Cross-Border Investing: What Changes When US Expats Move Abroad

US investment accounts do not automatically follow a move abroad. Custodians have their own policies for international clients, and many of them are more restrictive than most people expect.

In this episode, Arielle Tucker, CFP®, EA sits down with Otto Rivera, EA, CFP®, founder of Mindful Wealth Planning and Emergent Tax Services. Otto spent years at Charles Schwab before becoming both an IRS Enrolled Agent and a CFP®, a combination that gives him a working view of custodial policy, tax law, and financial planning that most cross-border advisors cannot offer from a single seat.

The conversation covers what custodians actually do when a foreign address goes on file, why non-US residents lose access to mutual funds and sometimes US ETFs, how the current US dollar policy is affecting Americans spending in foreign currency, and what holding euros or euro-denominated sovereign bonds through a US custodial account actually looks like in practice. Also covered: the PFIC trap, Schwab's 10% withholding rule on IRA distributions and Roth conversions taken abroad, and what cross-border divorce involving a US ERISA retirement plan actually requires legally.

Key Takeaways

What happens to US investment accounts when moving abroad

Every custodian sets its own policy for international clients — and those policies are not governed federally. Some will require accounts to be closed and assets moved within 90 days. Others allow accounts to stay open but restrict future purchases. Non-US residents generally cannot buy new mutual funds. Some custodians block retail access to US ETFs entirely, requiring a registered investment advisor to execute trades. Charles Schwab exited Italy four years ago and gave account holders 90 days to close and move assets. These decisions can happen again, at any custodian, at any time.

Currency risk and the US dollar

A US dollar-denominated portfolio creates a daily exchange rate drag for anyone spending in euros or another local currency. The current US dollar policy is widening that gap for Americans abroad. Some custodians can hold foreign currency and pay dividends in local currency — but most will not, and most advisors will not raise the question. Asking whether a custodian can hold euros or facilitate investment in European sovereign bonds paying in local currency is worth doing before and after a move.

The PFIC problem

US citizens who invest through foreign financial institutions risk holding Passive Foreign Investment Company assets without realizing it. PFIC status triggers complex annual tax reporting and punitive treatment on gains and distributions. For most US expats, the practical answer is keeping investments in US custodial accounts where reporting is clean, costs are lower, and compliance is straightforward.

When added complexity makes sense

For investors building toward a first million, low fees and simplicity tend to win. Vanguard ETFs are available in the US at expense ratios as low as 0.03%, compared to 1–1.5% for comparable products in Europe. Multi-custodial structures, euro-denominated assets, and direct indexing become worth considering as net worth grows and risk management priorities shift. Before that point, added complexity typically costs more than it returns.

The 10% withholding rule on IRAs and Roth conversions abroad

Schwab withholds 10% on IRA distributions and Roth conversions executed while the account holder lives outside the US. This is an internal Schwab policy — not a federal law. The withheld amount is applied as a credit at tax time, but because it is deducted from the conversion itself, there is a real reduction in the amount converted and compounded. Most advisors are not aware of this rule.

Cross-border divorce and ERISA retirement plans

A foreign divorce decree is not sufficient to divide US retirement plan assets. Because US plans are governed by ERISA, a separate legal process in a US state court is required to domesticate the foreign decree before assets can be split. This involves establishing legal nexus, engaging a US attorney in the appropriate state, and completing a process most domestic advisors and many cross-border advisors have never handled.

Why a domestic US advisor may not be enough

An advisor who does not have clients in a given country of residence and is not tracking local tax law there may give advice that is sound from a US perspective but creates problems at the first tax filing in the new country. This is one of the most consistent and costly patterns Otto sees with new clients who moved abroad while keeping a domestic US advisor.

Frequently Asked Questions

What happens to brokerage accounts when moving abroad?

It depends on the custodian. Some will keep accounts open with a foreign address on file. Others require accounts to be closed and assets transferred, sometimes within 90 days. Policies vary by institution, by country of destination, and sometimes by account size. They can also change without notice. Asking each custodian hypothetically — before a move is confirmed — is the most practical way to assess the situation early.

Can US expats still invest in ETFs?

ETFs already held can generally stay in the account. Whether new purchases are permitted depends on the custodian and country of residence. Some custodians restrict retail clients abroad from buying US ETFs and require trades to go through a registered investment advisor. Mutual funds are more broadly restricted — non-US residents typically cannot purchase new shares regardless of custodian.

What is a PFIC and why does it matter?

A Passive Foreign Investment Company is a foreign corporation that earns most of its income passively — a category that includes most foreign mutual funds and many products sold through non-US financial institutions. US citizens holding PFICs face annual reporting requirements and punitive tax treatment on gains. For most US expats, avoiding PFICs by staying within US custodial accounts is the most cost-effective approach.

Is it worth keeping US investment accounts after moving abroad?

For most US citizens, yes. US tax obligations on worldwide income continue regardless of country of residence. US custodial accounts offer low-cost index fund access, straightforward 1099 reporting, and a simpler compliance picture than investing through foreign institutions. The cost advantage of investing in the US does not disappear with a change of address.

How does a Roth conversion work differently from abroad?

Schwab withholds 10% on Roth conversions executed while the account holder lives outside the US. This reduces the converted amount and cannot be offset by paying from a separate account. The withheld amount comes back as a tax credit, but the opportunity cost of the smaller conversion is real.

Find a Vetted Expat Advisor

Find a vetted cross-border financial advisor or tax professional specializing in US expat investing and tax planning at the Passport to Wealth Directory.

Qualified professionals serving US expats are welcome to apply to join the directory.