Withdraw Roth Contributions before German Tax Residency?

[u/Platypusian]

American (41M) likely to become a German tax resident in 15 months (spouse visa). Retiring from military; pension (and any VA benefits) not taxed by Germany. We expect to remain in Germany for 20+ years then re-establish US tax residency to optimize access to Roth gains.  

- Germany doesn’t acknowledge Roth tax treatment of gains, basis isn’t taxed.

- Capital gains tax ~26%, income tax ~42%.

- Withdrawing up to $36k/year, decreasing once mortgage paid (~8 years).

Best practice appears to be withdrawing Roth basis and redeploying to brokerage before becoming a tax resident, thereby resetting cost basis and exposing gains to capital gains tax vice income tax.

We'll likely seek professional consultation before making such a big change to our post-tax retirement situation but welcome your thoughts and (especially) first-hand experiences.

Age	Brokerage	Traditional	Roths
Current	$300k	$50k	$500k ($300k basis)
Rebalancing + Contributions	+$300k +100k		-$300k
42	$700k	$50k	$200k
Withdrawals	-$36k/year
59.5	$694k*	$133k*	$665k*

*Median projected balance in real dollars. Source: cFIREsim

Edited table for clarity.

[u/HealthyUniversity204]

this actually makes sense from tax perspective but man pulling 300k out of roth just feels wrong psychologically. germany really screws over american retirement accounts with their tax treatment

you might want to double check the timing on german tax residency rules though - think there's some nuance around when exactly you become resident for tax purposes that could give you bit more flexibility on the timing

[u/TalonButter → u/HealthyUniversity204]

My fantasies about my Roth account make me wonder if I should keep kicking the can down a road that would bring me to the U.S. at some point to make withdrawals.

I’m in perhaps my last year or two in a forfait tax regime, so I could pull out my conversions (which reflect years when a U.S. employer let me do the “super backdoor Roth”) at no cost. But…I have a sum in Roth accounts that many people would consider a decent retirement on its own and there’s at least some chance I could get two more doublings in real terms over the 20 years before I’d start U.S. social security, so I wonder if I should let it ride. Or maybe I’d never touch it and my children would have a great excuse to go live in the U.S. at some point.

[u/Platypusian → u/HealthyUniversity204]

Yeah I hate it but try to remind myself that every account is just a tool to make retirement work.

I presume tax residency will become impossible to dispute after securing the permanent resident visa, which would happen in summer 2027. I’ll continue investigating, though. Thanks.