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The short answer
Yes. A 401(k) is your money whether you live in Houston or Lagos, and you can leave it, roll it into an IRA or cash it out. Cashing out before 59½ usually triggers a 10% additional federal tax, and once you are a nonresident alien the plan generally withholds 30% of the taxable amount unless a tax treaty sets a lower rate.
Your three options when you leave the US
Leaving your job and the country does not forfeit what you contributed. The vested balance belongs to you. When you separate from your employer you usually choose between three routes, and the plan administrator (the firm named on your 401(k) statements) handles each one.
- Leave it in the plan. Many plans let a former employee keep the balance invested. It keeps growing tax-deferred and you pay nothing until you withdraw.
- Roll it over to an IRA. A direct rollover moves the money to an individual retirement account in your name without tax or withholding, and gives you more control over investments and contact details.
- Cash it out. You take the balance as a payment. This is the route that costs the most, for the reasons below.
The right choice depends on your age, how long you plan to stay in Nigeria, whether you may come back, and whether a US provider will keep servicing an account for someone with a Nigerian address. That last point varies by provider, so ask before you move.
The 10% additional tax before age 59½
The IRS treats a distribution from a 401(k) before age 59½ as an early distribution and adds a 10% additional tax on the part included in your income, on top of ordinary income tax (IRS Topic 558, updated September 2026). The main exceptions that matter to people relocating are:
- You left the employer in or after the calendar year you turned 55 (the separation-from-service exception).
- Total and permanent disability, or terminal illness.
- Substantially equal periodic payments, which require separation from service before payments begin.
- Unreimbursed medical expenses above 7.5% of adjusted gross income.
- A qualified birth or adoption distribution of up to $5,000.
Moving abroad is not itself an exception. If the additional tax applies, you report it with your return; Form 5329 is needed when the code on your Form 1099-R is missing or wrong.
Withholding: it depends on your tax status, not your passport
If you are still a US citizen or green card holder
Cash paid out from a 401(k) that could have been rolled over is an eligible rollover distribution, and the plan must withhold 20% unless you choose a direct rollover. The IRS also says a US person cannot elect no withholding on payments delivered outside the United States (IRS pensions and annuity withholding page, July 2026). Many people who keep a green card after moving to Lagos are still US tax residents, so check your status first; our guide to how US tax residency is decided explains the tests.
If you have become a nonresident alien
Once you are no longer a US tax resident, US-source pension payments are generally subject to withholding at 30% of the taxable portion, or a lower treaty rate claimed on Form W-8BEN, and the plan reports the payment on Form 1042-S (IRS guidance on US-source income paid to nonresident aliens, July 2026). Before relying on a lower rate, check whether a treaty actually covers your situation; our guide to the US–Nigeria tax treaty question explains where to check.
A worked example
Example only. Ada is 41, a green card holder, and has a $40,000 vested 401(k) balance. She cashes it out before flying home.
| Line | Amount |
|---|---|
| Balance paid out | $40,000 |
| 20% withheld by the plan | $8,000 |
| Cash received | $32,000 |
| 10% additional tax due at filing | $4,000 |
| Ordinary federal income tax on $40,000 | Depends on her other income; the $8,000 withheld counts towards it |
If Ada instead rolled the $40,000 directly into an IRA, nothing would be withheld and no additional tax would apply at that point. She could then withdraw later, possibly after 59½, when the 10% charge falls away. If she had given up her green card and become a nonresident alien first, the plan would generally withhold $12,000 (30%) unless a treaty rate applied, and she should ask a tax preparer how the additional tax interacts with a Form 1040-NR.
The Nigeria side
Nigeria may also tax income you receive once you are resident there, and how a lump sum from a foreign pension is treated is a question for a Nigerian tax adviser. Our Nigeria library covers how the RSA pension system works if you plan to start contributing at home. Keep your Form 1099-R or 1042-S: you will need it to show what was taxed in the US.
What to check first
- Your vested balance and the plan's rules for former employees.
- Whether you will still be a US tax resident in the year of withdrawal.
- Whether your age puts you inside the age-55 or 59½ rules.
- Whether your IRA or plan provider allows a Nigerian address.
- Where the money will land, and in which currency.
Where Pryme fits
Pryme does not hold or manage retirement plans. Once retirement money has been paid out to you, a Pryme account holds US dollars alongside naira, so you can keep it in dollars and Swap to naira only when you choose; the app shows the rate and the fee before you approve. Accounts can be opened from any country, and naira deposits are held by a licensed Nigerian microfinance bank. See how the multicurrency account works.
Questions people ask
Can I withdraw my 401(k) from Nigeria?
Yes. Contact the plan administrator, confirm your identity and choose a cash-out or rollover. Withholding and any 10% additional tax apply the same way as if you were in the US, depending on your tax status.
Is there a penalty for cashing out a 401(k) when leaving the US?
Before 59½ there is usually a 10% additional federal tax, unless an exception applies, such as leaving the employer in or after the year you turned 55. Leaving the country is not an exception.
How much tax is withheld on a 401(k) paid to a nonresident alien?
Generally 30% of the taxable portion, unless a tax treaty sets a lower rate claimed on Form W-8BEN.
Should I roll my 401(k) into an IRA before moving to Nigeria?
A direct rollover avoids withholding and tax now, but check that the IRA provider will keep servicing your account with a foreign address. This is information, not tax advice.
Sources
- IRS, Topic no. 558: Additional tax on early distributions from retirement plans other than IRAs (updated 24 Sep 2026) · accessed Oct 2026
- IRS, Pensions and annuity withholding (updated 22 Jul 2026) · accessed Oct 2026
- IRS, Federal income tax withholding and reporting on other kinds of US source income paid to nonresident aliens (updated 23 Jul 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.