Moving abroad comes with a lot of decisions. What type of visa do you need? Should you rent or buy? One other interesting question: What do you do with your individual retirement account?
Take the example of Amanda, who — now in her mid-30s — is moving to the U.K. for her job as a cybersecurity expert. She loves the idea of life in London, but she doesn't know what the future holds. Maybe she'll meet someone and decide to make the move permanent, or she'll move back to the U.S. at some point.
She's aware that she still needs to file a tax return with the IRS, since Americans are taxed based on citizenship, rather than country of residence (exclusions and credits can help prevent double-taxation).
But Amanda is unsure about what to do with her individual retirement account (IRA). She's wondering if she should keep contributing to her IRA while she lives in London — or if she should even keep it at all.
An American expat can hold onto their traditional or Roth IRA while living abroad, though there are some added complications to think about. For one, you'll need to make sure your broker maintains IRA accounts for non-residents.
Additionally, for 2026, the IRA contribution limit is $7,500, or $8,600 for those over 50.
A traditional IRA is funded with pre-tax dollars, meaning it can lower your current tax bill similar to how 401(k)s do. Investments grow tax-deferred, and you pay ordinary income tax when you withdraw money in retirement.
If you or your spouse are covered by a workplace retirement plan, then deductions will depend on your modified adjusted gross income (MAGI) — your annual income after deductions, exclusions or other adjustments.
A Roth IRA, on the other hand, is funded with after-tax dollars. Investments grow tax-free and withdrawals are tax-free in retirement.
To make the full contribution to a Roth IRA, your MAGI must be below $153,000 for single filers or $242,000 for married couples filing jointly. These rules still apply when you move abroad — but tax exclusions and credits, as well as local tax laws make this much more complicated to calculate.
If you have an existing traditional or Roth IRA, you can continue contributing to it when you move abroad, so long as the income you earn isn't excluded by the Foreign Earned Income Exclusion (FEIE). While salary and self-employment income are eligible, passive income like dividends and rental income are not.
FEIE allows you to exclude earned income on your U.S. tax return, up to the annual limit, so long as you spend most of the year overseas. The FEIE limit for the 2026 tax year (for taxes filed in 2027) is $132,900.
This, in turn, lowers your earned income base for IRA contributions. For example, if Amanda earns an annual salary of $165,000 in London, she can claim the full FEIE of $132,900 for the 2026 tax year. That leaves her with $32,100 in earned income, which allows her to make IRA contributions from overseas.
If Amanda makes less than $132,900, she'll have $0 in earned income, meaning she won't be eligible to make an IRA contribution because she technically has nothing to report.
Another way to preserve IRA eligibility is to use the Foreign Tax Credit (FTC) instead of FEIE. This means your foreign earnings are considered taxable earned income in the U.S. The FTC provides a dollar-for-dollar credit to taxes you've already paid abroad (so you're not double-taxed) and you're still eligible to make IRA contributions.
Whether FEIE or FTC is best for you depends on if the country you're moving to has a tax treaty with the U.S. You'll need to understand its specific provisions before making a decision between FEIE or FTC.
While Amanda can make IRA contributions while living abroad, that doesn't necessarily mean that she should. It's important to understand how contributions and distributions are reported in your country of residence, so you don't end up facing double taxation — especially if you plan to retire there.
For example, an American expat with a traditional IRA is still required to follow required minimum distribution (RMD) rules. And not all countries recognize the tax-free status of Roth IRAs, so you could end up paying local taxes on withdrawals in retirement.
For someone who plans to return to the U.S. after a few years or when they retire, it may be a matter of deciding whether FEIE or FTC works better for your particular situation. But if you're planning a permanent move abroad — or, like Amanda, you're not sure — then it becomes a much more complex decision.
Each situation, and each country's tax laws, are different, so it's a good idea to get the help of a tax expert who specializes in advisory services for expats.
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