Can you avoid US withholding on IRA, 401k etc payments

marty - this is exactly what I have seen in practice with TIAA - it just means US tax refunds every time which is annoying but can be coped with ...

Guya - I didn't mind the TIAA annoyance (of witholding) but I was worried that Fidelity was wrong (not witholding) and something would jump up and bite me somewhere down the line. For anyone else who runs into it and is worried about it, it seems to work just fine.

Do set up all your accounts BEFORE you leave the US. Like many others, Fidelity won't open a new account if you have a foreign address, so they won't turn my 403b into an IRA, with the usual blah-blah about security, Patriot Act, etc.
Don't know if it matters but my 403b is (obviously) an employer plan.
Also, not totally on point, but if any of your accounts are 403b or 401k, and you have any taxed contributions in your account, study first the implications of rolling over to an IRA. They rollover as untaxed. And if relevant, any 403b grandfathering is lost.

Thanks,
I'll be retiring in a couple of years, which is why I'm researching all this, and I'll definitely get all my accounts set up at least a year before I move to make sure everything is good.

I plan to consolidate my alphabet soup of retirement plans into a number of IRAs, one IRA for each account so that I don't co-mingle money. I have a 401a that is MA state tax free and if I ever move back to the US I want to be able to easily document that. I already have a small tax free basis in an IRA that came from a 401k rollover so I'll have to deal with that when distribution time comes.

FYI I have emailed both Vanguard and TIAA-CREF about this again. TIAA-CREF got back to me quickly and reiterated their mandatory 10% withholding opinion without ever mentioning the treaty. I understand their stance as I wouldn't really want to mess with a procedure that satisfies the IRS code for such an uncommon situation. So I emailed them back to let them know that Fidelity uses 0% withholding and that I'll roll over my accounts to Fidelity when appropriate.

I wonder if knowing that Fidelity uses 0% withholding will make TIAA-CREF think again....I doubt it.

Thanks,
I'll be retiring in a couple of years, which is why I'm researching all this, and I'll definitely get all my accounts set up at least a year before I move to make sure everything is good.

I plan to consolidate my alphabet soup of retirement plans into a number of IRAs, one IRA for each account so that I don't co-mingle money. I have a 401a that is MA state tax free and if I ever move back to the US I want to be able to easily document that. I already have a small tax free basis in an IRA that came from a 401k rollover so I'll have to deal with that when distribution time comes.

The after-tax contributions are a pain. When the time comes, you might be able to get rid of them in satisfaction of your Required Minimum Distribution. I gather that there are some private letter rulings to this effect

FYI,
After I told TIAA-CREF that Fidelity do 0% withholding on IRA payments made to US citizens resident in the UK they sent me an email assuring me that my feedback and questions were very important to them and that they will review their withholding policy. I don't expect any change, but I get the impression that TIAA-CREF had never considered the tax treaty as it was never mentioned in the explanation of their policy, whereas, the treaty was front and center in Fidelity's explanation.

I have also asked Fidelity to give a bit more detail of the reasoning behind their 0% withholding policy, specifically why the 0% applies to a US citizen when the saving clause usually prevents US citizens from claiming treaty exemptions. I hope to get something that mentions Article 24.

Marty, FYI I just got this email from Fidelity after asking them why they use 0% withholding for non-resident US citizens.

Thank you for following up.
 
The information I provided in the previous email does apply only for non-resident aliens. I apologize for any confusion.
 
According to our Retirement Distributions group, U.S. citizens living abroad can not opt out of Federal Withholding. However, unless we receive a written distribution request, we cannot confirm what the withholding percentage will be. They mentioned that the minimum amount will be 10%.

I wrote back to them asking if they would apply 0% withholding if a US citizen submitted a W-9 and claimed exemption from backup withholding under Article 24 of the tax treaty. I don't expect there to be any joy from this, but it might get them thinking, or remind them of the stance they took with you.

Here is Fidelity's answer to whether they would allow 0% withholding if it was claimed using a W-9 and Article 24.

I called our Retirement Distributions group. They told me that will withhold at least 10% if a taxpayer is a U.S. citizen and the payment is sent to a foreign address. They also informed me that they could not provide a more definitive answer until they actually receive a distribution request in writing. You may certainly submit a W-9 and your note requesting a zero withholding, however, they are not able to guarantee that they will follow your instruction.

So the status quo I've found amongst IRA providers is exactly what is written in the IRC, hardly a surprise, ie 10% withholding on IRA distributions to non-resident US citizens.

There is actually a quick answer to all of this.

There is a fundamental difference between tax withholding requirements and your individual tax liability once all facts are known and a tax return is filed.  They are not one in the same and you cannot expect to manuever tax withholding to match your tax liability in all circumstances. 

Organisations responsible for tax withholding generally follow the IRC and also acknowledge that the IRS allows some manuevering by way of IRS witholding forms (W-4, W-8BEN, etc.)  Organisations responsible for tax withholding do NOT jump ahead to the treaty and try to apply it to your circumstances.  If the IRC says 10% withholding and there is no withholding form that accounts for your individual circumstances, then you should expect withholding REGARDLESS of the fact that your tax liability may be reduced to the treaty.

In short, you are expecting too much from these organisations.

Thanks Sara,  I had accepted the 10% withholding until Marty mentioned his experience with Fidelity. I also thought it worth while to ask if the W-9 could be used as it is the form a U.S. resident alien uses when they rely on an exception contained in the saving clause of a tax treaty to claim an exemption from U.S. tax on certain types of income. So it seemed logical that a US citizen might also use it to claim 0% withholding if the have to resource IRA payments to the UK so that UK tax can be paid correctly.