The number of Americans looking to retire overseas has tripled over the past three decades — and over 760,000 retirees living internationally received Social Security payments in 2022. Many retirees seek greener pastures and lower costs of living for their golden years.
Families and retirees are both seeking the European lifestyle, touting lower costs of living, a notably more relaxed way of life, and a safe environment, mainly due to the lack of gun violence in Europe. As the cost of living rises exponentially in the U.S., prospective retirees are increasingly considering moving abroad to stretch their savings and 401(k) balances even further.
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Historically, Portugal has been the most popular destination for retired Americans due to the ease of obtaining visas. However, Spain, Italy, Greece, and France have become increasingly popular as Portugal has become an overly competitive retirement destination.
Most countries within the UK and EU have Social Security and tax agreements with the US, allowing American retirees to continue receiving their Social Security payments while living internationally.
TheStreet met with Alex Ingrim, Financial Advisor at Chase Buchannan, who helps Americans aspiring to move overseas navigate the financial nuances of relocating to Europe.
How to identify the best country to retire in based on tax policy, Social Security, and cost of living
Ingrim identifies the untenable cost of living as the catalyst prompting Americans to move abroad for retirement.
“It’s, without a doubt, easier to live on a fixed income in Europe,” he said. “It depends on which tax regime you have— tax holidays in Portugal, Italy, or Greece and double taxation agreements like in France — can be very advantageous.”
“Europe is still dealing with inflation and rising costs in the EU, but prices are starting from a lower base, so it’s less noticeable,” Ingrim explained. “We work with retirees frequently, and many of them have considerable money left over at the end of the month. They’re getting the luxurious European beach lifestyle on a budget they can afford.”
Although there’s the added taxation, Ingrim notes that American retirees don’t have the same worries about health insurance or ensuring that their Social Security payments cover the skyrocketing cost of living. There is a much more robust safety net for aging retirees in most European countries than in the U.S.
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Portugal has typically been the most favorable destination for American retirees due to the low cost of living, pleasant weather, and relaxed visa process.
“The most popular countries to move to have come in different waves,” Ingrim noted.
“Portugal had the highest number of inquiries because there are several different visa options, and things like the Golden Visa were extremely well publicized. It became widely known as a cheap place to retire in terms of housing, groceries, and the general cost of living.”
“They had this tax holiday scheme called the Non-Habitual Residency (NHR) scheme, which was very enticing for retirees,” Ingrim continued. “You paid a 10% tax on Social Security and IRA distributions, but it was rescinded at the end of 2023. Portugal essentially became too popular and too expensive, so now we’re seeing more interest in Spain and France, too.”
“Italy has always been many Americans’ dream — if all factors were equal and Italy was just as easy to move to in terms of visa requirements and cost, most people would be interested in moving to Italy.”
Creating a roadmap for retiring abroad:
Though it may be easy to get caught up in the big picture of an international move, Ingirm warns of the importance of consulting professionals and understanding the logistics.
“There are a few people you need to talk to and important factors to prioritize when moving abroad. First, you need to talk to an immigration lawyer — you need to understand if you fit the eligibility requirements to live in the country you’d like to live in, and each country has different requirements.”
Ingrim notes that housing is an equally important consideration.
“You’ll also need to find housing and identify how that will fit into your budget,” He said. “Typically, you need to have a lease or mortgage to be eligible for most visa categories, so speaking with a realtor should be a priority, too.”
A couple enjoys a sunset on a beach.
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Understanding the tax implications of 401(k) and IRA withdrawals can be confusing enough for retirees in the U.S. Adding international tax policy and currency conversion to the equation requires professional consultation.
“Depending on whether you’re retired or working, you’ll need to understand the tax implications,” he elaborated. “There can be serious tax consequences if you don’t plan things correctly. So we recommend talking to a tax professional and putting together a plan to understand the implications of how those tax policies will affect your finances over the long term.”
“Lastly, you need to Identify how you’ll need to adjust your retirement plan — mainly how to change your investment portfolio based on the rules and regulations that are in place between the EU and the US. It’s a multi-step process.”
Understanding how international tax policy and financial regulation will affect your finances
There are many moving parts when moving overseas. Allowing yourself adequate time to iron out financial logistics, tax agreements, and bureaucratic red tape is the best way to ensure success.
“We recommend that people interested in moving to Europe start about two tax years before your move,” Ingrim said. “Give yourself two tax years to plan and understand what your tax liability is going to be before you start putting the other wheels in motion.”
“We get a lot of inquiries for Spain — once people see what their tax liability would be to Spain, they immediately stop the move. However, France has a wonderful Double Taxation Agreement with the US. If you’re a US citizen, France should be your first option for retirement.”
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“We often let clients know that their tax liability isn’t going to change if they move to France– it’s the best tax jurisdiction for a retired individual. Once you understand your tax liability, you have breathing room to adjust your plan accordingly. It’s really beneficial.”
If you’re considering moving to another country within the EU, understanding your international tax liability may be a bit more complicated. Ingrim helps break down the ambiguity of paying taxes as an American citizen living abroad.
“When you’re a U.S. citizen, you always have a tax liability to the US. You don’t always have to pay the U.S., but you always have to file your taxes and play by the US rules,” he explained. When you become a tax resident of a new jurisdiction — Spain, for example — and fulfill the requirements of being a Spanish tax resident, then you have a dual liability to Spain and the U.S.”
“You need to use the Double Taxation Agreement between Spain and the U.S. to determine who you pay your taxes to, and it doesn’t always exhaust your tax liability,” He said. “For Social Security, you need to pay Spain. Your tax obligation is to Spain, not the US, which would be disappointing because Spain has higher income tax rates.”
“If you owe 25% in taxes to Spain and 15% to the US, you need to pay Spain. Since that is the higher amount, you don’t owe anything to the US anymore — it extinguishes your liability,” Ingrim explained.
“You don’t get taxed twice; the higher rate of the two countries is your effective tax rate. It generally means you’re paying taxes to the European country.”
Moving abroad checklist: to ensure you’re adequately prepared for an international move, follow the steps below.
Speak to an immigration lawyer to understand visa eligibility and requirements.Speak to a tax professional to understand the tax liability you’re comfortable with, which helps determine the country best suited to your needs.Find housing and obtain a lease or mortgage.Apply for and obtain a visa.Speak with a financial advisor about adjustments to your investment portfolio, 401(k) distributions, and social security payments.
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