Required Minimum Distributions When Living Abroad

Yes. RMDs can still apply to US retirement accounts even if you live outside the United States.

The account holder’s country of residence does not automatically remove the requirement.

A review should usually consider:

• which accounts are subject to RMDs
• whether the account is an IRA or employer retirement plan
• whether the account is traditional or Roth
• whether the account is inherited
• when the first RMD is due
• how the RMD is calculated
• whether multiple accounts can be aggregated
• whether inherited account rules apply
• whether the provider can process payments to a foreign resident
• whether US withholding applies
• whether local tax applies
• whether treaty treatment is relevant
• whether foreign tax credits may be available
• whether the withdrawal creates currency issues
• whether the RMD should be spent, reinvested or used for tax planning
• whether beneficiary forms are current

IRS guidance says retirement plan and IRA account owners are generally required to take annual RMDs from age 73.

The IRS also says IRA account owners may delay the first RMD until 1 April of the year after they reach age 73, but delaying the first payment generally means taking two RMDs in that year.

The planning point is simple.

Living abroad does not make RMDs disappear.

It makes the tax, withholding, currency and administration more important.

1. Which accounts are subject to RMDs?

RMD rules may apply to:

• traditional IRAs
• rollover IRAs
• SEP IRAs
• SIMPLE IRAs
• 401(k) plans
• 403(b) plans
• 457(b) plans
• TSP accounts
• inherited retirement accounts
• some annuity-based retirement accounts

Roth IRAs are treated differently during the original owner’s lifetime, but inherited Roth accounts can still create distribution planning issues.

2. When does the first RMD need to be taken?

RMD timing depends on age, account type and whether the account is inherited.

The first RMD may be delayed until 1 April of the year after the account owner reaches the relevant starting age.

But this can mean two RMDs in one tax year.

That may increase taxable income, withholding and local tax exposure.

3. Can RMDs be aggregated?

Aggregation rules can be misunderstood.

Some IRA RMDs may be calculated separately but taken from one or more IRAs.

Employer retirement plans often need separate treatment.

Inherited accounts can have separate rules again.

Before taking distributions, confirm:

• which accounts can be aggregated
• which accounts cannot be aggregated
• whether employer plan RMDs must come from that plan
• whether inherited accounts are separate
• whether Roth accounts are excluded or included
• whether provider calculations are correct
• whether all accounts are visible

4. How should RMDs be funded?

An RMD may require selling investments.

That creates planning questions:

• which asset should be sold?
• should cash be held for RMDs?
• should income-producing assets fund distributions?
• should volatile assets be avoided near distribution dates?
• should withdrawals be phased through the year?
• should currency be converted immediately or later?
• should the money be spent, reinvested or used for gifts?

Good RMD planning should be connected to portfolio construction.

5. What tax and withholding apply?

RMDs can create US taxable income and may be subject to withholding.

For former US residents and non-US citizens, withholding can be especially important.

You may also need to review:

• local tax in your country of residence
• treaty treatment
• foreign tax credits
• timing of income
• whether withholding can be adjusted
• whether documentation is required
• whether the provider can process the right forms

The gross RMD is not always the amount you can spend.

6. How do RMDs affect the retirement income plan?

Some retirees need RMDs for spending.

Others do not.

If you do not need the RMD for living costs, you may need to decide whether to:

• reinvest it
• keep it in cash
• gift it
• use it for tax planning
• use it to rebalance the portfolio
• convert other assets to Roth before RMDs begin
• reduce future concentration risk
• fund local expenses
• manage currency exposure

RMDs should not be treated as an isolated compliance task.

They should be part of the wider retirement income strategy.

This page is for general information only and does not constitute personalised financial, tax, legal, pension, retirement, investment, withdrawal, RMD, inherited account, withholding, treaty, estate planning, US tax, local tax or currency advice.

Required minimum distributions, IRA withdrawals, 401(k) withdrawals, Roth IRA treatment, Roth 401(k) rules, inherited account distributions, withholding, penalties, aggregation rules, provider restrictions, beneficiary planning, treaty treatment, local tax, currency and future residence depend on personal circumstances and may change.

US tax advice should be taken from a suitably qualified US tax adviser or CPA. Local tax, legal, pension and estate planning advice should also be taken where relevant.

Financial planning should be coordinated with tax, legal, pension, investment, retirement and estate planning advice where appropriate.

Do not withdraw from, roll over, consolidate, transfer or restructure US retirement accounts without reviewing tax, investment, provider, withholding, beneficiary, local tax, currency and retirement planning implications.

Missed RMDs can have tax consequences.

Investing involves risk. Retirement account, pension and investment values can fall as well as rise, and you may get back less than you invest.

Currency movements can affect the value of US retirement accounts, RMDs, withdrawals, transfers, tax liabilities and future spending.