You’ve spent decades building it. Now you’re leaving the country.

Mark, 58, just accepted early retirement. He and his wife are moving to the south of Spain. His 401(k) sits at $480,000.

His first question isn’t about property or visas.

It’s: “What happens to my money?”

Good question. The answer is more nuanced than most people expect.

Your 401(k) Doesn’t Disappear, But the Rules Change

Your account stays open. The investments keep moving. You remain the owner.

What changes is everything around it. Tax obligations, withdrawal rules, currency exposure, reporting requirements. They all shift the moment you stop being a US resident.

The US Still Wants Its Share

The US taxes citizens on worldwide income, no matter where they live. Even retired in Spain or Portugal, you still file a US return each year. Withdrawals from your 401(k) are treated as ordinary income, taxable in the US.

But your new country may want to tax that income too. Whether you face double taxation depends on the tax treaty between the US and where you live. Many popular expat destinations have treaties in place. Some are more favourable than others.

Getting this wrong is costly.

What Actually Changes When You Withdraw Abroad

The core rules stay the same:

• Early withdrawals before 59½ trigger a 10% penalty plus income tax.
• RMDs begin at 73, wherever you are in the world.
• Roth conversions are still possible, but timing matters more abroad.

What shifts is how those withdrawals interact with your new country’s tax system and your currency situation.

Take Sarah, a retired teacher in the Algarve. She withdraws $3,000 a month. It arrives in dollars. She spends in euros. When the dollar weakens, her income shrinks without anyone touching her account. Currency risk is invisible until it isn’t.

The Withholding Trap

If you’re a non-US resident withdrawing from a 401(k), your plan administrator may automatically withhold 30% of every distribution. A tax treaty can reduce that, sometimes to 15% or lower. But you have to file the right forms with your provider before withdrawals begin. Miss that step, and you lose money you were entitled to keep.

Should You Roll Over to an IRA First?

It’s one of the most common questions we hear. Rolling into an IRA can give you more flexibility and a wider range of investment options.

But it doesn’t automatically solve the tax treaty question, the withholding issue, or the currency challenge. And you may be giving up lower fees or protections your employer plan offers. There’s no universal right answer. It depends on your destination, your situation, and your goals.

Reporting Obligations Don’t Stop at the Border

Living abroad can add to your US filing requirements, not reduce them.

Foreign financial accounts over $10,000 in total require an annual FBAR filing. Penalties for missing it start at $10,000. FATCA adds further reporting for assets above certain thresholds. Your 401(k) is a US account and doesn’t need foreign reporting, but anything you open abroad likely does.

Where You Retire Matters More Than You Think

Not every country treats US retirement income the same way. Some have clear frameworks. Some have favourable regimes that can change without warning. A few have almost nothing in place at all.

It’s not enough to ask whether a country is tax-friendly. You need to know exactly how it treats 401(k) withdrawals, for someone in your specific situation.

The Real Risk Is the Gap in the Plan

The 401(k) isn’t the problem. The problem is moving abroad without a plan built around all the moving parts: withdrawal sequencing, currency strategy, reporting obligations, local tax rules, and estate planning.

Most people keep doing what they did at home. Over time, that gap adds up.

You’ve Earned This. Now Protect It.

Retiring abroad is entirely achievable. It just rewards those who plan ahead.

At SJB Global, we help US expats build financial plans that account for the real complexity of life abroad. If you have a 401(k) and you’re thinking about retiring outside the US, we’d love to talk.