What happens to my 401(k) if I quit and move to another country?

Your 401(k) remains a U.S.-based retirement account regardless of where you live. When you leave your employer, you have several options — and your choice has significant tax implications, especially as an expat.

Your options:

• Leave it in the former employer's plan: Many plans allow ex-employees to keep their balance invested. This is often the simplest option if the plan has good fund choices and low fees. Your money continues to grow tax-deferred.

• Roll it over to a Traditional IRA: This gives you more investment options and potentially lower fees. You can do this from abroad — you just need a U.S. brokerage account (Fidelity, Schwab, and Vanguard all work with U.S. citizens abroad, though some have restrictions).

• Cash it out (generally not recommended): Withdrawals before age 59½ trigger a 10% early withdrawal penalty PLUS ordinary income tax on the full amount. Your former employer is required to withhold 20% for federal taxes. If you're in a country with a U.S. tax treaty, the treaty may reduce or eliminate the withholding, but you'll still owe U.S. tax.

Critical tax considerations for expats:

• U.S. citizens and green card holders must file U.S. tax returns regardless of where they live. Your 401(k) withdrawals are taxable as ordinary income on your U.S. return.
• Your country of residence may also tax the withdrawal. Check the U.S. tax treaty with that country — many treaties have provisions for retirement distributions that prevent double taxation.
• The Foreign Earned Income Exclusion (FEIE) does NOT apply to 401(k) distributions — it only covers earned income.
• Required Minimum Distributions (RMDs) start at age 73 regardless of where you live.

Important: Do NOT roll your 401(k) into a foreign retirement account. This would be treated as a full distribution by the IRS, triggering immediate taxation and possible penalties.