If I participate in a foreign pension plan, what do I need to know?
Bad news first. Foreign pension plans generally will not qualify for special tax treatment like a U.S. 401(k) or traditional IRA. The contributions you make to the plan are not tax deductible for U.S. income tax purposes and, in certain situations, you may be taxed on the annual growth in the plan - even if it is not distributed to you! In addition, employer contributions to those plans may also be taxable in the year of contribution.
Now the good news, if you are an expat in Canada, the UK, Germany, Belgium, or the Netherlands, you may not need to worry about these rules because you are covered by an income tax treaty. But, additional U.S. tax reporting obligations may apply to your foreign pension income.
Take a deep breath and don't worry! We are here to help and make sure you are prepared for retirement.
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