@stephnyc , thanks for posting the link. It is absolutely certain that IRA and 401(k) distributions will be taxed in the state of residency (Portugal), although I believe the 85/15 rule explained in the video only applies to Roth IRA distributions and Traditional IRA distributions where you have an after-tax contribution basis, but are not able to trace your exact amount of after-tax contributions. As I understand the rules, you are only allowed to claim exemption for the exact amount of your after-tax contributions if it is possible to trace your contributions. But, as the speaker mentioned, this maybe subject to interpretations.
Nevertheless, the biggest unknown seems to be on how Traditional to Roth IRA conversions are treated for taxation in Portugal, which the speaker does not address. On the one hand you could argue that since a Roth conversion just moves money from one retirement account to another, and since distributions from both are taxable in Portugal, conversion itself should not be a taxable event. On the other hand you could argue that since you are changing the after-tax basis by moving it to Roth, you should pay the tax at the time of conversion and claim an exemption for that amount later when you take a distribution from Roth. The good news is that the US will grant you an FTC for the amount of tax paid to Portugal, whichever way you decide to interpret the Portuguese tax rules.
In my opinion, it is better to pay the tax in Portugal at the time of conversion from Trad to Roth IRA and take the FTC against the US taxes due. In the future if you do take a distribution from Roth, then you will not owe any tax in the US and you can legitimately claim an exemption from Portugal for the previously taxed amount and thus avoid double taxation. I would like affirmation for this logic from a tax expert, if possible.
