Who this page is for
You are an American citizen or green card holder approaching retirement or already retired, planning to live or currently living abroad. Typical profiles:
- Social Security recipient drawing U.S. benefits from Portugal, Mexico, Panama, Thailand, or another popular retirement destination.
- Former W-2 worker with IRAs, 401(k)s, and possibly a defined-benefit pension.
- Homeowner deciding whether to sell, rent, or keep the U.S. home.
- Couple where one spouse might not be a U.S. citizen (see also married to a non-U.S. spouse).
Social Security taxation abroad
From the U.S. side, Social Security benefits are potentially taxable on a sliding scale:
- Up to 50% of benefits taxable if your provisional income (AGI + tax-exempt interest + half of Social Security) is between $25,000 and $34,000 (single) or $32,000 and $44,000 (married filing jointly).
- Up to 85% of benefits taxable above those thresholds.
- Withholding is available via Form W-4V if you want taxes held back before receiving payments.
From the foreign country's side, whether Social Security is taxed by your new country of residence depends on the U.S. tax treaty. Some treaties grant exclusive taxing rights to the U.S. (e.g., Germany, Canada, UK). Others allow the country of residence to tax, with various mechanisms. A few countries (Portugal's former NHR regime, for example) have historically exempted U.S. retirement income — but these regimes change. Check the current treaty provisions before you move; do not rely on blog posts about "best" retirement destinations without reading the actual treaty article.
Medicare reality check
Medicare does not travel with you. Outside of narrow exceptions (emergencies in Mexico or Canada close to the U.S. border, certain shipboard care in U.S. territorial waters), Medicare Part A and Part B do not cover medical care abroad. If you live in France and see a doctor there, Medicare pays nothing.
Practical decisions:
- Part A (hospital) is premium-free for most Americans with sufficient work history. Keep it — no reason to drop it.
- Part B (medical) costs a monthly premium ($185+/month in 2026, higher at upper income levels). The decision is: keep it as backup for U.S. care visits, or drop it and save the premium. Dropping Part B creates a late-enrollment penalty if you want to rejoin — 10% for each 12 months you were eligible but not enrolled, adding to your Part B premium permanently.
- Part D (drugs) similar logic — late-enrollment penalty if you drop and re-enroll. Typically drop if you have reliable local coverage and prescription access abroad.
- Medigap is useful if you return to the U.S. for care; some plans have "foreign travel emergency" riders that cover a portion of overseas emergency care.
For coverage while you live abroad, see international insurance for Americans. Most retirees end up with some combination of local country health system enrollment, an international plan, or both.
Required Minimum Distributions (RMDs)
Once you reach the RMD start age (73 for those born 1951-1959, 75 for those born 1960 or later under SECURE 2.0), you must take annual distributions from traditional IRAs, 401(k)s, 403(b)s, and other tax-deferred accounts. Living abroad doesn't change this. Failing to take an RMD triggers a 25% excise tax on the amount you should have withdrawn (reduced from 50% by SECURE 2.0, further reduced to 10% if corrected within the correction window).
Tax treatment:
- U.S. side: distributions are ordinary income. Federal withholding defaults to 10% for periodic distributions unless you elect differently. If you're abroad, most U.S. custodians will still withhold U.S. tax — you may need to file Form W-8BEN or similar depending on your situation (check with your custodian).
- Foreign side: depends on your country's tax treatment and the U.S. treaty. Some treaties reserve taxation of U.S. IRAs to the U.S. Others allow the country of residence to tax, with credit for U.S. tax paid.
- Roth IRAs: distributions are U.S.-tax-free if qualified. Treaty treatment by foreign countries varies — some respect the U.S. Roth characterization; some tax it like any other distribution. Worth checking per country.
Foreign pensions
Common categories:
- UK SIPPs — often treated as U.S.-qualified pensions under the U.S.-UK treaty, allowing deferral until distribution, but the PFIC exposure for underlying funds is a separate issue.
- Canadian RRSPs — U.S.-Canada treaty permits deferral of U.S. tax on earnings inside the RRSP until distribution. Much simpler than historically — Form 8891 was eliminated years ago.
- Australian Superannuation — the "pension vs foreign grantor trust" question is still debated. Most practitioners use a treaty-based position, but the analysis is imperfect. Contributions, earnings, and distributions need careful tracking.
- German Riester / Rürup — often treated as foreign grantor trusts for U.S. tax purposes; may require Form 3520/3520-A filings.
- Japanese kosei nenkin (public pension) — treated as social security, generally U.S.-taxable, foreign tax credit available if Japan taxes.
- French régimes — complex, usually require specialist input.
If you have any foreign pension, plan on professional tax help for at least the first year. Software cannot handle the judgment calls these plans involve.
State income tax severance for retirees
Retirement income (Social Security, IRA distributions, pensions) is often state-taxable in your state of residency. If you leave a sticky state without severing properly, you may still owe state tax on retirement income earned after you physically moved abroad.
| State category | Examples | Retiree implication |
|---|---|---|
| No state income tax | Texas, Florida, Nevada, Washington, South Dakota, Wyoming, Alaska, Tennessee, New Hampshire | Nothing to sever. Many retirees move domicile to FL or TX before departing abroad. |
| No tax on retirement income | Illinois, Mississippi, Pennsylvania (partial), others | Even staying domiciled here, retirement income is often untaxed by the state. |
| Sticky states | California, New York, Virginia, New Mexico, South Carolina | Require affirmative severance — sold or rented the home, new driver's license, voter registration changed, no continuing ties. |
Investment income, dividends, capital gains
Brokerage accounts, dividends, interest, and capital gains continue to flow through your U.S. return on Schedule B and D. From abroad, this is usually straightforward because the income is U.S.-sourced and reported on U.S. 1099s.
Two retiree-specific complications:
- Brokerage account access from abroad. Many U.S. brokerages (Vanguard, Fidelity, Schwab) restrict or close accounts for non-U.S. residents. Some allow continued holdings but not new contributions or trades. Solve this before you move by confirming with your broker; some offer international account structures specifically for U.S. expats.
- Foreign-country tax on U.S. investment income. Depending on the treaty, your country of residence may tax dividends, interest, and capital gains from your U.S. investments. Foreign Tax Credit on the U.S. side offsets. Specific treaty rates vary.
FBAR and foreign accounts for retirees
If you open a local bank account abroad (most retirees do, for local spending), the aggregate balance crossing $10,000 at any point triggers the FBAR. Easy to cross with a single pension deposit or real-estate purchase down payment. Use the FBAR Threshold Checker to verify.
Country-choice considerations
Retirees are the most "country-picking" expat segment — often choosing destination based on cost of living, climate, visa availability, and healthcare. Tax-side questions worth asking before you commit:
- Does the country have a U.S. tax treaty? Most popular retirement destinations do (Mexico, Portugal, Spain, France, UK, etc.). Some don't (Thailand has a treaty; the UAE has one; some Central American countries don't). Treaty changes who taxes what.
- Are U.S. Social Security benefits taxed locally? Treaty answers this.
- Is there a specific retiree visa or tax regime? Some countries offer favorable treatment for foreign retirees. Regimes change frequently — read the current version, not old posts.
- How does the country treat U.S. IRA distributions? Again, treaty dependent.
- What about estate and inheritance tax in the country? Worth understanding if you plan to leave assets there or buy local real estate.
For countries ClearedExpat covers in depth, see the country guide hub. If you are still planning the move, the moving abroad checklist covers the tax setup steps worth completing before you leave.
Who should help with filing
For retirees with U.S.-sourced income only (Social Security, IRA/401(k) distributions, U.S. brokerage dividends) and one or two foreign bank accounts, expat-specialist software handles the filing cleanly — 1040, FBAR, Form 8938 if applicable, Foreign Tax Credit if you pay local tax. Most retirees fall into this category.
This page contains affiliate links. If you use them, I may earn a commission at no extra cost to you.
Escalate to a CPA or EA if you have:
- Foreign pensions (most of them need specialist input)
- Foreign rental real estate
- Foreign investment accounts holding non-U.S. mutual funds (PFIC risk)
- A spouse who is not a U.S. citizen (see the non-U.S. spouse guide)
- Any question about relinquishing U.S. citizenship or green card status (exit tax analysis, Form 8854)
FAQ
Is Social Security taxable when you live abroad?
From a U.S. perspective, yes — Social Security is potentially U.S.-taxable on the same progressive basis as if you were in the United States (up to 85% of benefits taxable depending on provisional income). From the foreign country's perspective, whether it taxes your U.S. Social Security depends on the tax treaty. Some treaties give exclusive taxing rights to the U.S.; others allow the country of residence to tax. The treaty matters — check it before you move, not after.
Does Medicare cover me if I live abroad?
Generally no. Medicare does not cover medical care outside the United States except in very narrow cases (emergencies in Mexico or Canada near the border, care on ships in U.S. territorial waters). Most retirees abroad either enroll in the local country's public system, buy international health insurance, or accept that they will fly back to the U.S. for major care. Keeping Medicare Part B active costs monthly premiums whether you use it or not — some retirees keep it as optional backup; others drop it.
Do I still take RMDs from my IRA and 401(k) abroad?
Yes. Required Minimum Distributions apply the same way whether you live in Ohio or Portugal. Starting at age 73 (or 75 for those born in 1960 or later under SECURE 2.0), you must take RMDs from traditional IRAs, 401(k)s, and other tax-deferred accounts. The distribution is U.S.-taxable as ordinary income and may also be taxable by your country of residence depending on treaty. Missing an RMD triggers a 25% excise tax (reduced from 50% under SECURE 2.0), which drops further to 10% if corrected within the correction window.
Do I still pay state income tax as a retiree abroad?
Depends on the state. No-tax states (Texas, Florida, Nevada, Washington, South Dakota, Wyoming, Alaska, Tennessee, New Hampshire) create no issue. Sticky states (California, New York, Virginia, New Mexico, South Carolina) may continue to treat you as resident without affirmative severance steps — sold or rented out your home, driver's license surrendered, voter registration changed, no continuing state-side professional licenses. Many retirees plan this before departing by moving domicile to a no-tax state first.
Are foreign pensions taxed by the U.S.?
Generally yes, with complications. Contributions, accruals, and distributions from a foreign pension interact with U.S. tax rules in country-specific ways. Some foreign employer plans are treated as grantor trusts; some qualify for treaty-based deferral; some are PFICs. This is one of the most complex areas for retirees and usually requires specialist input for anything beyond a small state pension. Treaty analysis by a U.S. expat CPA is worth the cost before you start taking distributions.