Picture yourself wrapping up a client call on a rooftop in Medellín — laptop open, coffee gone cold, three time zones behind you. The one thing that should never feel stuck back in the States is your retirement money. And here's the good news: as a US nomad you can defer up to $24,500 into a solo 401(k) as an employee, stash up to $7,500 in an IRA, and layer catch-ups on top if you're 50 or older — all 2026 numbers straight from IRS Notice 2025-67. The fine print the Instagram captions skip? If you exclude your foreign earned income with the Foreign Earned Income Exclusion (FEIE), that same income can't bankroll your IRA. Keep reading for the moves that let your nest egg grow — historically, broad US stocks have returned roughly 7% to 10% a year — while you chase sunsets from Bali to Barcelona.

Keep Your Existing 401(k) Where It Is

If you already have a 401(k) with a US-based employer, you can usually leave it invested with the same custodian while you work from anywhere with Wi-Fi. You just can't add new money unless you're still earning US-source wages (source: https://www.irs.gov/publications/p54).

Leave It Invested

Your money stays in the same funds, keeps growing tax-deferred, and you avoid the hassle of moving assets across borders.

  • No paperwork or transfer fees
  • Investment options remain unchanged
  • No new employer match after you leave — matches stop the day you do

Rollover to a Traditional IRA

Moving the balance to a traditional IRA gives you more investment flexibility and can simplify your life if you've collected old 401(k)s like passport stamps.

  • Access to a broader range of stocks, bonds, and ETFs
  • Potential for lower expense ratios
  • Still tax-deferred until withdrawal

Cash Out (Not Recommended)

A lump-sum distribution is the taxman's favorite kind of nomad move. Unless you're 59½ or older, you convert the whole balance to ordinary income and hand over a 10% early-withdrawal penalty on top.

  • Immediate ordinary income tax on the full amount
  • 10% early-withdrawal penalty if under 59½
  • Permanent loss of tax-deferred growth

Pros and Cons of Leaving Your 401(k) with a US Custodian

  • Pros: No immediate tax event, continued employer-plan protections, simple to manage
  • Cons: Limited to the plan's investment menu, no new contributions without US-source wages, possible inactivity fees

IRA Options for Nomads: Traditional vs Roth

Here's the correction most nomad-advice blog posts get wrong. To contribute to any IRA — traditional or Roth — you need taxable compensation. And IRS Pub 590-A is blunt about what doesn't count: any amount you exclude from income, other than combat pay, is NOT compensation (source: https://www.irs.gov/publications/p590a). Foreign earned income you exclude via the FEIE, and housing costs you exclude, create exactly zero IRA contribution room.

So the rule splits cleanly:

  • Full-FEIE nomads: if you exclude all your foreign earned income, your contribution basis is $0 — no IRA contribution allowed that year (combat pay is the lone exception).
  • Partial-FEIE nomads: only the earned income you did NOT exclude counts as compensation — US-source wages, income above the exclusion cap, or foreign income you chose not to exclude. That slice can fund your IRA.

Contribution Limits and Deadlines (2026)

For the 2026 tax year you can put up to $7,500 into an IRA — or $8,600 if you're 50 or older (the $7,500 base plus a $1,100 catch-up). Contributions for the 2026 tax year can be made through the filing deadline of the following year: April 15, 2027.

  • $7,500 limit (under 50)
  • $8,600 limit (50+, base + $1,100 catch-up)
  • Deadline: April 15, 2027 for the 2026 tax year

Choosing Between Traditional and Roth

Your decision hinges on whether you want a tax break now or tax-free withdrawals later — and on how your MAGI lands, which for IRA purposes is computed before the FEIE (more on that below).

FeatureTraditional IRARoth IRA
Tax treatment of contributionsPotentially deductible (depends on MAGI & workplace plan)After-tax (no deduction)
Tax treatment of withdrawalsTaxed as ordinary incomeTax-free if qualified
Income limits for contributionsNo limit to contribute, but the deduction phases outContribution eligibility phases out at higher MAGI
Required Minimum Distributions (RMDs)Start at 73 (75 if born 1960 or later, per SECURE 2.0)No RMDs during your lifetime

When a Traditional IRA Makes Sense

If you expect to be in a lower tax bracket in retirement — and you can still deduct — going traditional shaves dollars off your current tax bill. Just track the deduction phase-out: for 2026 it runs $81,000–$91,000 of MAGI for a single filer covered by a workplace plan, and $129,000–$149,000 for married filing jointly when both spouses are covered.

  • Potential deduction reduces current taxable income
  • Good if you anticipate lower retirement taxes
  • No income ceiling for contributing

When a Roth IRA Is the Better Bet

If you anticipate higher taxes later — or you want tax-free growth — a Roth locks in today's rates. For 2026 the phase-out range is $153,000–$168,000 of MAGI for single filers and heads of household, $242,000–$252,000 for married filing jointly.

  • Tax-free withdrawals in retirement
  • No RMDs, letting the account grow longer
  • Ideal if you expect to earn more in the future

Boost Savings with a Solo 401(k) (for Self-Employed Nomads)

Self-employed US nomads get the biggest lever: a solo 401(k) lets you contribute both as employee and as your own employer. For 2026 you can defer up to $24,500 as employee, add an $8,000 catch-up if you're 50 or older ($11,250 if you're 60–63), and contribute up to 25% of compensation as employer — all inside a $72,000 annual-additions cap (IRC 415(c)) with catch-ups on top (source: https://www.irs.gov/retirement-plans/one-participant-401k-plans).

Open the Account

Pick a provider that offers a solo 401(k) with low fees and a solid lineup of index funds or ETFs.

  • Compare providers: Fidelity, Vanguard, Charles Schwab, Rocket Dollar
  • Verify no account-maintenance fees
  • Ensure the plan allows both employee and employer contributions

Determine Your Compensation

Here's the FEIE rule that catches self-employed nomads (Pub 54 / IRC 401(c)(2)): self-employment income you exclude via the FEIE cannot be your contribution base. Your base is your net self-employment earnings after deducting half your self-employment tax and any retirement contributions — and after removing anything you excluded.

  • Use Schedule SE to calculate net earnings
  • Subtract 50% of self-employment tax
  • Subtract FEIE-excluded income — it does not count as compensation

Make Employee Contributions

You can defer up to $24,500 of your compensation into the solo 401(k) for 2026, plus an extra $8,000 catch-up if you're 50+, or $11,250 if you're 60–63.

  • Electronically transfer funds from your business account
  • Choose pre-tax (traditional) or Roth (if your plan offers it)
  • Contributions reduce your taxable self-employment income

Add Employer Contributions

As the employer, you can contribute up to 25% of compensation, limited by the overall 415(c) annual-additions cap of $72,000 for 2026 — with catch-up contributions stacking on top.

  • Calculate 25% of your net self-employment income
  • Ensure total (employee + employer) stays under the annual limit
  • Contributions are tax-deductible for your business

This is the section a hundred blog posts get backwards, so pay attention. For IRA purposes, Pub 590-A computes your modified adjusted gross income (MAGI) without the FEIE and the foreign housing exclusion — in other words, MAGI ADDS those amounts back rather than being lowered by them. That flips the usual advice: the FEIE doesn't shrink you into Roth eligibility; it can push you out of it.

Track Your Foreign Earned Income

Maintain a monthly log of invoices, bank deposits, and any US-source payments so you know exactly what you're excluding.

  • Use a simple spreadsheet or income-tracking tool
  • Separate US-source vs foreign-source income
  • Keep copies of contracts and invoices for IRS proof

Calculate Your MAGI Accurately

MAGI starts with your adjusted gross income (AGI) then adds back the foreign earned income exclusion and the foreign housing exclusion or deduction — it does not subtract them.

  • AGI = total income minus above-the-line deductions
  • Add back the FEIE and any foreign housing exclusion/deduction
  • The result is your MAGI for IRA purposes

Adjust IRA Contributions Accordingly

If your IRA MAGI falls within the 2026 Roth phase-out range — $153,000–$168,000 single/head of household, $242,000–$252,000 married filing jointly — you may need to reduce or eliminate direct Roth contributions. And because your MAGI adds the FEIE back, a full-FEIE nomad's true MAGI can land above those thresholds even with modest foreign income.

  • Check the IRS phase-out tables each year
  • Consider a "backdoor" Roth if direct contributions are barred
  • For traditional IRAs, watch the deduction phase-out if you (or a spouse) have a workplace plan

Use Tax Software or a Pro Who Gets Nomads

General-purpose tax prep can mishandle the FEIE and foreign tax credits; a specialist saves you headaches and potential penalties.

  • Look for a CPA or Enrolled Agent with US-expat expertise (Pub 54)
  • Use expat-specific tax software, or hire a qualified US-expat pro
  • Keep records for at least seven years in case of an audit

The PFIC and Foreign-Account Minefield

Living abroad usually means foreign accounts — and foreign accounts come with extra paperwork the IRS takes very seriously.

  • FBAR (FinCEN Form 114): if the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the calendar year, you must file. The threshold applies across all accounts combined, not per account, and the penalty for a willful non-file can start at $100,000 or half the account balance — whichever is greater.
  • FATCA (Form 8938): a separate disclosure, filed with your US return when the value of specified foreign financial assets crosses set thresholds. An FBAR is not a FATCA filing and vice versa — you may owe both.
  • The PFIC trap (Form 8621): foreign mutual funds — including the ubiquitous Irish-domiciled UCITS ETFs — count as Passive Foreign Investment Companies. Holding them in any brokerage, US or foreign, triggers Form 8621 and punitive tax treatment (interest and penalties that can swallow a decade of gains). If you're tempted by a euro-denominated ETF, run the tax math first; it rarely works out.
  • The relief valve: a US-custodied 401(k) or IRA is NOT a foreign financial account, so it doesn't trip the FBAR or FATCA thresholds simply by existing.

Bottom Line

  • Keep an old 401(k) invested abroad — but new contributions need US-source wages, and no new employer match accrues once you leave.
  • IRA contributions require taxable compensation: if you exclude all foreign earned income via the FEIE, your contribution basis is $0 (combat pay excepted).
  • For IRA phase-outs, MAGI adds the FEIE back — it never lowers your IRA MAGI.
  • Self-employed nomads can stack $24,500 (plus catch-ups) and up to 25% employer contributions in a solo 401(k), capped at $72,000 total for 2026 — but FEIE-excluded self-employment income can't be the base.
  • Foreign accounts mean FBAR and FATCA filings, and UCITS funds can be a PFIC nightmare — keep retirement money in US-custodied accounts.
  • When in doubt, consult a tax pro who speaks both nomad and IRS.

FAQ

Can I contribute to a 401(k) if I'm paid entirely in foreign currency?

No. New 401(k) contributions generally require US-source wages; a foreign-source salary doesn't count, even if it's deposited into a US bank. (And if that foreign salary is also FEIE-excluded, it can't fund an IRA either.)

Does the FEIE affect my ability to deduct a traditional IRA contribution?

Yes — and mostly in the direction you wouldn't expect. Excluded foreign earned income isn't "compensation" under Pub 590-A, so a full-FEIE nomad has $0 contribution basis in the first place. And when you do have non-excluded compensation, the IRS computes your IRA MAGI by adding the FEIE back — so the exclusion can raise (not lower) your MAGI and phase you out of Roth eligibility or the IRA deduction if you or your spouse have a workplace plan.

Is a solo 401(k) worth the paperwork for a part-time freelancer?

If your net self-employment income is under $10,000, the administrative burden may outweigh the benefits; a SEP IRA or SIMPLE IRA could be simpler. Above that threshold, the solo 401(k)'s higher contribution limits often justify the effort — provided your contribution base isn't wiped out by the FEIE.

This article is for educational purposes only and is not tax or legal advice. US tax rules for citizens living abroad are complex and change every year — IRS Pub 54 and Pub 590-A are the primary references, and you should have a qualified US-expat tax professional review your specific situation before acting on anything here.