Act 60 and Retirement Accounts: What Happens to Your 401(k), IRA, and Roth

Distributions from U.S. retirement accounts — a 401(k), a traditional IRA — are not decree-covered income, and moving to Puerto Rico can make a U.S. Roth taxable rather than tax-free. This is the most caveat-heavy topic in the guide: it sits at the junction of U.S. law, Puerto Rico law, and your specific accounts, and the published rules themselves point to a licensed professional. What follows describes what those rules say — nothing here is advice.

Are 401(k) and IRA distributions covered by the decree?

No. The decree's 0% (or 4%) covers Puerto Rico–source investment income — gains, dividends, and interest earned after residency begins (tax benefits guide). Retirement distributions were never in that category: a 401(k) or traditional IRA distribution follows its own rules on both sides of the water, no matter when the move happens or how long the decree runs. The distinction matters most for anyone whose net worth is concentrated in retirement accounts rather than taxable brokerage or cryptopositions — relocators who model the move as "everything goes to 0%" discover this one late.

What happens to a Roth conversion after the move?

Converting a U.S. traditional IRA to a Roth after the move remains subject to U.S. federal tax, and Puerto Rico treats the conversion as a distribution in the year it's made — a taxable event on both sides of the water, each under its own rules. How the two interact depends on the account, the amounts, and your facts — exactly the question the rules leave to a professional working from your actual accounts.

Why is every answer on this page conditional?

Because retirement accounts sit at the junction of three systems not designed together: U.S. federal law, which created the accounts; Puerto Rico law, with its own code and its own definitions of qualified plans; and the terms of your specific accounts. Most guide topics live inside one system at a time — this one doesn't, which is why the honest phrasing throughout is "generally."

Does Puerto Rico tax withdrawals from a U.S. Roth?

Generally, yes — and "generally" is doing real work here. Puerto Rico generally does not recognize the U.S. Roth's tax-free character: withdrawals by a Puerto Rico resident are generally subject to Puerto Rico income tax, unless the account is rolled into a Puerto Rico–qualified plan. Whether a rollover is available, what it costs, and what it preserves are fact patterns only a professional can resolve. This is the sentence that surprises more relocators than any deadline: the account is tax-free under U.S.law — and the move takes your withdrawals into Puerto Rico's system, which never made that promise.

Can decree-covered income fund an IRA?

Here the trap runs the other direction. Income excluded under IRC §933 cannot count as compensation for U.S. IRA contribution eligibility. The exclusion that helps your gains can close your contributions: a holder whose income is entirely §933-excluded may have no eligible compensation left to contribute against. One rule, seen from two sides.

What about Social Security and Medicare?

At a high level — and this one is good news, kept deliberately high-level: Social Security and Medicare eligibility are unaffected by the move.

Where are these rules actually written down?

The governing document for how bona fide residents split U.S. and Puerto Rico obligations is IRS Publication 1321 — it exists because this split is genuinely complicated. Publication 570 covers the residency tests and §933 sourcing, and Form 8898reports a change of residency. Every "generally" above marks a place where those documents leave the answer to your facts — this is a brief-your-professional subject, not a read-a-page subject. If the move itself is still open, the exit guide covers unwinding.