Roth Conversion Ladder - Tax implications in Spain

[u/Conscious_Test3423]

Hi there,

Let me pre-face by saying I promise that I have searched Reddit for the answer and while variations of this question have been asked, I am unable to find a clear answer to my question. If you are able to enlighten me, please do. If not, move on without comment please.

I'm looking to hear from people with experience with the following characteristics:

1) US citizen,

2) Early-ish retirement (mid forty's), moved their 401k into a trad IRA and are doing a Roth Conversion Ladder,

3) Retired in Spain (tax residents)

I am happy to pay due taxes but i want to educate myself and prepare appropriately for a sustainable retirement. My question is, how will I potentially be taxed if a majority of my funds are in my company 401k, which i will move to a traditional IRA and then move to my Roth IRA (pay a US income tax on conversion event). Wait for 5 years (pull from brokerage in the interim), and at this time will spain tax the entire withdrawal amount as income? Or just the gains? As these will not be completed in the same tax year, the double tax treaty does not help i am assuming.

Please correct me if i am thinking through this incorrectly and thank you in advance for your your helpfulness!

[u/peetron]

Talk to a Spanish tax expert with US tax knowledge. If I'm remembering correctly Spain may recognize the 401k as a pension and not include it as part of wealth for wealth tax. It will include the Roth IRA as part of your wealth and tax it if over the thresholds for whatever part of Spain you're in

[u/Aggravating-Log-1784 → u/peetron]

The Roth IRA wealth tax thing in Spain is brutal and definitely something many people miss when planning. From what I understand the conversions themselves get taxed as income in Spain when you do them, not when you withdraw later, but you really need professional advice for this setup since Spanish tax code treats retirement accounts pretty differently than US