IRA and 401(k) While Living in Portugal: Americans' Guide

Yes, both accounts stay inside the US tax system. The IRS says US citizens and residents living abroad file income tax returns in the same way as those residing in the United States, and withdrawals from an IRA or a 401(k) are generally taxable, with extra rules for early and required withdrawals.

This guide follows what the IRS and Portuguese Tax Authority pages say about these accounts for someone who lives in Portugal. We read them on 19 October 2026. The most recent of them, the IRS topic pages on pensions and on early IRA withdrawals, carry the line “Page Last Reviewed or Updated: 16-Oct-2026”, which is the date we give as the last information. It is a reading of official pages, not tax advice. The wider picture, including treaties and deadlines, is in our guide to US taxes for Americans abroad.

Do I still file US taxes if I live in Portugal?

Yes. The IRS page on filing requirements for citizens and residents abroad says you generally have to file returns and pay estimated tax “in the same way as those residing in the United States”, and that you usually must file when your gross income from worldwide sources reaches the amount for your filing status. The page’s last-updated line is 28 September 2026. Our article on filing US taxes from abroad and the deadlines goes through dates and extensions.

Americans and Britons differ here only in that the IRS rules apply to US citizens and residents. If you are British with no US status, none of the IRS pages below apply to you, and your own pension questions are in the article on foreign pensions in Portugal.

Are IRA and 401(k) withdrawals taxable?

Generally yes. The IRS describes a traditional IRA as one where “amounts in your traditional IRA (including earnings and gains) are not taxed until you take a distribution”, and says that for a 401(k) your elective deferrals are generally made before tax. On pensions and annuities, IRS Topic 410 says payments are fully taxable if you have no investment in the contract, and only partly taxable if you contributed after-tax dollars.

A Roth account is different. The IRS says you cannot deduct Roth IRA contributions and that, if you satisfy the requirements, qualified distributions are tax-free. Publication 590-B defines a qualified distribution as one made after the 5-year period beginning with the first tax year for which you made a contribution, and also on or after age 59½, because of disability, to a beneficiary or estate after your death, or for a first home (up to a $10,000 lifetime limit).

What is the 10% early withdrawal tax?

The IRS says an additional 10% tax applies to the part of a distribution you must include in gross income if you receive it before age 59½, unless an exception applies. For IRAs this is in Topic 557, and for 401(k) and other qualified plans in Topic 558. Both pages were updated or reviewed in autumn 2026 (16 October and 24 September 2026).

The lists of exceptions differ between IRAs and employer plans:

Both pages list further exceptions (medical expenses above a share of income, IRS levy, reservists, domestic abuse, personal or family emergency expenses, disaster relief). The 10% tax is reported on Schedule 2 of Form 1040, and in some cases on Form 5329. Living in Portugal is not an exception on either page.

When must I start taking required minimum distributions?

The IRS page on required minimum distributions (RMDs), last updated 8 April 2026, says you generally have to start withdrawals from an IRA or retirement plan account at age 73. It also says:

• for an IRA the first RMD is due by April 1 of the year after the year you reach 73;
• for a 401(k) the date is generally April 1 after the later of the year you reach 73 or the year you retire, if the plan allows delaying;
• after that, withdraw by December 31 each year;
• you are not required to take withdrawals from Roth IRAs, or from designated Roth accounts in a 401(k), while the owner is alive;
• a shortfall can bring a 25% excise tax on the amount not distributed (10% if corrected within 2 years).

Will tax be withheld if the money goes to Portugal?

Publication 590-B (2025) says federal income tax is withheld from traditional IRA distributions unless you choose not to have it withheld, and generally at a 10% rate on nonperiodic payments. Then it adds, under “IRA distributions delivered outside the United States”, in general: if you are a US citizen or resident alien and your home address is outside the United States or its territories, “you can’t choose exemption from withholding” on distributions from your traditional IRA.

For pension and annuity payments in general, IRS Topic 410 says a US citizen or resident alien “must provide the payer with a home address in the United States (or its territories)” to be able to choose to have no tax withheld. We did not read the plan rules of any particular custodian, so how your provider handles a Portuguese address is a question for the provider. Withholding is not the final tax: you still report the distribution on your US return.

Can I keep contributing to an IRA while working in Portugal?

Contributions are limited to the annual dollar amount or your compensation, whichever is lower. The IRS page on IRAs for taxpayers abroad gives $7,000 for 2024 and 2025 ($8,000 if you were 50 or older by year end) and $7,500 for 2026 ($8,600 if 50 or older by year end). That page was last updated on 6 August 2026.

The effect of the foreign earned income exclusion (FEIE) needs care, because the IRS pages we read do not word it the same way:

• Publication 54 (December 2025) says that in determining compensation “don’t take into account amounts you exclude” under the FEIE or the foreign housing exclusion.
• Publication 590-A (2025) lists among what is not compensation any amounts you exclude from income, “such as foreign earned income and housing costs”, and also lists pension or annuity income and rental, interest and dividend income as not compensation.
• The IRS page on IRAs for taxpayers abroad says the opposite, that you “must add back the excluded amounts” in determining compensation, with an example.

We cannot reconcile these three texts. If you exclude your salary under the FEIE and have no other compensation, the publications point to no room for IRA contributions, but check the current text with the IRS or a US tax professional before you contribute. The FEIE itself is explained in our article on the FEIE and the foreign tax credit. The IRS FEIE page also states that foreign earned income does not include pension or annuity payments, so the exclusion does not shelter withdrawals.

Does the US-Portugal treaty change any of this?

Article 20 of the 1994 convention says pensions and similar remuneration in consideration of past employment, and annuities, are taxable only in the state of residence. The Protocol’s saving clause, however, lets the United States “tax its citizens, as if the Convention had not come into effect”, with listed exceptions. The text does not mention IRAs or 401(k) plans, and we found no page saying how it classifies them. Our article on the US-Portugal tax treaty covers the wider text.

What does Portugal say about foreign retirement income?

The Tax Authority page “Rendimentos obtidos no Estrangeiro” says residents must declare in Portugal all income obtained in Portugal and abroad, using Annex J of the Model 3 IRS return, which has a table for pension income (table 5). You report gross income and the tax paid abroad, and the page says tax paid in the source country is taken into account as a credit for international double taxation. The filing period runs from 1 April to 30 June of the following year. The page shows no last-updated line. Residency and the tax on a foreign pension are covered in our foreign pensions guide. If you moved on the passive income route, see the retirement and passive income visa article.

What else should I check about US accounts held from Portugal?

Funds held outside a retirement account have their own US rules, covered in investing from Portugal and the PFIC rules.

An IRA or 401(k) held at a US institution is not a foreign account, and the pages we read do not say it is reported on the FBAR or Form 8938; those cover foreign accounts such as a Portuguese bank account. See FBAR and FATCA reporting.

Pages read on 19 October 2026: IRS filing requirements abroad; IRS FEIE; IRS IRAs and the FEIE; IRS Publications 54, 590-A and 590-B; IRS Topics 410, 424, 557 and 558; IRS RMD, Roth IRA and traditional IRA pages; the 1994 US-Portugal convention; Portal das Finanças, Rendimentos obtidos no Estrangeiro.