How is my 401K taxed in Spain? (Here's what I found out working with an expat tax firm)

One of the biggest concerns my clients have when planning their move to Spain is taxes, and especially how their 401K, IRA, and other U.S. savings will be handled. Navigating this can quickly turn into a nightmare if you're not prepared. Avoiding double taxation, understanding Spain’s wealth tax, and getting your paperwork right is just as important as choosing the perfect city or learning Spanish.

A lot of people love to talk about the "dream" of moving to Spain, but they skip over the hard conversations around taxes, finances, and wealth management that are absolutely key to making the move successful.

I didn’t want my clients to make avoidable mistakes, so I partnered with a leading expat wealth and tax firm to get the real answers. Here's what I learned and if you're thinking about moving too, I promise this will save you a lot of headaches.

What Happens to Your 401K When You Move to Spain

First thing I found out: once you become a tax resident in Spain, any money you withdraw from your 401K is treated as general income.

Spain taxes it at progressive income rates, and depending on your total worldwide income and the region you settle in, that can be as high as 47%.

Even if you're not paying U.S. taxes when you withdraw (because of your age or deferred status), Spain still taxes it.

Bottom line: If you take money out of your 401K while living in Spain, expect to pay Spanish income tax on it.

Quick Tip: If you can, plan withdrawals carefully and work with a tax advisor to stay in a lower bracket.

Got 401K or IRA questions about moving to Spain?

Get a free call from an expert to help manage your savings, investments, and retirement accounts for a smooth transition abroad.

Talk to an expert

Do You Need to Report Your 401K to Spanish Authorities?

One of my big questions was whether I'd have to report my 401K balance on Spain's infamous Modelo 720 (the foreign asset reporting form).

Good news: Generally, you don't have to report a 401K on the Modelo 720 as long as it’s considered a pension product linked to employment.

But you need good documentation proving that it's a pension plan. Otherwise, Spanish tax authorities might view it differently and you could get hit with fines.

Another important note from my conversations with the tax team: if your 401K ever loses its pension classification, for instance, if it becomes fully accessible without age restrictions, it could trigger reporting obligations. This is why regular annual reviews of your financial structure are essential once you become a Spanish resident.

Watch Out: Wealth Tax and Your 401K After Age 55

Here's a sneaky thing I had no idea about until I worked with the expat tax team:

• Once you hit 55 (and can legally access your 401K), the total value of your 401K is counted toward Spain's Wealth Tax.

• Spain taxes your worldwide assets if they go above a certain threshold (€700,000 nationally, but varies depending on the region).

Scenario: If you have €500,000 in your 401K and another €300,000 in other assets, you're now above the threshold and you could owe Wealth Tax every year.

Key takeaway: Even if you don't take money out, your 401K’s balance could push you into Wealth Tax territory once you can access it.

The tax team emphasized that many Americans moving to Spain forget to account for this. Wealth Tax exposure can be mitigated with strategic asset restructuring — but only if planned well before you arrive.

Moving Money to Spain?

Work with a trusted currency expert to lock in the best rates and transfer your savings at the right time. Don't leave thousands on the table.

Get Currency Guidance

What About Roth IRAs and Social Security?

While working through my plan, I also asked about Roth IRAs and U.S. Social Security:

• Social Security benefits are taxed in Spain if you are a tax resident. There are treaties to avoid double taxation, but you have to report it properly.

• Roth IRAs are trickier. They're not automatically seen as "pensions" in Spain, and you might need to declare them. Plus, Spain may not respect the "tax-free" nature of Roths the way the U.S. does.

The tax experts also pointed out that Spain focuses more on the origin and structure of your income than the U.S. tax status of the account. So while a Roth IRA may be tax-free in the U.S., Spain may still apply income or wealth tax depending on how it classifies the underlying assets.

Bottom line: Don't assume what’s tax-free in the U.S. stays tax-free in Spain.

Things I’d Tell Anyone Moving to Spain With a 401K

After working through all this, here's what I'd tell anyone considering a move:

1. Audit Your Retirement Accounts: Know exactly what you have, where it's held, and what access rules apply.

2. Confirm Your 401K's Pension Status: Work with a cross-border advisor to confirm it qualifies under Spanish tax law.

3. Get a Global Wealth Snapshot: Add up your worldwide assets to anticipate possible Wealth Tax exposure.

4. Plan Your Withdrawal Timing: Strategic timing of distributions could lower your tax bill considerably.

5. Understand Reporting Obligations: Be clear about what must be declared on Modelo 720 and when.

6. Work with a Cross-Border Tax Advisor: Seriously, do it before you move, not after.

7. Prepare for Roth IRA and Social Security Taxation: Roth IRAs and Social Security aren't automatically treated tax-free in Spain.

8. Work with a Currency Exchange Expert: Timing your transfers from USD to EUR can save you thousands. For example, when Trump announced tariffs, the dollar swung sharply against the euro. If you move large sums at the wrong time, you could lose a significant amount to poor exchange rates. A trusted currency advisor can help you lock in better rates and transfer your money strategically.

If possible, start structuring your retirement accounts and property holdings 12–18 months before you move. Spain rewards good advance planning.

Got 401K or IRA questions about moving to Spain?

Get a free call from an expert to help manage your savings, investments, and retirement accounts for a smooth transition abroad.

Talk to an expert

Final Thoughts

Taxes were one of the scariest parts of planning my move to Spain. But honestly? Getting real advice changed everything.

If you’re sitting there wondering "How is my 401K taxed in Spain?" — now you know the basics, and a little more.

Partnering with experts made a huge difference for me and my clients. Understanding local tax nuances, having a plan for Wealth Tax, knowing when and how to report your assets, and smartly timing your currency transfers can save you thousands — and a lot of unnecessary stress.

If you want personalized help, I offer planning sessions where we map all this out step-by-step, and if needed, I can connect you with the same trusted expat tax advisors and currency experts I worked with.

Let's make your move a little less overwhelming.