Foreign Pensions Explained: How US Expats Are Taxed on Overseas Retirement Accounts

Many US expats assume that foreign pensions work like US 401(k)s or IRAs.

Unfortunately, they don’t — at least not under US tax law.

Foreign retirement accounts are one of the most misunderstood (and misreported) areas of US expat taxes.

For a full foundation, see our main guide:
👉 /complete-guide-us-expat-taxes

What Counts as a Foreign Pension?

A foreign pension may include:

• Employer-sponsored retirement plans

• Mandatory government pension schemes

• Private retirement savings accounts

• Foreign superannuation or provident funds

Even if the plan is “tax-free” locally, it may still be taxable in the US.

Are Foreign Pensions Taxable in the US?

It depends on:

• The country

• The type of pension

• Applicable tax treaties

• How contributions and growth are treated

Some pensions are taxed:

• When contributions are made

• As they grow

• When distributions occur

There is no universal rule.

Tax Treaties and Foreign Pensions

Some US tax treaties provide:

• Deferral of pension income

• Favorable tax treatment

• Partial exclusions

But treaties are specific and technical — assumptions often lead to errors.

Treaties also do not override reporting requirements.

Reporting Requirements You Cannot Ignore

Foreign pensions may trigger:

• FBAR reporting

• FATCA Form 8938

• Income reporting on your tax return

Learn more here:
👉 /fbar-foreign-bank-account-reporting-expats
👉 /fatca-form-8938-expats

PFIC Risk Inside Pensions

Some foreign pensions hold:

• Foreign mutual funds

• ETFs

• Investment products classified as PFICs

This can silently create severe US tax issues.

Learn more:
👉 /pfic-foreign-investments-us-expats

Common Pension Mistakes Expats Make

Typical errors include:

• Assuming pensions are tax-deferred

• Not reporting pension accounts

• Ignoring PFIC exposure

• Relying solely on local advisors

These mistakes often compound over time.

Fixing Pension Reporting Errors

If pension accounts or income were not reported correctly, options may exist under:
👉 /streamlined-filing-compliance-procedures-expats

Early action matters.

Practical Takeaway

Foreign pensions require country-specific analysis, not generic advice.

Exemplary helps expats understand how their foreign retirement plans interact with US tax law — and how to stay compliant without overpaying.