1. Is it worth for me to contribute to the 401k from my employer? I will likely contribute up to the match but is it worth doing more? I will only be working for 5 years. I am unsure how this account will be treated once I stop being a ”US person”? Will Roth ladder work for me?
Normal 401k/IRA: probably good, most European countries have dual-tax treaties that ensure that only country of residence taxes the withdrawal - so you'd get the same taxation as a local pension scheme, but with more flexibility. (Note: US citizens/LPRs still get taxed even with the treaty in place, but in your scenario that's not relevant.)
2. Is it worth for me to contribute to IRA? My understanding is that due to income restrictions I can only contribute to a non deductible IRA and only 6000 USD/year. How is this account treated once you stop being a ”US person”?
[Updated since I miswrote earlier.]
IRA's are generally the same as a 401k.
Roth is where it gets complicated: some dual-tax treaties cover Roth IRA's, some don't. If they aren't covered, then the Roth IRA could theoretically be treated as a normal post-tax account in your country of residence (so income tax, capital gains if applicable, etc.) - but this really depends on where you are going to live. Personally, I'd stay away from Roth's because they're very US-specific, uncommon in Europe, and hence very few people know how to actually handle them correctly. (I.e. you may end up needing to find a tax lawyer if your local tax agency disagrees with your views on how an Roth should be taxed.)
3. Most of my investments will be in a taxable account and with US domiciled ETFs. Once I move, is it recommended that I liquidate everything and buy equivalent non-US domiciled ETFs?
For tax reasons: it probably doesn't matter. In fact US-domiciled ETFs holding US stocks are often advantageous due to withholding tax issues, but it really depends on the specific country you'd be living in.
Estate tax is the other issue: if your country of residence OR country of citizenship has an estate tax treaty with the US, then US ETFs are OK. If there is no estate tax treaty, then the US will tax all US-based assets over 60k on death. That's not so nice for your descendants. Hence it might be worth liquidating for that reason alone, but maybe not.
4. One alternative is to stay in the US until I get citizenship and then move to Europe. However, I have read about a lot of problems that US citizen ex-pats face. I assume that the best choice is to leave the US before I qualify for the exit tax. Is this the general consensus or am I missing something? Does anyone know if the years on an EAD count towards the total 8 years for exit tax purposes or is it only the years on a green card?
Yeah you don't want to do that. I know lots of people who are US citizens who are renouncing just to avoid the hassle. The main issues are: the US tax return is a lot o paperwork, it costs 2000-3000 USD to have the tax return prepared by a professional (you can do it yourself, but it requires a lot of reading/research), and of course the additional tax is expensive (depends on the exact country).
Also, for most FIRE types, the foreign income exemption for US expats living abroad should be well above income after early retirement, so other than the inconvenience of having to file a federal return every year, it's unclear to me what the actual costs are. Thoughts?
Foreign
EARNED income exclusion: That doesn't work for passive income, especially if you hold US-domiciled funds.
Foreign tax credit might work, but (A) there are countries with taxes lower than the US, (B) there are gaps between tax schemes in various countries, which means you can still end up paying double-tax on part of your income, (C) the filing takes a lot of time and is costly if you don't do it yourself.
Finally (D) you are restricted in terms of investments you can make because of PFIC blocking you from non-US funds, and (E) the US restricts travel for its citizens (Cuba, Iran, etc.).
As someone who is roughly in the same situation as you, I think you're making a mistake by trying to cut ties to the US when you leave. By doing so, you are locking yourself out of one of the best labor pools in the world, a very diverse country, and bilateral agreements for easier immigration to Canada, Mexico, and Australia.
I have no idea about Mexico, but Canada and Australia are easy to reach for anyone with the relevant work skills. On the rest, well, lol. Your government regards you as suspect just because you don't live in the US, and bans you from travelling to certain countries for ideological reasons. For a retiree there's more to life than work, and there's plenty of interesting work in the rest of the world if really needed.
