Roth IRA for Americans living/working abroad

A Roth Individual Retirement Account (IRA) is a versatile retirement vehicle. Contributions can be withdrawn at any time without penalty. Your earnings grow tax-free and can be withdrawn tax-free in retirement. Plus, you can still contribute to Roth IRA when you live or work abroad, if you meet certain criteria.

Key Findings

People living or working abroad can contribute to a Roth IRA just like people living in the United States.
If you live or work abroad, make sure you have sufficient earned income after filing the Foreign Earned Income Exclusion to contribute to a Roth IRA.
You can still have a spousal IRA if you live abroad but don’t have any earned income of your own, as long as your spouse has enough earned income for both of you to contribute.

What is a Roth IRA?

A Roth IRA is a type retirement savings account which has tax advantages and distinct differences from other retirement accounts. For example, traditional IRA offers an advance tax deduction by the amount of your contribution, reducing your taxable income in the year you contribute. However, when you retire, you pay income taxes on your withdrawals.

Tax Treatment of Roth IRAs

Vice versa, Roth IRA do not offer an advance tax deduction. Instead, the money grows tax-free over the years, and you can withdraw it tax-free once you reach age 59½.

Because you didn’t take an upfront tax deduction, contributions to Roth IRA accounts can be withdrawn at any time tax-free. roll Contributions can be withdrawn tax-free after five years. However, your investment earnings or profits from these contributions cannot be withdrawn until age 59½ without huge tax penalty from Internal Revenue Service (IRS).

Roth IRAs can also be tax-free to an heir, which can make your contributions a form of life insurance for your family.

Roth Contribution Limits

Mouth and traditional IRA contribution limits for 2024 is $7,000 for individuals under age 50. Individuals age 50 and older can contribute an additional $1,000 towards catch-up contribution.

Roth Income Limits

You cannot contribute to a Roth IRA for 2024 if you earn more than the individual income limit of $161,000 or, for a couple filing jointly, income exceeds $240,000.

Fast Fact

In 2024, you can contribute up to $7,000 per year to charity. Roth or Traditional IRA. If you are 50 or older, you can contribute an additional $1,000 per year.

Can you contribute to a Roth IRA if you live or work abroad?

If you are a U.S. citizen or permanent resident living or working abroad, you can contribute to a Roth or traditional IRA if you meet certain requirements. There are income limits for eligibility for a Roth IRA.

Earned Income

You must have income to contribute to a Roth or traditional IRA. To determine whether you have enough earned income to contribute to a Roth IRA, the Internal Revenue Service (IRS) will look at your income. modified adjusted gross income (MAGI).

Expats who have income from work in the US, whether from pre-departure work, travel to the US, or compensation from the US government, typically have earnings close to their MAGI.

For MAGI purposes, many expats or citizens living abroad will undergo foreign housing And foreign income exclusions. These exclusions typically reduce MAGI significantly and may disqualify some people from participating in a Roth IRA. In 2024, the first $126,500 earned in a foreign country will not be excluded from foreign earned income. By 2025, this figure will increase to $130,000.

Consult your tax specialist to see if a partial exclusion is possible or appropriate for your situation.

Can I withdraw money from an IRA while living or working abroad?

Yes, you can withdraw money from your Roth IRA (Roth IRA) while you live or work abroad.

Same Roth IRA withdrawal rules apply to people living in the United States and apply to U.S. citizens or permanent residents living abroad. Standard contributions can be withdrawn from your Roth IRA at any time. Rollover contributions can be withdrawn from your Roth IRA. in five years. Earnings or gains from investments in a Roth IRA can be withdrawn without penalty only if you have held the account for at least five years and are age 59½ or older.

What is the annual deadline for contributing to a Roth IRA?

You can contribute to traditional or Roth IRA before the tax return filing deadline for that year. In most years, the deadline is April 15, unless that date falls on a holiday or weekend.

Can I contribute to a family IRA while living or working abroad?

If you are part of a married couple filing jointly and live abroad and your modified adjusted gross income (MAGI) tax return exceeds $14,000, you can both contribute up to $7,000 to your individual IRAs for 2024.

If you are 50 years or older, you can add $1,000 as an additional contribution. Your contributions cannot exceed your taxable compensation. This means that if one of you is 50 or older, you can add $15,000, and if both are over 50, you can add a total of $16,000. However, even if one spouse has zero earned income, the couple can contribute to spousal IRA.

Bottom line

You can contribute to a Roth IRA if you are a U.S. citizen or permanent resident living or working abroad, as long as you have sufficient earned income after any tax benefits and you do not earn more than the earned income limit.

Roth IRA are a powerful tool for saving for retirement and worst-case emergencies. If you don’t already have one, you might want to consider opening one if you’re eligible.