“I'm currently working in California and plan to return to my home country in about 5 years. Does it make sense to max out my Traditional 401(k) now, and then do a Roth conversion ladder gradually each year after I move back and become a nonresident alien with $0 US income?”
You can make the saving decision now without committing to a conversion schedule five years in advance. Leaving California may remove California tax on later retirement payments, but the U.S. federal and destination-country results still need to be accounted for.
The decision turns on your actual tax residency after leaving, whether a treaty protects the particular payment, and what your destination country taxes.
If you become a and a actually exempts the particular pension payment or conversion, annual conversions may be attractive; pension exemptions can exclude lump sums or deferred compensation, so this is a conditional route, not an assumed 0% rate. [IRS Publication 515](https://www.irs.gov/publications/p515)
You can convert eligible pre-tax plan money directly to a Roth IRA, or direct rollover|roll it directly into a traditional IRA and later make Roth conversion|Roth conversions. The pre-tax amount converted is included in income; U.S.-source payments to a nonresident generally face 30% absent a treaty, with the final tax determined under the applicable sourcing rules and return. [IRS Publication 575](https://www.irs.gov/publications/p575); [IRS Publication 590-A](https://www.irs.gov/publications/p590a); [IRS Publication 515](https://www.irs.gov/publications/p515)
After an eligible distribution, a from your 401(k) to a traditional IRA generally defers tax rather than forcing an immediate Roth conversion. This lets you separate the decision to save now from the later decision about conversion timing. [IRS rollover guidance](https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions); [IRS Publication 575](https://www.irs.gov/publications/p575)
A of pre-tax money is itself income. The ordinary no-standard-deduction rule for nonresidents and the U.S.-source retirement-payment rules defeat the shortcut from '$0 U.S. wages' to '$0 U.S. tax.' [IRS Publication 590-A](https://www.irs.gov/publications/p590a); [IRS nonresident tax guidance](https://www.irs.gov/individuals/international-taxpayers/nonresident-figuring-your-tax); [IRS Publication 515](https://www.irs.gov/publications/p515)
California generally does not tax qualifying retirement income received after you truly become a nonresident, but that does not remove federal or foreign-country tax.
These steps keep today's retirement saving separate from the tax decision you will face after moving.
While you work in California
Set your Traditional 401(k) payroll deferral
Elect pre-tax contributions through your employer's plan payroll process. The 2026 basic employee deferral limit is $24,500; any eligible catch-up is separate, and the 2026 Roth-only catch-up rule can apply when relevant 2025 wages exceeded $150,000. [IRS 401(k) overview](https://www.irs.gov/retirement-plans/plan-participant-employee/401k-resource-guide-plan-participants-401k-plan-overview); [2026 limits](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits); [Notice 2025-67](https://www.irs.gov/pub/irs-drop/n-25-67.pdf)
Requirements
Before treating a conversion as nonresident income
Establish your actual tax-residency dates
Apply the federal green-card and presence rules separately from California's domicile and temporary-absence rules. If you remain a U.S. tax resident, do not use the nonresident withholding scenario; if you are still a California resident on an IRA conversion's distribution date, do not assume California's nonresident retirement-income protection applies. [IRS residency-ending rules](https://www.irs.gov/individuals/international-taxpayers/residency-starting-and-ending-dates); [FTB residency rules](https://www.ftb.ca.gov/file/personal/residency-status/index.html); [FTB Publication 1005](https://www.ftb.ca.gov/forms/2025/2025-1005-publication.pdf)
Requirements
After leaving that job
Use a direct rollover if you want to postpone conversion
Ask the 401(k) administrator to send an eligible distribution directly to the traditional IRA, rather than paying it to you. An eligible traditional-to-traditional rollover generally defers income tax; a direct rollover to a Roth IRA instead includes the otherwise taxable pre-tax amount in income. [IRS distribution rules](https://www.irs.gov/retirement-plans/plan-participant-employee/401k-resource-guide-plan-participants-general-distribution-rules); [IRS rollover instructions](https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions); [IRS Publication 575](https://www.irs.gov/publications/p575)
Requirements
Each year you choose to convert
Budget each Roth conversion and its withholding
Convert only the chosen amount from the traditional IRA to the Roth IRA, or use an eligible direct plan-to-Roth rollover. The otherwise taxable amount is included in income. For a treaty benefit that actually applies, provide Form W-8BEN to the U.S. payer before payment; without an applicable exemption, U.S.-source pension payments generally face 30% nonresident withholding, which need not equal the final tax. The specific treaty and destination-country tax cannot be calculated without the country. [IRS Publication 590-A](https://www.irs.gov/publications/p590a); [IRS Publication 515](https://www.irs.gov/publications/p515); [Form W-8BEN instructions](https://www.irs.gov/instructions/iw8ben)
Requirements
For a year in which you are a nonresident
Report the conversion and reconcile tax withheld
Use Form 1040-NR to report applicable U.S. income and claim any excess withholding back; attach Form 1042-S or 1099-R when federal tax was withheld. For a traditional-IRA-to-Roth conversion, complete Form 8606 Part II under the cited form instructions. These are the currently published form rules, not a guessed filing deadline for your anticipated move year. [Form 1040-NR instructions](https://www.irs.gov/instructions/i1040nr); [Form 8606 instructions](https://www.irs.gov/instructions/i8606)
Requirements
You are not the first to go through this. Here is how it went for others who asked the same thing.
u/gorgonzolasandwichr/USExpatTaxesMay 27, 2026
This answer draws on Internal Revenue Service retirement and nonresident-tax publications, IRS form instructions, and California Franchise Tax Board guidance.
IRS 401(k) Resource Guide
Traditional 401(k) employee deferrals are made before federal income tax.
A traditional 401(k) plan allows eligible employees (i.e., employees eligible to participate in the plan) to make pre-tax elective deferrals through payroll deductions.
IRS 401(k) contribution limits
The 2026 basic employee deferral limit is $24,500.
Employee elective deferrals
The limit on employee elective deferrals (for traditional and safe harbor plans) is: $24,500 in 2026,
IRS Notice 2025-67
The preceding-year wage threshold for mandatory Roth catch-up contributions in 2026 is $150,000.
Roth catch-up wage threshold
The Roth catch-up wage threshold for 2025, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in section 408(k) or (p)) for 2026 must be designated as Roth contributions, is increased from $145,000 to $150,000.
IRS 401(k) general distribution rules
Separation from employment is generally an event allowing distribution of 401(k) elective deferrals.
When distributions can be made
You die, become disabled, or otherwise have a severance from employment.
IRS retirement-plan rollover guidance
A departing participant can request a payment directly to another eligible retirement account.
Direct rollover
If you’re getting a distribution from a retirement plan, you can ask your plan administrator to make the payment directly to another retirement plan or to an IRA.
IRS Publication 575 (2025)
An eligible rollover into a traditional IRA generally postpones taxation.
Rollovers
If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can generally defer tax on the distribution by rolling it over to another qualified retirement plan, a traditional IRA, or, after 2 years of participation in a SIMPLE IRA sponsored by your employer, a SIMPLE IRA under that plan.
IRS Publication 575 (2025)
Moving pre-tax qualified-plan funds directly to a Roth IRA does not make them tax-free.
Rollovers to Roth IRAs
You can roll over distributions directly from a qualified retirement plan (other than a designated Roth account) to a Roth IRA. You must include in your gross income distributions from a qualified retirement plan (other than a designated Roth account) that you would have had to include in income if you hadn’t rolled them over into a Roth IRA.
IRS Publication 590-A (2025)
A traditional-IRA-to-Roth conversion includes the otherwise taxable amount in income.
Converting from a traditional IRA to a Roth IRA
You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you hadn’t converted them into a Roth IRA.
IRS LB&I Deferred Compensation of Nonresident Aliens
Certain distributions attributable to U.S. services after 1986 are taxable to nonresidents at graduated rates.
Qualified plan distributions
Distributions with respect to contributions for services rendered by the employee after December 31,1986, are taxed as ECI at graduated rates under IRC 871(b) and 864(c)(6).
IRS LB&I Deferred Compensation of Nonresident Aliens
The IRS describes the U.S.-trust earnings portion of these qualified-plan payments separately from the U.S.-service portion.
Qualified plan earnings
So long as the plan is a U.S. trust, these distributions are treated as U.S.-source FDAP and taxed at 30% under IRC 871(a)(1)(A).
IRS LB&I Deferred Compensation of Nonresident Aliens
Pension withholding can cover the entire U.S.-source portion even where ultimate tax is lower.
Withholding on qualified-plan distributions
The withholding regulations under IRC 1441 provide that the entire U.S.-source portion of a pension distribution (including both “contributions” and “earnings and accretions”) to an NRA is subject to 30% withholding. Amounts withheld in excess of the NRA’s ultimate tax liability may be refundable.
IRS Publication 515 (2026)
Pension treaty exemptions have important payment-type limitations.
Pensions and annuities
The exemption may not apply to lump-sum payments.
IRS Publication 515 (2026)
A treaty can provide a pension exemption, but the applicable treaty must actually be identified.
Pensions and annuities
Most tax treaties provide an exemption from tax on non-government pensions and annuities.
IRS Publication 515 (2026)
Without a treaty exemption, the default withholding on a U.S.-source pension distribution is 30%.
Pensions and annuities
For purposes of chapter 3 withholding, in the absence of a treaty exemption, you must withhold at the statutory rate of 30% on the entire distribution that is from sources within the United States.
IRS pensions and annuity withholding
The IRS applies nonresident withholding rules to pension and annuity distributions unless a treaty exemption applies.
The distributions to NRAs are generally subject to withholding under IRC 1441 (related to withholding of tax on NRAs), unless a tax treaty withholding exemption applies.
California FTB Publication 1005 (2025)
California generally does not tax covered retirement income received once the recipient is a nonresident.
Nonresidents and retirement income
California does not impose tax on retirement income received by a nonresident after December 31, 1995.
California FTB Publication 1005 (2025)
For a traditional-IRA-to-Roth conversion, California focuses on residency on the distribution date.
Roth IRA conversions by part-year residents
The taxable amount of a distribution from a traditional IRA (that is being converted to a Roth IRA in 2025) is included in your California source income only if you were a resident of California on the date of the distribution.
California FTB residency-status guidance
A temporary absence does not necessarily end California residence.
Residents
Domiciled in California, but outside California for a temporary or transitory purpose
IRS residency starting and ending dates
A green-card holder cannot assume tax residence ends merely by departing.
Green card test
However, you are still considered to be a resident of the United States for U.S. income tax purposes, until you:
IRS Nonresident—Figuring Your Tax
Nonresident aliens generally cannot rely on the ordinary standard deduction to shelter small conversions.
If you are a nonresident of the U.S., you cannot claim the standard deduction.
Instructions for Form W-8BEN
A nonresident claiming appropriate withholding treatment gives Form W-8BEN to the payer before payment.
When to provide Form W-8BEN
Provide Form W-8BEN to the withholding agent or payer before income is paid or credited to you.
Instructions for Form 1040-NR (2025)
The nonresident return instructions identify the payment statements to attach when federal tax was withheld.
Pensions and annuities
Attach Form 1042-S or 1099-R to Form 1040-NR if any federal income tax was withheld.
Instructions for Form 8606 (2025)
Form 8606 Part II reports traditional-IRA-to-Roth conversions under the cited year's instructions.
Who must file
Complete Part II if you converted part or all of your traditional IRAs to a Roth IRA in 2025.
IRS Publication 590-B (2025)
Each Roth conversion has a separate five-year early-withdrawal period.
Early distributions of converted amounts
A separate 5-year period applies to each conversion and rollover.
These are the official rules in the cited publications and tax-year materials as available on October 5, 2026; rules can change before your planned move.
This is general information about official processes, not legal advice, and SettleKit is not a law firm.
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