Your 401(k) keeps growing after you move. Nothing new goes into it.

By Skyler Bissell · August 10, 2026 · 9 min read

A software engineer in New York on $225,000 who defers $22,500 into a 401(k) this year pays $8,192 less federal and state tax for having done it. The same person on the same salary in Seattle saves $5,970. Move either of them to Berlin in January and the balance carries on compounding untouched, while that annual saving goes to zero, because the thing that produced it was a US employer's payroll and that is what ended.

Almost every article on this question spends its length on the account and skips the money. The account is the easy part. What the move costs you is a specific, computable number, and it is different in every US city you might be leaving.

What the deferral was worth, city by city

Take the household our comparison pages already publish for a senior engineer: one person, $225,000 of salary, filing single, deferring 10% of it. That is $22,500, comfortably inside the 2026 elective deferral limit of $24,500 that the IRS set in November. Run the same person through our engine twice, once deferring and once not, and the gap between the two tax bills is what the shelter bought:

cityparity engine figures, $225,000 single filer, 2026 rates. The middle column is the household's actual tax bill; the first column re-runs the identical household with the contribution set to zero. Country-level take-home context is at take-home pay by country.

Seattle and Austin land on the same dollar, because neither Washington nor Texas taxes wage income. The $2,222 separating New York from Seattle is state income tax on money that never got taxed at all.

The Seattle figure repays a closer look. $5,970 is not 32% of $22,500, and 32% is the marginal bracket this salary sits in. Here is why. Taxable income before the deferral is $208,900, after the $16,100 standard deduction, which puts it $7,125 above the $201,775 where the 32% bracket starts. So the deferral unwinds $7,125 at 32% and the remaining $15,375 at 24%: $2,280 plus $3,690. A deduction is worth its own blended rate, and betting on the headline 32% would have overstated the saving by about $1,230. That mechanism is the subject of marginal vs effective tax rate.

At a lower salary the numbers compress fast. On $150,000 with a 6% contribution, the default household on most of our comparison pages, the same calculation gives $2,160 in Seattle, $2,997 in San Francisco and $3,151 in New York. Roughly a third as much, because both the contribution and the rate it unwinds shrink together.

What happens to the account itself

Five things are worth knowing, and only one of them is urgent.

The balance stays put and stays invested. No rule requires a US retirement account to be liquidated, repatriated or reported to your new country's authorities as a condition of the move. It sits with the same custodian and tracks the same funds.

Contributions end with the US paycheck. A 401(k) is an employer-sponsored plan, and elective deferrals are withheld from wages paid by the sponsor. A foreign employer has no route into it. If you keep a US employer and work abroad for them, the deferrals can continue; if you sign a local contract, they cannot.

The custodian may object to your new address. This is the urgent one. Several large US brokerages restrict trading, block new purchases, or close accounts held at a non-US address, and the policy differs by firm and sometimes by country. Nothing in tax law causes this. It is a compliance decision by the institution, and it is much easier to solve while you still have a US address than after the change of address has already gone through.

A rollover to an IRA is usually the tidier structure. Moving a 401(k) into a traditional IRA by direct rollover is tax-neutral and gives you one account, a wider investment menu, and no dependence on a former employer's plan administrator. Doing it before you leave avoids the address problem above.

Withdrawals still start when the IRS says they start. Take money out before age 59 and a half and you owe an additional 10% on top of ordinary income tax, unless one of the statutory exceptions applies. There are 27 of those categories and living outside the United States is not among them. At the other end, required minimum distributions begin at age 73, with the first one due by April 1 of the following year, and residence abroad changes none of that.

Why the exclusion closes the IRA door too

The obvious fallback when a 401(k) stops accepting money is an IRA, at $7,500 for 2026 plus an $1,100 catch-up from age 50. For a lot of Americans abroad that door turns out to be shut, and the reason is the tax break they are already using.

An IRA contribution requires taxable compensation. IRS Publication 590-A, in its list of what is not compensation, includes "any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs." Claim the foreign earned income exclusion on your whole salary and you have excluded the very income an IRA contribution needs. Earn under the 2026 exclusion of $132,900, exclude all of it, and your IRA room for the year is zero.

There is a way through, and it is a choice you were making anyway. Use the foreign tax credit instead of the exclusion and the income stays in your gross income, remains compensation, and supports a contribution. In a high-tax destination the credit usually beats the exclusion on the tax arithmetic alone, and this is a second reason to prefer it. We work that comparison through destination by destination in FEIE vs foreign tax credit.

How a withdrawal gets taxed when you live somewhere else

Two systems can have a claim on the same dollar, and the order in which they press it decides what you keep.

The United States taxes its citizens and green card holders on worldwide income regardless of residence, so a distribution from a traditional 401(k) is ordinary US income whether you are in Denver or Dublin. Your country of residence may also tax it, since most countries tax residents on worldwide income too.

Tax treaties are written to sort this out, and most of them hand pension income to the country of residence. Then the savings clause takes it back for Americans. Nearly every US treaty contains a provision letting the United States tax its own citizens as though the treaty had not been signed, with a short list of carve-outs, and pension articles usually sit outside those carve-outs. So a treaty rarely removes the US claim on your 401(k). The IRS treaty index has the text country by country, and the clause itself is unpicked in how tax treaties work.

The foreign tax credit is what usually saves you here. Whichever country taxes the distribution second gives credit for what the first one took, so the total lands near the higher of the two rates instead of the sum. Plan around it, because the country you retire in sets that higher rate.

The Roth version of this question has no general answer, and be wary of anyone who gives you one. A Roth 401(k) or Roth IRA is tax-free on the way out under US law, and that is a feature of US law only. Some countries recognise the treatment, some tax the growth as ordinary investment income, and some have never ruled on it. Before you assume your Roth stays tax-free, find out what your specific destination does with it, because the answer changes the case for the whole account.

What replaces it: the pension you cannot opt out of

The American framing treats retirement saving as a choice you make with your own money, with a tax break attached to encourage you. Most of the countries our readers move to take the contribution at source, at a rate written into statute, and you get no vote.

Germany is the clearest case. The Deutsche Rentenversicherung contribution rate for 2026 is 18.6% of gross, split evenly, so 9.3% comes out of your pay and your employer pays the other 9.3%. It applies up to a ceiling of EUR 101,400, which caps the employee side at EUR 9,430 a year. Unemployment insurance adds 2.6% on the same split and the same ceiling. On our engine, a senior engineer in Berlin on €194,000 pays €18,526 of employee social insurance, or 9.5% of gross. That figure bundles pension with health, long-term care and unemployment, since German payroll takes all four together. The 9.3% pension slice inside it is the statute's number, and our engine does not break it out separately.

Three differences matter when you set that beside a 401(k). The German contribution is mandatory, so it never loses an argument with your mortgage. It buys an entitlement calculated on a points formula, with no balance in your name and no dependence on what markets did. And the employer's 9.3% is real compensation that shows up on your payslip as somebody else's line item, which is the same accounting move that hides the health premium your employer pays.

Whether the swap leaves you better off depends on the numbers for your specific pair of cities, which is what San Francisco vs Berlin for a software engineer works out line by line. The general case for putting a currency figure on the parts of a package that never reach your bank account is the hidden paycheck.

Five things to do before you go

1. Call your 401(k) provider and ask whether they permit a non-US address. Use those words. Do it before you change anything on the account, because the answer decides the next item.
2. Roll the balance into an IRA if the answer is no. Open it at a firm that accepts overseas residents while you still have a US address, a US phone number and a US driving licence to verify with.
3. Max the deferral in your final US payroll year. Every dollar you defer before the last paycheck is sheltered at your American marginal rate, and $8,192 in New York is the last time that rate works for you.
4. Choose the exclusion or the credit before you file the first full year abroad. That single election governs whether you have any IRA room at all.
5. Ask the new employer for its pension contribution as a percentage of gross, and where the ceiling sits. Both numbers belong in the offer comparison next to the salary.

One thing sits outside the list. If you are carrying unvested US equity into the move, it follows a different set of rules entirely, and we cover those in RSUs when you move abroad.

FAQ

What happens to my 401k if I move abroad?

Nothing happens to the balance. A 401(k) is a US account held by a US custodian and it keeps compounding whether you live in Ohio or Osaka. Three things do change. Contributions stop, because a 401(k) takes elective deferrals only out of wages paid by the employer that sponsors the plan. The deduction stops with them, which on a $225,000 salary was worth $8,192 a year in New York and $5,970 in Seattle. And two tax authorities now have a claim on the eventual withdrawal.

Can I still contribute to my 401k while living abroad?

Only if a US employer is still paying you wages and still sponsors the plan. Elective deferrals come out of that employer's payroll, so a foreign employer cannot feed a US 401(k) whatever it wants to do. The 2026 elective deferral limit is $24,500, rising to $32,500 for participants aged 50 and over, and none of it is available to you once the US paycheck stops. An IRA is the usual fallback, at $7,500 for 2026, but claiming the foreign earned income exclusion removes the compensation an IRA contribution needs.

Do I pay US tax on a 401k withdrawal if I live overseas?

Yes. US citizens and green card holders are taxed on worldwide income wherever they live, and a distribution from a traditional 401(k) is ordinary income. Most US tax treaties assign pensions to the country of residence, but the savings clause in those same treaties lets the United States tax its own citizens as though the treaty were not there. Your country of residence may tax the distribution as well, and the foreign tax credit is normally what stops that becoming double tax.

Should I roll my 401k into an IRA before I move?

Do it before you leave, and do it for administrative reasons. A direct rollover from a 401(k) to a traditional IRA is tax-neutral whenever you run it. Many US brokerages restrict or close accounts held at a foreign address, and opening a new IRA from overseas is harder than moving an existing one while you still have a US address and a US phone number. What you gain is control over the investment menu and a single account to administer from eight time zones away.

The retirement question is rarely what decides a move, and it is often the last thing anyone checks. It deserves ten minutes: one call to the custodian, one decision about the exclusion, and one line added to the offer you are weighing. Run both cities through the calculator and the pension contribution stops being invisible.

Sources. 2026 contribution limits: IRS news release IR-2025-111. Compensation for IRA purposes: IRS Publication 590-A. Early distributions and the exception list: IRS, tax on early distributions. Required minimum distributions: IRS RMD FAQs. Treaty text and the savings clause: IRS, United States income tax treaties A to Z. German pension and unemployment rates and ceilings for 2026: Deutsche Rentenversicherung. Tax figures are computed by cityparity's per-city engine; per-field provenance is in data/_meta.json.

This is general information about how the rules interact, and not tax advice for your situation. Custodian policies on foreign addresses change without notice and vary by firm. See the methodology.