Roth or Traditional When You Might Leave

Every paycheck asks a question most visa holders answer by default: should retirement contributions go in pre-tax (traditional) or after-tax (Roth)? For someone who will retire in the US, the answer turns on today's tax rate against the rate in retirement. For someone who might leave, the later rate is set by different rules: US withholding on payments to nonresidents, a tax treaty, and the tax law of the country you move to. This chapter lays out how each side of that comparison works, with your current rate computed from the 2026 brackets, so you can make the choice deliberately.

The rule that decides it, and why leaving changes it

A traditional contribution saves tax at your rate today and is taxed when withdrawn. A Roth contribution is taxed today and, once the rules are met, comes out tax-free. If the rate were the same at both ends, the two would leave you with the same spending money. The winner is whichever side has the lower rate.

For a resident who stays, the later rate is the US rate in retirement. For someone who leaves, the later rate is a combination of up to three things:

• US tax on the withdrawal as a nonresident, which follows special rules described below.
• A treaty, which can lower or remove the US tax on pension payments to residents of the other country.
• Tax in your new country, which may tax the payment as income, may give credit for US tax paid, and may or may not recognize a Roth as tax-free.

That is why there is no single answer for visa holders. But the pieces can be estimated.

Your rate today

Your marginal rate today is the rate a traditional contribution saves. It comes from your taxable income, filing status and the 2026 brackets, plus your state's rate.

A single filer with $150,000 of wages has $133,900 of taxable income after the $16,100 standard deduction, owes about $24,734 of federal income tax, and is in the 24.0% bracket. Every traditional contribution at that income saves federal tax at 24.0%, plus state tax.

Contributing the full $24,500 employee limit as traditional brings federal tax down to about $18,854, from $24,734, and the filer stays in the 24.0% bracket.

In a low-income year, such as early-career pay or a year with a long gap between jobs, the tax is about $3,220 and the bracket is 12.0%. A traditional contribution saves little in a year like that, which is the classic case for Roth. These examples assume a full-year resident filing as single; a dual-status year, when you arrive or leave, follows different rules and gets no standard deduction (IRS Publication 519, chapter 6).

Your rate later, if you leave

Publication 519 sets out how the US taxes retirement payments to a nonresident, and the rule has two parts.

1. The part from your US work is taxed at graduated rates. Pension and retirement distributions attributable to personal services performed in the US after 1986 are effectively connected income "to the extent attributable to contributions," taxed on Form 1040-NR at the ordinary graduated rates. Nonresidents cannot claim the standard deduction, so that tax starts from the first dollar.
2. The rest is subject to a flat 30%. Payments that are not effectively connected, which by the rule above can include the growth on your contributions, are taxed at 30% unless a treaty lowers the rate.

In practice the plan usually withholds 30% from the whole payment unless you give it Form W-8BEN claiming a treaty rate, or ask, on Form W-8BEN or Form 8233 before the payment, for graduated-rate withholding on the part from US services (Publication 519). The final tax is settled on Form 1040-NR, which can produce a refund. Before age 59½, an additional 10% tax applies to early distributions whatever your residence, with the same exceptions as for anyone else.

Treaties. Many US tax treaties have a pensions article that can lower or remove US tax on pension payments to residents of the other country. Whether a particular 401(k) or IRA payment falls under it, and in what form (a lump sum is sometimes treated differently from periodic payments), depends on the wording of each treaty. Read the article and the Treasury technical explanation on the IRS treaty page for your country rather than relying on a summary.

Your new country. If your new country taxes the payment and gives credit for US tax, your effective rate is roughly the higher of the two. If it does not credit US tax, you could pay both.

What a Roth does for someone who leaves

A Roth IRA or Roth 401(k) can be a strong choice for someone who leaves, for three reasons and with one important caveat.

• Qualified withdrawals owe no US tax, whatever your residence. Qualified means age 59½ or later and at least five years since your first Roth contribution (for a Roth IRA), with similar rules for a Roth 401(k).
• No withholding at payout on qualified withdrawals, so the drag described in chapter 3 does not apply to that part of the portfolio.
• Contributions to a Roth IRA can come out at any time without US tax or penalty, which gives flexibility if plans change.

The caveat: your new country may not treat the Roth as tax-free. Some countries tax the growth inside it once you are resident, or tax withdrawals as income, because their law or their treaty with the US does not recognize Roth accounts. If that is true for your country, the US tax you paid up front buys less than it seems.

There are also limits. You can contribute up to $7,500 a year to IRAs in 2026, and the amount you can put into a Roth IRA starts to fall once modified adjusted gross income passes $153,000 for a single filer. A Roth 401(k), if your plan offers one, has no income limit, and the backdoor Roth calculator shows the route around the IRA limit.

How to choose

No rule fits everyone, but some patterns hold.

• Low-income years favor Roth. Early-career pay, a year with a long gap between jobs, a year of part-time work: the tax saved by traditional contributions is small. (If you are still a nonresident for tax, as many students on OPT are, your return follows the nonresident rules in Volume 1 of this shelf, but the logic is the same. Publication 519 does not address Roth IRA contributions by nonresidents directly, so confirm eligibility before opening one; a Roth option inside your employer's 401(k) does not raise that question.)
• High-bracket years can favor traditional, even if you might leave. Saving tax at 24% or more now, against a later rate that could be lower under graduated rates or a treaty, often comes out ahead. It comes out behind if the money will end up taxed at 30% in the US and again at home with no credit.
• Not knowing favors splitting. A mix of pre-tax and Roth money lets you choose later which account to draw from, in whichever country you end up in.
• Low-income years after leaving work can be used. If you stop working in the US before leaving, a year with little income can be a good year to convert some pre-tax money to Roth while you are still a resident. The Roth conversion calculator estimates the tax on a conversion.