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The short answer
Taking money out of a 401(k) before age 59½ normally adds a 10% US tax on top of income tax, unless an exception applies, so many returnees leave the account invested. US citizens can generally keep receiving Social Security in Nigeria; Nigerian citizens who are not US citizens generally need at least 40 credits or 10 years of US residence for payments to continue, and non-resident non-citizens have 25.5% of the benefit withheld for US tax.
The two questions every returnee asks
If you worked in the United States and are moving back to Lagos, Abuja or anywhere else in Nigeria, two US retirement pots are usually in play: the 401(k) you built through an employer, and your Social Security record built from payroll taxes. They follow different rules. The 401(k) is your money in an investment account; Social Security is a government benefit that depends on your record, your citizenship and where you live.
Your 401(k): leave it, roll it or cash it
The IRS says early withdrawal normally means taking money from a plan such as a 401(k) before age 59½, and that you may have to pay an additional 10 percent tax on the withdrawal. The same IRS page says there are exceptions, naming certain medical expenses and disability, and that plan exceptions differ from IRA rules. It also says rollovers are not subject to income tax, and that you must report what you withdrew.
| Option | What happens | Points to weigh |
|---|---|---|
| Leave it with the plan | Stays invested in dollars | Check the plan allows former employees with a foreign address to keep accounts |
| Roll over to an IRA | Moves to an individual account; a rollover is not taxed | Some US providers restrict accounts for non-US addresses; ask before moving |
| Cash it out before 59½ | Paid out after withholding | Usual income tax plus the 10% additional tax, unless an exception applies |
| Wait until 59½ | Withdraw without the additional tax | Income tax still applies to taxable withdrawals |
Worked example: what cashing out can cost
Example only. Kemi, aged 41, has $40,000 in her 401(k) and wants the cash for a house in Ibadan. If no exception applies, the additional tax alone is 10% of $40,000, which is $4,000. Ordinary US income tax on the $40,000 comes on top, at whatever rate applies to her in that year. If her combined US cost were, say, 25%, she would keep $30,000 of the $40,000. Leaving it invested costs nothing today and keeps the money in dollars.
Social Security: can payments come to Nigeria?
The Social Security Administration's publication Your Payments While You Are Outside the United States (April 2026) sets the rules. In short:
- US citizens can keep receiving payments abroad if they are eligible and live in a country where payments can be sent. Nigeria is not on the Treasury or Social Security restriction lists in that publication.
- Nigerian citizens who are not US citizens, receiving benefits on their own work record, can have payments continue if they earned at least 40 credits or lived in the US for at least 10 years, according to the publication.
- Non-citizens who meet no continuation condition have payments stopped after six full calendar months outside the US. To restart, they must return and stay in the US for a full calendar month.
- Dependants and survivors who are not US citizens may face extra residency tests, generally five years in the US during the family relationship.
The SSA's online Payments Abroad Screening Tool asks a few questions and shows whether payments would continue, stop after six months or face country restrictions. Use it before you move.
US tax withheld from benefits
For non-citizens who are not US permanent residents, the SSA publication says 30% is withheld from 85% of the benefit, which is 25.5% of the monthly amount. Countries with tax treaties can reduce this, but the IRS treaty list (updated 3 January 2026) has no US-Nigeria income tax treaty, so the 25.5% generally applies to Nigerian citizens living in Nigeria.
How the money reaches you
The SSA can pay by direct deposit to an account in a country that has an international direct deposit arrangement with the US. The publication we read does not say whether Nigeria is on that list, so ask the SSA or the Federal Benefits Unit that covers Nigeria. Some beneficiaries also receive periodic questionnaires to confirm they are still eligible; the publication sets out who receives them.
Nigerian tax once you are back
Nigeria taxes residents on worldwide income (PwC, reviewed 29 May 2026), and you become resident if, among other tests, you spend 183 days or more in Nigeria in a 12-month period. Whether and how Nigeria taxes a US pension withdrawal or Social Security benefit should be checked with the Nigeria Revenue Service or a tax adviser. Our guide to the 183-day residency rule and US tax for green card holders cover the background.
What to check first
- Run the SSA Payments Abroad Screening Tool with your citizenship and record.
- Ask your 401(k) plan whether a Nigerian address is allowed.
- Get the tax cost of any early withdrawal in writing before you decide.
- Confirm how benefits can be paid into an account you control.
- Keep a US mailing address or online access for statements and questionnaires.
Where Pryme fits
If dollar income lands in Nigeria, a Pryme multicurrency account keeps USD as USD with its own local details, and Swap converts to naira only when you choose, with the rate shown first.
Questions people ask
Can I collect Social Security if I move back to Nigeria?
US citizens generally can. Nigerian citizens who are not US citizens generally need at least 40 credits or 10 years of US residence for payments to continue, per SSA Publication 05-10137 (April 2026). Use the SSA screening tool for your case.
What is the penalty for withdrawing 401(k) early?
An additional 10% tax on the withdrawal before age 59½, on top of income tax, unless an exception applies (IRS).
Is there a US-Nigeria tax treaty?
No. The IRS treaty list updated January 2026 does not include Nigeria, so treaty reductions on withholding do not apply.
Can I keep my 401(k) after leaving the US?
Often yes, but check with your plan. Some providers restrict accounts with foreign addresses.
Sources
- IRS: Tax rules on early withdrawals from retirement plans (reviewed 29 May 2025) · accessed Oct 2026
- Social Security Administration: Your Payments While You Are Outside the United States, Pub. 05-10137 (Apr 2026) · accessed Oct 2026
- Social Security Administration: Payments Abroad Screening Tool · accessed Oct 2026
- IRS: United States income tax treaties A to Z (updated 3 Jan 2026) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, individual residence (reviewed 29 May 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.