IRA contribution limit is 7,000 US dollars, or 8,000 US dollars if you are 50 or older. For 2026, the limit rises to 7,500 US dollars, or 8,600 US dollars if you are 50 or older, following the first inflation adjustment to the catch up contribution in nearly two decades. This limit applies across all your Traditional and Roth IRAs combined, not per account.
Key point
The IRA contribution limit is a combined limit across all your Traditional and Roth IRAs. If you contribute 4,000 US dollars to a Traditional IRA, you can add no more than the remaining allowance to a Roth IRA in the same year.
Roth IRA eligibility is also subject to an income cap. For 2026, direct Roth contributions phase out between 153,000 and 168,000 US dollars of modified adjusted gross income for single filers, and between 242,000 and 252,000 US dollars for married couples filing jointly. Above these levels, a backdoor Roth strategy, contributing to a Traditional IRA and then converting it, may still be available, though it carries its own complexity if you hold other pre-tax IRA balances. Take advice before attempting a backdoor Roth from abroad.
The Foreign Earned Income Exclusion and Your IRA Eligibility
This is the single most common trap for US expats contributing to an IRA. The Foreign Earned Income Exclusion (FEIE) lets you exclude a substantial amount of foreign earned income from US taxation. For 2026, that exclusion is 132,900 US dollars. The problem is that the IRS requires IRA contributions to be made from US taxable earned income. If you claim the FEIE in full and it reduces your taxable compensation to zero, you have no eligible compensation left to support an IRA contribution for that year.
The alternative is the Foreign Tax Credit (FTC), which credits foreign tax paid rather than excluding the income itself. Because the FTC leaves your foreign earnings on your US return, it preserves your IRA contribution eligibility. For US expats in higher tax countries such as France or Spain, the FTC often produces a comparable income tax outcome to the FEIE while keeping the door open to IRA contributions.
Key point
Contributing to an IRA in a year where the FEIE has eliminated your eligible compensation creates an excess contribution, subject to a 6 percent excise tax for every year it remains uncorrected. For the full FEIE versus FTC decision, including how it interacts with 401(k) planning, see our guide to 401(k) options for US expats.
How Your Country of Residence Treats Your IRA
Where you live determines two separate things: how your country taxes IRA distributions when you draw them, and whether it recognizes the US tax free status of a Roth IRA at all. The two questions do not always have the same answer, and the notes below are general and current as at the date of review. They are a starting point, not a substitute for country specific advice.
Treaty countries: Portugal, France, Spain, and beyond
The US has bilateral tax treaties with most major economies, including Portugal, France, Spain, and the rest of the European Union, and you can check whether one exists on the IRS list of United States income tax treaties. These treaties generally address Traditional pension and IRA income specifically. Roth IRAs are a newer product than most of these treaties, and few of them mention Roth accounts by name, which is why Roth recognition is treated as a separate question from ordinary treaty relief in every country below.
Portugal: A Leading European Market for US Expats
Portugal has become one of the most popular European relocation destinations for US expats, but its Roth position is genuinely unsettled. The Non Habitual Resident regime, which historically offered favorable treatment of foreign income, closed to new applicants, with the transitional window ending on 31 March 2025. Its replacement, often called NHR 2.0, is narrow and generally does not extend to pension or retirement account income. For Traditional IRA distributions, expect standard Portuguese tax rates on new arrivals, with individuals who secured the former regime keeping their existing terms for the remainder of their period. For Roth IRAs, Portugal has no settled position recognizing the US tax free treatment, so a Roth withdrawal that is tax free in the US should not be assumed to be tax free in Portugal without specific confirmation.
France
France is widely regarded as one of the more favorable treaty jurisdictions for US source retirement income. Traditional IRA distributions received by a French resident are generally relieved from French income tax through a credit mechanism, so the income is, in practice, not taxed twice, though it must still be declared and can affect the rate applied to your other French income. Roth treatment remains the genuine grey area here as elsewhere: French recognition of the US tax free status of a Roth is not certain, so confirm the position before converting or drawing.
Spain
Spain taxes its residents on worldwide income and will generally treat Traditional IRA distributions as taxable income, with treaty relief available through a foreign tax credit to prevent the same income being taxed in full twice. Roth IRAs face the same uncertainty as in France and Portugal: Spain has no clear framework recognizing the tax free status of a Roth, so a Roth distribution could, in principle, be taxed by Spain even though it is tax free in the US.
Non-treaty jurisdictions: UAE, Hong Kong, Singapore, Qatar
The US has no comprehensive income tax treaty with these countries, so standard IRS rules apply in full on the US side. On the local side, however, many of these jurisdictions impose no personal income tax at all, which changes the Roth calculation in a meaningful way.
Key point
In a country such as the UAE with no local income tax, the US tax free status of a Roth IRA is not competing with a local tax claim, because there is no local tax to recognize it against in the first place. This is one of the few situations where the Roth decision is genuinely simpler for a US expat than it is for someone in a higher tax European treaty country.
This does not mean the Middle East is automatically the right base for a Roth strategy. Your long term plans, including whether you expect to return to the US, a treaty country, or elsewhere, should still drive the decision. It simply means the local tax friction that complicates Roth planning in Portugal, France, or Spain is largely absent.
The Roth Conversion Decision Abroad
Converting a Traditional IRA, or a former 401(k) rolled into a Traditional IRA, into a Roth IRA triggers US income tax on the converted amount in the year of conversion. In the US, this is a well understood trade: pay tax now at your current rate, in exchange for tax free growth and withdrawals later. As a US expat, three additional factors matter.
First, the treaty position of your country of residence toward Roth IRAs, covered above, determines whether the benefit you are paying for is actually recognized locally. A conversion that makes excellent sense on US tax grounds can produce a poor outcome if your country of residence taxes the Roth distribution anyway. Second, timing matters more for US expats, because a year in which the FEIE has reduced your reportable US income can be an efficient year to convert, since the conversion itself is not foreign earned income and is not excluded by the FEIE, while your overall US bracket for the year may still be favorable. Third, if you plan to return to the US, a Roth conversion completed while abroad, and past the five year clock, can be highly efficient, since qualifying withdrawals will be tax free once you are back in the US system regardless of how your country of residence treated the account while you lived there.
The backdoor Roth for higher earners abroad
If your income exceeds the direct Roth contribution limits, a backdoor Roth, a nondeductible Traditional IRA contribution followed by an immediate conversion, is a legitimate route used by many US taxpayers. For US expats, the same pro rata rule applies as for US residents: if you hold other pre-tax IRA balances anywhere, including one built up from a previous 401(k) rollover, part of the conversion will be taxable. This is a compliance detail that is easy to get wrong from abroad, particularly if your custodian records are split across accounts. Take advice before attempting this if you hold multiple IRAs.
Required Minimum Distributions and the Traditional IRA
Traditional IRAs are subject to Required Minimum Distributions from age 73. There is no exception for living abroad, and no mechanism to defer RMDs simply because you are outside the US. Roth IRAs have no RMDs during the lifetime of the original owner, which is one of the clearest long term advantages of the Roth for someone who does not need the income and would prefer the account to continue growing, or to pass to heirs.
Key point
US state tax is a separate risk that follows many US expats overseas, independent of any treaty position, particularly for those who previously lived in California, New York, Massachusetts, or Virginia. Our guide to 401(k) options for US expats covers this in full, including the domicile tests California and New York apply.
Rolling a 401(k) into an IRA as a US Expat
If you are moving a 401(k) from a former US employer into an IRA, the destination account type matters as much as the transfer mechanics. Rolling into a Traditional IRA is not a taxable event when done as a direct custodian to custodian transfer. Rolling into a Roth IRA is treated as a conversion: the full amount becomes taxable income in the year of the rollover, exactly as if you had converted an existing Traditional IRA. For background on the account you are rolling from, see our 401(k) Pension Plan page.
For the mechanics of direct versus indirect rollovers, including the 20 percent withholding that applies to indirect rollovers and the 60 day window to complete one, see the IRS guidance on rollovers and our companion guide, 401(k) options for US expats. That guide also covers verifying that your chosen custodian will service a foreign resident account holder, which is not universal and is worth confirming before you initiate anything.
Key point
A 401(k) rolled into a Roth IRA is a conversion, not a like for like transfer. It creates a US tax bill in the year of the rollover. Model this alongside your FEIE versus FTC position and the Roth recognition rules of your country of residence before choosing a Roth destination for a 401(k) rollover.
What This Means for You
The Traditional versus Roth decision is not solely a US tax question once you live abroad. Your country of residence, whether it recognizes Roth tax free treatment, and whether the FEIE or the FTC better serves your overall position all feed into an answer that looks different in Portugal than it does in France, Spain, or the UAE.
If you are still holding a 401(k) from a former US employer, start with our guide to 401(k) options for US expats to confirm your rollover options before deciding where that money should land. For related reading, see our Traditional IRA, Roth IRA, SEP IRA, and US Investments pages.
Get the Traditional versus Roth decision right for where you live
Your IRA choice, and any 401(k) rollover, turns on your residence, treaty position, and FEIE decision. Cameron James USA advisers hold individual SEC authorization through Beacon Global Advisor Network and advise US expats on IRA and 401(k) planning.
Frequently Asked Questions
Should I choose a Traditional or Roth IRA as a US expat?
It depends on your country of residence, your current versus expected future tax rate, and whether you plan to retire in the US. A Traditional IRA suits those expecting a lower tax rate in retirement or wanting to defer the decision. A Roth IRA suits those expecting higher future tax rates or a long retirement horizon, but only after confirming that your country of residence will not tax the Roth distribution on top of the US treatment. This is not a decision to make without cross border advice.
Can I contribute to a Roth IRA if I claim the Foreign Earned Income Exclusion?
Only if you have US taxable earned income left after the exclusion. If claiming the FEIE in full reduces your taxable compensation to zero, you have no eligible compensation to support any IRA contribution, Traditional or Roth, for that tax year. The Foreign Tax Credit is often a better approach for US expats in higher tax countries, because it preserves IRA contribution eligibility.
Is a Roth IRA recognized as tax free in Portugal, France, or Spain?
Not with certainty. None of these countries has a settled position clearly recognizing the US tax free status of a Roth IRA, since Roth accounts postdate most of the relevant tax treaties. A Roth withdrawal that is entirely tax free in the US could, in principle, be taxed locally. Confirm the current position before relying on the US tax treatment of the Roth as your plan.
What is a backdoor Roth IRA, and does it work for US expats?
A backdoor Roth is a nondeductible Traditional IRA contribution that is then converted to a Roth IRA, used by taxpayers whose income exceeds the direct Roth contribution limits. It is available to US expats on the same terms as US residents, but the pro rata rule still applies: if you hold other pre-tax IRA balances, including one built from a rolled over 401(k), part of the conversion becomes taxable. Take advice before attempting this if you hold more than one IRA.
Can I roll my 401(k) into a Roth IRA instead of a Traditional IRA?
Yes, but it is treated as a Roth conversion rather than a like for like transfer, and the full amount rolled over becomes taxable income in the US in that year. This is different from rolling into a Traditional IRA, which is not a taxable event when done as a direct custodian to custodian transfer. See our guide to 401(k) options for US expats for the full rollover mechanics.
Do I need a US address to open or contribute to an IRA as a US expat?
Not always, but not every custodian will open or service an account for a foreign resident address, and this varies by provider and can change without much notice. Verifying that your chosen custodian will service a foreign resident account holder before you initiate a contribution, conversion, or rollover is an essential first step, not an afterthought.
What happens to my Roth IRA if I move back to the US?
Very little changes mechanically. Qualifying Roth withdrawals remain tax free in the US regardless of where you lived while the account grew, provided the five year rule and the age 59.5 requirement are met. Any local tax exposure in your former country of residence ends when your tax residency there ends, subject to the exit rules of that country.
Can California or New York still tax my IRA if I live abroad?
Potentially yes. The tax residency rules of neither state automatically end when you move abroad, and the exposure of neither state is covered by any bilateral tax treaty. This is covered in full, including the domicile and statutory residency tests both states apply, in our guide to 401(k) options for US expats.
I live in the UK. Does this guide apply to me?
The Traditional versus Roth mechanics and the FEIE contribution eligibility rules are the same for UK residents as for anyone else. The treaty position, and the rollover process from a UK pension or a US 401(k), have UK specific detail that is better covered in our dedicated UK rollover guide, which addresses lump sums, periodic payments, and UK self assessment treatment directly.
Related Articles
If you are a US expat building or drawing a US retirement account from outside the United States, these guides go deeper on the questions that come up most often.
Traditional IRA
Contribution rules, tax deferral, deductibility, and Required Minimum Distributions for the most common rollover destination.
Roth IRA
Why the tax free US treatment does not always travel abroad, the five year rule, and what to verify before you convert.
401(k) to IRA Rollover for UK Residents: 2026 SEC Guide
The rollover itself in depth: the treaty position, the 30 percent withholding, PFIC, and the direct rollover mechanics, written for readers living in Britain.
Navigating US Investment Tax Rules Abroad: Why Advisers Are Key for US Expats
How US expats can invest compliantly outside the United States, why most non-US funds are PFICs, and how the right structure keeps your filings clean.
Can a US Resident Keep a UK ISA?
Why the ISA wrapper is not recognized as tax free for US persons, how PFIC rules can apply inside it, and what to check before you act.
Disclaimer and Disclosures
This article is for informational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified and regulated financial adviser before making any decisions about your pension or financial planning arrangements. Tax laws are complex and vary by individual circumstance. Cameron James USA does not offer tax advice.
This article is intended for US citizens and US persons living outside the United States. Advisory services in the United States are offered and provided through Beacon Global Advisor Network, LLC, a registered investment adviser with the Securities and Exchange Commission. Registration as an investment adviser does not imply a certain level of skill or education and does not imply that any regulatory authority has passed upon the firm or its advisers. Beacon Global Advisor Network, LLC and Cameron James USA are not affiliated. Cameron James USA is a marketing name and is not licensed or registered to conduct advisory business.
Tax treaty information, IRA contribution limits, and the Portuguese Non Habitual Resident position referenced in this article reflect the understanding of Cameron James USA as at the date of publication, per IRS Notice 2025-67. Treaty and domestic provisions are complex, vary by jurisdiction, and depend on individual circumstances. Verify your position with a qualified US and local tax adviser before making any contribution, conversion, or distribution.
Jonathan Laws, ACA Ch.FCSI
Senior Independent Financial Adviser, Cameron James
“The Traditional versus Roth question feels like a US tax puzzle, and in the US it mostly is. The moment you live abroad, a second layer appears. A Roth that is tax free in the US is only genuinely tax free to you if the country you live in agrees, and in Portugal, France, and Spain that recognition is not settled.
So the answer I give most often is that the account type should follow the country and the plan, not the other way around. A US expat in the UAE, with no local income tax competing with the Roth, sits in a very different position from one in a high tax European country. Get the residence and the Foreign Earned Income Exclusion decision straight first, and the Traditional versus Roth choice becomes much clearer.”