Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Retiring to Europe
Old 07-14-2007, 05:40 AM   #1
Dryer sheet wannabe
 
Join Date: Jul 2007
Posts: 11
Retiring to Europe

We are considering retiring early, one of the biggest expenses and unknowns is health care. We are thinking of moving to Europe, which has a nice socialized health care system. My husband is a European citizen, and I am an American.

As far as I can tell, from what I have read here and there, this would be the perfect scenario since being residents in Europe would entitle us to free healthcare, but having our retirement accounts in the US would mean we are still taxed in the US, right.

I am looking for information regarding this. It is my understanding that being a US citizen we would still be taxed in the US, not Europe. But I dont know how this applies to my husband, would his IRAs and ROth account still be taxed in the US, even though he is a European citizen. How about our taxable accounts, they are joint accounts, so I am not sure what applies to them. Having to sell everything and pay penalties on the retirement accounts in order to be able to retire would be a deal breaker.

Can someone point me in the right direction. I have been searching the net, but cant seem to get good information on what exactly it would cost in terms of tax dollars. Is there an office, or profession that would know. I asked an accountant and he didnt know. Not sure where I can get the information I need.

I am assuming theres a catch, I cant imagine them giving free healthcare when you are not contributing to their coffers.
__________________

__________________
haydee is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-14-2007, 10:39 AM   #2
Recycles dryer sheets
 
Join Date: Jan 2006
Posts: 329
As a US citizen, you always pay taxes. The question is, how much? That boils down to what tax treaties the US has with the country you plan to move to and what your last state of residence was. I don't think there is a treaty that encompasses the EU as a whole, so you'll have to do some digging.

As for healthcare, it's probably based on residency. With Canada, once you move back and adjust residency, you are eligible again, afaik. I'd imagine Europe is similar. But obviously you'll wanna confirm this with a professional.

I'd suggest looking for accountants that specialize in this sorta thing. A random accountant isn't going to know. A good way to look for this is to check immigration message boards, as lots of those people deal with these issues every day.

I'm curious about what happens with your husband's IRA as well. If you find anything, please keep us posted.
__________________

__________________
NinjaPigeon is offline   Reply With Quote
Old 07-14-2007, 11:03 AM   #3
Thinks s/he gets paid by the post
DangerMouse's Avatar
 
Join Date: Jan 2007
Location: Silicon Valley
Posts: 1,812
Are you certain that you as the non-European spouse would be eligible for free healthcare throughout Europe?

My husband is a UK citizen and I know when we lived in the UK I was eligible for free healthcare there. However, when we were in France I don't think I was eligible to use their system, even though he was, because I was not a European citizen.

I would be curious to know the answer to this question as we are planning on spending extended periods of our retirement in Europe. However, as an Australian I know I am covered in UK, Italy and Greece due to recipricoal (sp?) agreements between our countries.
__________________

I be a girl, he's a boy. Think I maybe FIRED since July 08. Mid 40s, no kidlets. Actually am totally clueless as to what is going on with DH.
DangerMouse is offline   Reply With Quote
Old 07-14-2007, 04:11 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,018
HD, the details will depend on which European country you wish to live in. First check out the IRS website for the tax treaty the US has with that country and then go to the ministry of health website for the country.
__________________
Meadbh is offline   Reply With Quote
Old 07-14-2007, 05:02 PM   #5
Recycles dryer sheets
 
Join Date: Jun 2007
Posts: 359
The US taxes its citizens on their worldwide income regardless of their domicile, there is some ability to avoid double taxation of "earned" income (prob not relevant to retirees) due to an exclusion, and tax treaties which vary from situation to situation. Marginal tax rates in EU countries tend to be VERY high, far higher than in the US for an equivalent income level, but again this depends on the country.

The health care in Europe may be "free", but be sure to check into quality, waiting lists, availability of advanced procedures and diagnostic tests, etc. Would you be willing to wait months to get an MRI done? The US tends to offer more in this area, at least to those who have good insurance. Healthcare in EU countries is really only "free" if you didn't / don't pay taxes into their system.

My travels in Europe have left me noticing that just about everything I buy costs 2x to 4x the price it would in the USA, and often the selection of goods (esp electronic goods and specialty items) is very lacking. You'll want to check this out too in forming a budget for your retirement.
__________________
FinanceGeek is offline   Reply With Quote
Old 07-16-2007, 10:22 AM   #6
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by haydee View Post
We are considering retiring early, one of the biggest expenses and unknowns is health care. We are thinking of moving to Europe, which has a nice socialized health care system. My husband is a European citizen, and I am an American.

As far as I can tell, from what I have read here and there, this would be the perfect scenario since being residents in Europe would entitle us to free healthcare, but having our retirement accounts in the US would mean we are still taxed in the US, right.

I am looking for information regarding this. It is my understanding that being a US citizen we would still be taxed in the US, not Europe. But I dont know how this applies to my husband, would his IRAs and ROth account still be taxed in the US, even though he is a European citizen. How about our taxable accounts, they are joint accounts, so I am not sure what applies to them. Having to sell everything and pay penalties on the retirement accounts in order to be able to retire would be a deal breaker.

Can someone point me in the right direction. I have been searching the net, but cant seem to get good information on what exactly it would cost in terms of tax dollars. Is there an office, or profession that would know. I asked an accountant and he didnt know. Not sure where I can get the information I need.

I am assuming theres a catch, I cant imagine them giving free healthcare when you are not contributing to their coffers.
You'll definitely be taxed in the US as the US taxes on citizenship. Your husband will probably still be taxed in the US if he has funds in the US. You'll be taxed in Europe based on residency/domicile. The bottomline is that you will have to deal with both tax regimes under the terms of the tax treaty between the US and your country of residence and your husband's residence/domicile. You'll probably be able to get relief from double taxation, but as tax rates tend to be higher in the EU you'll end up paying the difference between the US tax and the EU countries tax to the EU country.

In the UK you get free hospital treatment on the NHS if you are "ordinarily resident" in the UK ie you are settled in the UK, so it wouldn't matter if you are a US citizen. I'm not sure what the situation is for other EU countries.
__________________
nun is offline   Reply With Quote
Old 07-16-2007, 10:49 AM   #7
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by haydee View Post

I am looking for information regarding this. It is my understanding that being a US citizen we would still be taxed in the US, not Europe. But I dont know how this applies to my husband, would his IRAs and ROth account still be taxed in the US, even though he is a European citizen. How about our taxable accounts, they are joint accounts, so I am not sure what applies to them. Having to sell everything and pay penalties on the retirement accounts in order to be able to retire would be a deal breaker.

Can someone point me in the right direction. I have been searching the net, but cant seem to get good information on what exactly it would cost in terms of tax dollars. Is there an office, or profession that would know. I asked an accountant and he didnt know. Not sure where I can get the information I need.

I am assuming theres a catch, I cant imagine them giving free healthcare when you are not contributing to their coffers.
You will have to read the tax treaty between the US and the country you retire to and you will have to understand your residency and domicile as this affects how you are taxed. The treatment of retirement accounts is a difficult one, however, I know the UK recognises the tax exempt or deferred status of US retirement accounts, so a ROTH is tax free in the UK as well as the US. If you move to the UK you can leave all your US retirement accounts as is and there won't be any issues until you start taking income from them. Then the US will tax the income and the UK will also tax it if you are domiciled in the UK, but it will tax it on a remittance basis (bringing the money into the UK) if you are a UK resident, but domiciled outside of the UK........easy right
__________________
nun is offline   Reply With Quote
Old 07-16-2007, 08:52 PM   #8
Recycles dryer sheets
 
Join Date: Jan 2006
Posts: 329
Quote:
Originally Posted by nun View Post
The treatment of retirement accounts is a difficult one, however, I know the UK recognises the tax exempt or deferred status of US retirement accounts, so a ROTH is tax free in the UK as well as the US.
Really? If so that's surprising because the treaty we have with Canada does not recognize a Roth.
__________________
NinjaPigeon is offline   Reply With Quote
Old 07-16-2007, 09:43 PM   #9
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,044
Haydee,

In our case, my wife is the US citizen and I am the one with the European citizenship. There is a chance we move to Europe for our retirement, although there is nothing set in stone, it will kind of depend what our family's situation will be at the time. We have 2 incentive to move there: 1) we will be covered by the national healthcare system in Europe and 2) I will have a paid for condo which my parents plan on giving me in a few years.

In term of the national healthcare system, I will be automatically covered, being a European citizen, and my wife will be too (through me) as long as she does not work. The catch though is that right now I am still paying into the healthcare system of my country of origin. I don't need the coverage, but it will make it much easier for me to get coverage if I ever go back. Also it's a back up in case I lose my health insurance here.

As for taxes, well my wife being the one with the job that pays well, she is the one maxing out retirement accounts in her name (as a US citizen, she will always be taxed in the US, so there shouldn't be much problems with her accounts). I do have small IRAs in my name but most of my money is in taxable accounts. That way, if we ever move to Europe, I would just move all my money to a European account and we would leave my wife's accounts here in the US. One advantage of that strategy is currency diversification, but it also should greatly simplify our tax situation.
__________________
FIREd is online now   Reply With Quote
Old 07-16-2007, 10:25 PM   #10
Recycles dryer sheets
 
Join Date: May 2005
Posts: 189
Keeping tax and health issues aside, what are you planning to do about ever changing exchange rate. US$ is depreciating right now, over long run nobody knows where it will go, it may become strong again. I am looking at the same problem...
__________________
landover is offline   Reply With Quote
Old 07-16-2007, 11:24 PM   #11
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by NinjaPigeon View Post
Really? If so that's surprising because the treaty we have with Canada does not recognize a Roth.
The UK/US treaty was recently ammended to include tax deferred retirement accounts and pensions. I think its a first, but as there are so many expats in each country it was becoming a real issue. Maybe something will happen for Canada/US soon.

Another interesting provision is that if I'm living in the UK and get US social security its only taxable in the UK and not in the US
__________________
nun is offline   Reply With Quote
Old 07-16-2007, 11:31 PM   #12
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,044
Quote:
Keeping tax and health issues aside, what are you planning to do about ever changing exchange rate. US$ is depreciating right now, over long run nobody knows where it will go, it may become strong again. I am looking at the same problem...
Personally I don't worry too much about the exchange rate right now. Retirement is at least 10 years away for us, and there is no telling what the exchange rate is going to be in 10 years. Just 7 years ago the Euro was quite weak Vs. the dollar and the situation completely inverted in just a few years. Sure, over the short to medium term the dollar looks weak, but things could change down the road. So in the mean time I do invest some money in Euros just in case, but I don't bet the house on it either. If the dollar regains some strength I will start exchanging small portions of my accounts at a time (kind of DCA) if it becomes evident we want to retire in Europe. My wife's money, we will exchange on a as-needed basis (once or twice a year), so again, some years we'll get more if the dollar is strong, and some years we'll get less if the dollar is weak. The only worrysome scenario would be a case of hyperinflation here in the US, but then even retiring in the US would become difficult...
__________________
FIREd is online now   Reply With Quote
Old 07-16-2007, 11:33 PM   #13
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by landover View Post
Keeping tax and health issues aside, what are you planning to do about ever changing exchange rate. US$ is depreciating right now, over long run nobody knows where it will go, it may become strong again. I am looking at the same problem...
I plan to retire to the UK and the exchange rate is a big worry so for many years I've split my equity investments 50/50 between US and International Index funds that are biased to Europe. In the future (hopefully far off) I'll get a UK inheritance so that's a hedge against fluctuations too.
__________________
nun is offline   Reply With Quote
Old 07-16-2007, 11:45 PM   #14
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by FIREdreamer View Post
Haydee,

In our case, my wife is the US citizen and I am the one with the European citizenship. There is a chance we move to Europe for our retirement, although there is nothing set in stone, it will kind of depend what our family's situation will be at the time. We have 2 incentive to move there: 1) we will be covered by the national healthcare system in Europe and 2) I will have a paid for condo which my parents plan on giving me in a few years.

In term of the national healthcare system, I will be automatically covered, being a European citizen, and my wife will be too (through me) as long as she does not work. The catch though is that right now I am still paying into the healthcare system of my country of origin. I don't need the coverage, but it will make it much easier for me to get coverage if I ever go back. Also it's a back up in case I lose my health insurance here.

As for taxes, well my wife being the one with the job that pays well, she is the one maxing out retirement accounts in her name (as a US citizen, she will always be taxed in the US, so there shouldn't be much problems with her accounts). I do have small IRAs in my name but most of my money is in taxable accounts. That way, if we ever move to Europe, I would just move all my money to a European account and we would leave my wife's accounts here in the US. One advantage of that strategy is currency diversification, but it also should greatly simplify our tax situation.
It won't simplify your tax situation! Your wife will be taxed in the US as she is a citizen and probably by the European country where you reside. You will have to deal with 2 tax juristrictions and your taxes will be complicated! The income from your wife's US based retirement accounts may only be taxed in the European country on a remittance basis, but if she becomes domicled in Europe that country may tax the income even if it stays in the US, the exact tax rules will depend on where you retire.

Also if you have ROTHS you may have to pay tax on that money in Europe if the tax exempt status of themoney is not recognized. Also if you are a Green Card holder make sure youunderstand the Expatriation Taxation rule of the IRS and notify them before you leave the US.....hard to believe I know, but even if you give up the Green Card the IRS will still come after you. Another thing, don't forget the your state tax, for some states its very difficult to break residence, if you or your wife don't become permanently resident, or in sme cases domiciled, abroad your last state of residence may need you to file tax forms. You will probably get relief on double taxation, but there is a nasty tax provision that hammers a US citizen or Resident for owning foreign based mutual funds (PFICs). I'm not sure how is affects a green Card holder that goes home, but your wife should NOT buy mutual funds in the European country you might move to. Here's an article

Investing Offshore: Guidelines for Expatriates
__________________
nun is offline   Reply With Quote
Old 07-16-2007, 11:58 PM   #15
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,044
Nun,

I realize that my wife's tax situation is still going to be iffy. What I meant was that if as a European citizen, all my money is in Europe and not scattered between Europe and the US, it will be one less thing to worry about when tax time comes around. It would be doubly difficult if I still had accounts in the US. That's what I meant by "simplifying" our tax situation.
__________________
FIREd is online now   Reply With Quote
Old 07-17-2007, 12:17 AM   #16
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by FIREdreamer View Post
Nun,

I realize that my wife's tax situation is still going to be iffy. What I meant was that if as a European citizen, all my money is in Europe and not scattered between Europe and the US, it will be one less thing to worry about when tax time comes around. It would be doubly difficult if I still had accounts in the US. That's what I meant by "simplifying" our tax situation.
That may be true, but it will depend on whether you have a Green Card and your's and your wife's exact residency situation, that's the first thing to understand as most tax law starts from there. I assume that you and your wife will be filing separetly (ie not on a single married return) in both juristictions
__________________
nun is offline   Reply With Quote
Old 07-17-2007, 12:19 AM   #17
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,044
Quote:
your wife should NOT buy mutual funds in the European country you might move to
She will keep all her investments in the US (in Vanguard Funds probably). The only money she would transfer to Europe would be to pay bills. Besides, I don't particularly like the investment options available in the country we are contemplating for retirement.

Quote:
Also if you have ROTHS you may have to pay tax on that money in Europe if the tax exempt status of themoney is not recognized
We don't have Roths.

Quote:
Also if you are a Green Card holder you are liable to pay tax to the IRS for 10 years after you leave the US.....hard to believe I know, but even if you give up the Green Card the IRS will still come after you and you will have to fill out a 1040.
That I didn't know... I have to look into it but the tax code could change in the next 10 years, so who knows. If it comes to that, we could always try to minimize my income to almost nothing (invest all my money in equity index funds for example) and maximize my wife's income for the first 10 years, so that I would not owe any taxes here in the US (and that way, if we do it right, we would have to deal only with HER tax return).
__________________
FIREd is online now   Reply With Quote
Old 07-17-2007, 02:21 AM   #18
Dryer sheet wannabe
 
Join Date: Jul 2007
Posts: 11
All this sounds incredibly complicated. I am kind of wondering how the average Joe who would just pick up and go would ever figure out what the correct thing to do is.

My head is spinning.

Im wondering if maybe having all our money in a joint account with my money might not be the best thing since I keep hearing "European citizens have rule X while American citizens have rule Y". Our money is taxable so I'm wondering if in order to split it up we need to sell and buy, thus generating distributions.

BTW, my husband is Norwegian.
__________________
haydee is offline   Reply With Quote
Old 07-17-2007, 07:19 AM   #19
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by haydee View Post
All this sounds incredibly complicated. I am kind of wondering how the average Joe who would just pick up and go would ever figure out what the correct thing to do is.

My head is spinning.

Im wondering if maybe having all our money in a joint account with my money might not be the best thing since I keep hearing "European citizens have rule X while American citizens have rule Y". Our money is taxable so I'm wondering if in order to split it up we need to sell and buy, thus generating distributions.

BTW, my husband is Norwegian.
As a UK/US dual citizen I've looked into this quite a bit and it is complicated, its an area where professional advice is really worth it. Many US citizens leave the US not understanding the issues and fail to file 1040s. If you don't have many accounts in the US this isn't a really big issue, but you have to do back taxes when you return. I think there are some basic things to remember.

1) As a US citizen you are taxed on your worldwide income no matter what. So each year you must file a 1040 even if its to say you have zero US tax liability.
2) The first $84k of income earned abroad is not taxable by the US, this is the "foreign earned income exclusion"
3) Understand your residency situation in your foreign country as it will probably detemine how you are taxed.
4) As a US citizen it is far easier to leave your money in the US and invest in the US to avoid the complications of how the US taxes foreign investments.
5) Wade through the tax treaty between the US and where you move.
6)If you are married its usually simpler to file separate taxes so your spouse has the opportunity to deal with only on tax authority.
7) Most treaties will give you relief from double taxation, so you can take credit in one counrty for tax paid the another.
8) The treatment of retirement accounts is something that can be problematic. The situation between the US and the UK is good, but that's because of recent amendments, check on this with a qualified professional.

Here's the US/Norway tax treaty its old, but I think a new one will be signed in 2008

Norway - Tax Treaty Documents
__________________
nun is offline   Reply With Quote
Old 07-17-2007, 08:14 AM   #20
Recycles dryer sheets
 
Join Date: Jan 2006
Posts: 329
List of most of the tax treaties we have with other countries can be found here:

U.S. Tax Treaties
__________________

__________________
NinjaPigeon is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
What stops you from retiring early? bongo2 Young Dreamers 38 08-31-2007 01:02 AM
Short-term leasing - house/condo/hotel room in europe or asia chinaco Life after FIRE 8 04-16-2007 12:29 PM
Real retiring age of Spaniards highest ForeignExchange Life after FIRE 0 01-20-2006 08:58 AM
Europe struggling with pension issues Jay_Gatsby FIRE and Money 12 01-10-2006 10:32 AM
Europe, a giant Welfare State and it's results Eagle43 Other topics 39 06-06-2005 01:26 PM

 

 
All times are GMT -6. The time now is 02:02 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.