If you move abroad, your U.S. investments do not vanish, but the rules around them shift in ways that catch many people off guard. Most U.S. brokerages will restrict or close your account once they learn you live overseas. Your 401(k) and IRAs stay open, though your ability to contribute depends on how you file. If you keep your U.S. citizenship, you still owe U.S. tax on your worldwide investment income, and you pick up new reporting obligations for any foreign accounts you open. Understanding what happens to your investments if you move abroad means sorting through brokerage policy, IRS rules, and a handful of traps that can turn an ordinary portfolio into an expensive problem.
What Your U.S. Brokerage Will Do
Brokerages decide whether to keep serving you based on your residence, not your citizenship. When you update your address to a foreign country, the compliance team weighs whether continuing to provide investment services would put the firm on the wrong side of that country’s securities laws. In the European Union, the Markets in Financial Instruments Directive II requires firms offering investment services to EU residents to meet licensing, disclosure, and reporting standards that most U.S. brokerages do not hold and will not pursue for a small number of expat clients.
You will usually see one of three outcomes. The firm places your account in liquidation-only mode, so you can sell but not buy. Or it sends a termination notice giving you 30 to 60 days to transfer your assets. Or, if you ignore the notice, it force-sells the portfolio and mails you a check. None of this comes from a federal law barring Americans from investing while abroad; it comes from the firm’s own compliance stance on foreign regulatory risk.
A few brokerages actively serve expats. Charles Schwab’s international division offers U.S.-domiciled brokerage accounts built for Americans living overseas, with simplified 1099 reporting.1Charles Schwab International. Investing and Brokerage Services for U.S. Expatriates Interactive Brokers is another firm that accepts clients in a wide range of countries. Line up an expat-friendly account before you move, not after your current broker’s letter arrives.
Some expats try to keep a U.S. mailing address through a virtual mailbox. This is risky. Brokerages require a physical residential address under anti-money-laundering rules, and misrepresenting where you live to a financial institution can be treated as fraud. If the firm discovers it, the account closes on their timeline, not yours.
Mutual Funds Freeze; ETFs Usually Don’t
Mutual fund shares are continuously created and redeemed by the fund company itself, so each purchase is effectively a new offering. Fund companies generally register their products for sale only in the United States. Once you move, they typically disable dividend reinvestment and block new purchases. You can hold what you own indefinitely, but the position drifts from your target allocation because you cannot add to it or rebalance within it.
ETFs sidestep this. They trade on secondary exchanges like ordinary stocks, so your brokerage handles the transaction rather than the fund company. As long as the brokerage keeps serving you, you can trade ETFs freely. Many expats convert mutual fund positions into comparable ETFs before leaving, both to preserve trading flexibility and to avoid complications with how their new country would tax the sale later.
Retirement Accounts Stay Open
Your 401(k), traditional IRA, and Roth IRA remain open and under IRS jurisdiction wherever you live. What changes is your ability to contribute and the logistics of taking money out.
Contributions From Abroad
IRA contributions require U.S. compensation. For 2026, the annual limit is $7,500, or $8,600 if you are 50 or older.2Internal Revenue Service. Retirement Topics – IRA Contribution Limits The complication is the Foreign Earned Income Exclusion. For 2026, you can exclude up to $132,900 of foreign earnings from U.S. tax.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The IRS requires you to add back FEIE-excluded amounts when calculating compensation for IRA purposes.4Internal Revenue Service. Individual Retirement Arrangements So earning $80,000 abroad and excluding all of it still leaves you with $80,000 of compensation for IRA limit purposes. Whether contributing makes sense in your overall tax picture is a separate question, but FEIE alone does not automatically disqualify you.
If you work abroad for a U.S. employer and stay on U.S. payroll, your 401(k) generally continues to function with ongoing contributions. Once you leave that employer, the plan administrator may eventually push small balances out. Under current rules, balances between $1,000 and $7,000 can be involuntarily rolled into an IRA chosen by the plan sponsor if you don’t respond to distribution notices. Balances of $1,000 or less may be mailed to you as a check with 20% withheld for taxes.5Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions Keep your contact information current with every plan administrator. Mail that goes unanswered long enough can result in the account being turned over to a state unclaimed property office.
Required Minimum Distributions
At 73, you must begin taking required minimum distributions from traditional IRAs, 401(k)s, and similar tax-deferred accounts. Living abroad does not exempt you. The penalty for a shortfall is a 25% excise tax on what you should have withdrawn, dropping to 10% if you correct it within two years.6Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Set up electronic transfers with your custodian before you leave so you can actually receive the funds.
You Still Owe U.S. Tax on Worldwide Income
The United States taxes its citizens on worldwide income wherever they live. If you hold U.S. citizenship or a green card, you file Form 1040 every year reporting all income from everywhere: wages, dividends, interest, capital gains, rental income, and the rest. That remains true even when your host country also taxes the same income.
Expats with interest or ordinary dividends above $1,500 must file Schedule B, which asks about foreign accounts and trusts.7Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends Under the Foreign Account Tax Compliance Act, foreign financial institutions where you hold accounts report your balances and identity directly to the IRS.8Internal Revenue Service. Summary of FATCA Reporting for U.S. Taxpayers Quietly holding money overseas without the IRS knowing is no longer a workable strategy.
The Foreign Tax Credit
The main tool for keeping the same investment income from being taxed twice is the Foreign Tax Credit, claimed on Form 1116. It reduces your U.S. tax dollar-for-dollar by the foreign tax you paid on the same income, up to a limit.9Internal Revenue Service. Foreign Tax Credit – How to Figure the Credit
That limit is your foreign-source taxable income divided by total worldwide taxable income, multiplied by your total U.S. tax liability. Excess foreign tax paid above the limit carries forward for up to ten years. Investment income like dividends, interest, and capital gains falls into the “passive category” for foreign tax credit purposes.10Internal Revenue Service. Instructions for Form 1116 (2025)
If your only foreign-source income is passive and your total foreign taxes for the year do not exceed $300 ($600 on a joint return), you can claim the credit directly on your return without filing Form 1116.9Internal Revenue Service. Foreign Tax Credit – How to Figure the Credit For most expats with real investment portfolios, the full Form 1116 calculation is unavoidable. You cannot claim FEIE and the Foreign Tax Credit on the same dollars of income, so allocation matters.
The PFIC Trap for Foreign Funds
One of the harshest surprises for Americans abroad is the Passive Foreign Investment Company regime. A PFIC is any foreign-based fund or company that derives most of its income from passive sources or holds mostly passive assets. Almost every foreign mutual fund, foreign ETF, and many foreign holding companies qualify.
If you move abroad and buy a local mutual fund or index fund through a foreign brokerage, you have very likely bought a PFIC. Under the default rules, when you receive an “excess distribution” or sell at a gain, the IRS spreads the gain across your entire holding period, taxes each year’s slice at the highest individual rate that applied in that year (currently 37%), and adds an interest charge on top.11Internal Revenue Service. Instructions for Form 8621 The effective rate can easily exceed 50%.
Two elections can soften this. A Qualified Electing Fund election lets you include your share of the PFIC’s ordinary earnings and capital gains in income each year at ordinary rates, but the fund must provide an annual information statement, and many foreign funds will not. A mark-to-market election lets you treat the shares as sold and repurchased at year-end fair market value, recognizing gain or loss annually. That one is only available for shares regularly traded on a qualifying exchange.11Internal Revenue Service. Instructions for Form 8621
Every PFIC holding needs its own Form 8621 with your return. The cleanest fix is to avoid foreign-domiciled funds entirely and stick to U.S.-domiciled ETFs through a brokerage that still serves expats.
Reporting Foreign Accounts
Any bank or investment account you open in your new country of residence can trigger two U.S. reporting duties that have nothing to do with owing tax on the account. Missing either one can generate penalties that dwarf the underlying tax.
FBAR (FinCEN Form 114)
If the combined value of your foreign financial accounts exceeds $10,000 at any point during the year, you must file a Report of Foreign Bank and Financial Accounts with the Financial Crimes Enforcement Network by April 15, with an automatic extension to October 15.12Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) That covers checking, savings, brokerage, and any other financial account outside the U.S. Filing is electronic only, through the BSA E-Filing system.
Penalties for non-willful violations can reach $10,000 per account per year, adjusted for inflation. Willful violations carry penalties up to 50% of the highest account balance during the year or $100,000 per violation, whichever is greater. Criminal prosecution is possible for deliberate concealment.
Form 8938
Separately, the IRS requires Form 8938 to report specified foreign financial assets above certain thresholds. For expats filing as single, the trigger is $200,000 on the last day of the year or $300,000 at any point during it. For married couples filing jointly, the thresholds are $400,000 and $600,000.13Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets Form 8938 covers a wider range of assets than the FBAR, including foreign stock or securities not held in a financial account, foreign partnership interests, and certain foreign trusts. The two overlap for bank and brokerage accounts, but one does not substitute for the other. Many expats file both.
If You’re Not a U.S. Citizen
Non-citizens who move abroad and become nonresident aliens face a different regime on their U.S. investment income. Instead of filing a full return on worldwide income, they owe a flat 30% withholding tax on U.S.-source dividends, interest, and other periodic payments.14Internal Revenue Service. Fixed, Determinable, Annual, or Periodical (FDAP) Income
Tax treaties often reduce the rate, sometimes to 15% or 0% for certain income types. To get the treaty rate, file Form W-8BEN with your brokerage certifying foreign status and treaty eligibility.14Internal Revenue Service. Fixed, Determinable, Annual, or Periodical (FDAP) Income The form must be renewed periodically; let it expire and the broker will withhold the full 30% on every distribution until you file a new one.
Capital gains are treated more favorably. A nonresident alien present in the U.S. for fewer than 183 days during the tax year generally owes no U.S. tax on gains from selling stocks or other capital assets.15Office of the Law Revision Counsel. 26 U.S. Code 871 – Tax on Nonresident Alien Individuals Cross the 183-day threshold and those gains face a flat 30% tax. Many treaties further reduce or eliminate capital gains tax for residents of the treaty country.
A nonresident alien who inherits a U.S.-based IRA or retirement account generally sees distributions subject to the same 30% withholding rate unless a treaty says otherwise.16Internal Revenue Service. Withholding of Tax on Nonresident Aliens and Foreign Entities File the appropriate withholding certificates before distributions begin.
The Exit Tax If You Renounce Citizenship
Americans who renounce citizenship, and long-term green card holders who formally end residency, may face an exit tax under a mark-to-market regime. The IRS treats all your worldwide assets as sold at fair market value the day before you expatriate.17Office of the Law Revision Counsel. 26 U.S. Code 877A – Tax Responsibilities of Expatriation Any unrealized gain above an exclusion amount, set at a base of $600,000 and adjusted annually for inflation, is taxed as income that year.
This does not hit everyone who leaves. You face the exit tax only as a “covered expatriate,” meaning you meet any one of three tests: a net worth of $2 million or more, an average annual net income tax liability over the prior five years exceeding an inflation-adjusted threshold (recently around $190,000), or an inability to certify five years of full tax compliance before expatriation.
For a covered expatriate, the deemed sale reaches nearly everything: stocks, bonds, real estate, retirement accounts, and other property worldwide. Deferred compensation and interests in certain trusts follow their own rules. You file Form 8854 with the return for the year of expatriation.18Internal Revenue Service. Instructions for Form 8854 (2025) If you have deferred tax or hold interests in nongrantor trusts, the annual Form 8854 filing continues indefinitely.
Anyone weighing renunciation or green card abandonment should model the exit tax well ahead of time. Charitable gifts of highly appreciated assets and accelerating income into pre-expatriation years can reduce the bill, but the planning window is measured in years, not weeks.