Your IRA can sit quite happily here in the United States while you're abroad. Even if you're a permanent expat living in Dublin or Delhi, moving outside the country doesn't close out your IRA or hit it with extra taxes. You will, however, be playing by a different set of rules, and putting more money in the account may not be doable.
If you make your home in a foreign country for an entire tax year and earn money there, you may not have to pay US tax on it. The IRS allows Americans who live abroad to earn above $90,000 without paying American income tax, provided they meet various tests. The downside is that if you don't have any taxable income to report in a given year, you can't contribute money to your IRA.
You only exclude your foreign income if the foreign location is your tax home for the year. A tax home isn't where your house is, but where your work is based. If you have a house in Florida, but you're working from an office in Canada for two years, your tax home may be in Canada. Coming back to the United States for an occasional visit doesn't change that, unless you're, for instance, commuting back and forth every weekend to be with your family at home.
If you withdraw money from a traditional IRA while you're abroad, you owe American income tax on it. Depending on where you live, you may owe tax to your expat government too. Your IRA account manager normally takes out withholding to cover your taxes, but if you live in the United States, you can opt out. Overseas, you can't avoid withholding unless you certify that you're not an American citizen or that you're not living abroad to avoid American taxes.
You can't contribute to a Roth if you don't have any taxable compensation, but you can roll a traditional IRA into a Roth. You pay income tax on everything you roll over -- after-tax traditional IRA contributions are an exception -- but no tax at all on withdrawals. If conversion sticks you with high overseas taxes, it might be better to postpone doing this until you're home. On the other hand, if your American home is a state with high income taxes, making the conversion when you're not paying state taxes may be the better move.
- Digital Vision./Digital Vision/Getty Images
- How to Temporarily Stop Withholding from a Paycheck
- Tax Handling of a Non-Deductible IRA
- Does Cashing Out an IRA Affect Modified Adjusted Gross Income?
- How to Make My Traditional IRA Into a Roth IRA
- Which State Do You Pay Taxes in if you are a Multiple State Resident?
- Can I Close an IRA Account Without Penalty?
- Are IRA Withdrawals Subject to Social Security Tax?
- What is a Non-deductible IRA Contribution?