Roth IRAs and non-US investors

[Guest Ric310]

I was wondering if a Roth IRA has anything to do with US citizenship and residency.

I am not a US citizen, but I work here (with a temporary permit). My status is "non immigrant resident".

I intend to open a Roth IRA but in a few years I might have to go back to Europe.

Would I be able to contribute from abroad and also collect the tax-free distribution if by then I am residing overseas?

I know it's a tricky situation, but before committing in what seems to me like a very convenient instrument in the long term, I have to work out any potential problem.

Thanks again,

Ric

[mbozek]

Dont understand your Q. The roth is a way to eliminate taxation on income from retirement benefits under US tax law. If you are only here temporarily it will not affect your taxation at retirement if you live in a foregin country. You need to review the tax laws in your domicile to determine how the roth would be taxed at distribution.

[Guest Ric310]

I understand that I have to check with my country's tax code to determine if I will be taxed when I collect my Roth distribution from the USA.

I just want to make sure that there are no loopholes in the US legislation that regulates Roth IRAs preventing me from contributing/collecting from an overseas country (say a mandatory US residency).

Also I want to make sure that collecting while residing abroad is tax-free (US tax that is) as collecting while being a US resident/citizen.

Thanks,

Ric

[mbozek]

Contributions to a roth are permitted only to the extent you have US comp in the year of the contribution. Under the curent tax law there is no US income tax on earnings on roth contributions that are held for a minimum of 5 years, although the tax law could be changed in future tax years.

[Appleby]

Something else you may want to check on is the type of compensation you receive, and whether that compensation satisfies the requirement for contributing to an IRA. For instance, if you receive W-2 wages as defined in IRS publication 590-see page 7 of the 2004 version at http://www.irs.gov/pub/irs-pdf/p590.pdf

[Guest Ric310]

Publication 590 says that foreign earned income is NOT compensation.

So if I will not have any US compensation in a few years I wil not be able to contribute to any IRAs.