Editor’s note: There are many reasons why an American may seek to relocate to Europe, chief among them retirement, work opportunities or simply a better work-life balance. This is the first article of a four-part series in which we’ll discuss key financial considerations Americans should keep in mind when considering a move to Europe and zoom in on three countries in particular: France, Italy and Portugal.
Americans are moving to Europe in ever-increasing numbers, often because they believe that a better balance between work and lifestyle may be available in European countries. But many Americans who take up residence in Europe often find the transition to be more complex than they anticipated. While the issues can be complicated and differ significantly depending on the country, here are some things to keep in mind if you’re considering a move to Europe when you retire.
A U.S. citizen with a dream of retiring in France may know that Americans are allowed to spend up to 90 days in the Schengen area. However, U.S. retirees wanting to live in Europe long-term require a visa, and all long-term visa options have some sort of minimum income requirements.
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For example, Americans who retire in France typically apply for a long-stay visitor visa. An important component of the application involves providing proof of sufficient financial resources that meet or exceed France’s minimum wage, known as the SMIC. This amount is 1,398.69 euros after taxes (net), or about $1,500.
The maximum amount of time you will be granted for your first application is one year, at which point you may apply to renew your visa. From the beginning, a consultation with an immigration lawyer might be the best way to make sure visa requirements are properly met, particularly if you plan to reside in France for several years.
Living abroad is different than visiting abroad
It’s important to remember that living somewhere as a foreign resident is very different from visiting as a tourist.
Americans should consider which countries they would feel most comfortable living in. Night owls may feel right at home in Spain, where the culture involves eating and socializing late into the evenings, while morning people may appreciate the rigorous bustle of Italy’s fashion and business center, Milan.
Can you continue to use your U.S. driver’s license?
One significant difference between traveling and living somewhere involves your driver’s license. Many U.S. licenses may be valid for only a certain period. In some places, such as France, most long-term residents have up to one year to exchange their U.S. license for a French one, but only if they hold a valid license from a qualifying state.
This problem can vary according to where you plan to live. Living in a small, bucolic family home in the Tuscan countryside has vastly different implications for driving than living in an apartment in the center of Paris or Barcelona.
Moreover, if your driver’s license is not recognized, you will need to invest time and money to acquire a new one.
Cost of living and financial planning
Figuring out the cost of living in a new country can be more complex than one may expect. An online tool such Numbeo can help, but broadly speaking, the cost of living in Europe is lower than in the U.S. Moreover, while major cities such as Paris and Milan are unsurprisingly expensive, it’s worth considering how the introduction and evolution of tax regimes may impact the cost of living. For example, the Portuguese government sunset its Non-Habitual Residence (NHR) Scheme at the end of 2023 in a first step toward addressing the housing crisis in Lisbon and Porto caused by an influx of wealthy foreigners who qualified for this special tax regime. While Portugal remains an attractive country to live in for many reasons, the affordability of its major cities is no longer definitively one of them, and the financial planning calculus for prospective U.S. immigrants to Portugal has changed dramatically.
Also, it is important for Americans to consider the long-term implications that moving abroad may have on their financial assets. For instance, U.S. investment products may be treated differently abroad. The value of an American’s asset base in Europe will depend on three critical factors:
- Whether your new country has a double taxation agreement with the U.S.
- How the details of that agreement affect your particular assets
- Whether you intend to live in one or multiple European countries
Evaluate tax circumstances
Several countries have positioned themselves as favorable destinations for certain foreigners via visas that offer long-term residency and (in some cases) citizenship pathways.
For example, in 2022 and 2023, Valencia and Malaga were recognized by foreigners as the best cities to live abroad, causing some Americans to think seriously about moving to Spain. But the country lacks a lot of supportive tax infrastructure for retirees; Americans living in Spain could face taxes as high as 47%, and certain retirees could trigger the Spanish wealth tax.
However, Italy offers a 7% tax rate for people who draw a foreign pension and want to live in southern Italy. In France, the double taxation agreement enables ongoing financial planning via familiar retirement vehicles, such as Roth IRAs and traditional IRAs.
Timing your move abroad
Those who move abroad often do so to reconnect with or re-establish priorities that may have been lost in the U.S. Whether you plan to move to a major European city or a quaint village, however, the best time to begin planning is typically at least two years in advance. This timeframe allows you to research your target country, connect with experts who can support you with all the logistics of your move and ultimately create a financially sustainable roadmap to live out your golden years in comfort and ease.
In the next article, we’ll look in-depth at the specific considerations Americans must bear in mind when evaluating a potential move to France.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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