Europe is a continent of myths and legends.
Whether it’s the “banshee,” the wailing old woman of Irish folklore who brings death… to the story of Gargantua, the giant who carved the landscape of Brittany… to the Greek and Roman myths that are still popular today, like the stories of Hercules…
Thousands of years of history have brought a culture and sophistication to Europe that make it a draw for many American retirees…
Unfortunately, there are also a lot of myths out there about expat life in Europe—how to achieve your European dream, and what it would cost you.
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Fact is, I hear all kinds of wrong ideas about European life all the time.
Europe has been a draw for me since I was in high school. I saved up my junior year to take a whirlwind tour of Europe… 9 countries in 30 days by bus.
It was on the trip that the seed of the idea of spending time in Europe was planted. Residency, taxes, and cost of living weren’t terms I was familiar with yet so they weren’t a concern.
Decades later I’ve lived in Ireland and France full-time and am now settled into an annual pattern of part of the year in Paris and part in Panama, with travel to other places mixed in.
And now I understand the residency, tax, and cost of living questions relevant to living in Europe clearly… as I say, there are a lot of myths out there about them.
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Myth #1: A “Golden Visa” Is Your Only Route To Residency
I heard this recently from a reader… some readers are under the impression that the only way an American can get a visa to live in Europe is by investing hundreds of thousands of euros (in property or a business). What’s known as a “Golden Visa.”
This is not the case at all…
Europe offers many options for residency—including some as easy and affordable as options in the Americas.
The question is where do you want to be?
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The easiest way to be able to live in a European country is to become an EU citizen. I did it by putting in my time in Ireland and becoming naturalized.
However, many Americans are eligible for citizenship in Europe through their ancestry.
Ireland would be on that list, but so are Italy, Hungary, Spain, and others. The requirements vary by country, but Ireland and Italy are simple. If you have a grandparent (or even a great-grandparent) who was a citizen, you are likely eligible for citizenship, as well.
If citizenship by ancestry isn’t in the cards for you, then look to the residency-by-income options. Most European countries allow you to apply for residency if you can prove you can support yourself without taking a local job—that is that you have enough pension, Social Security, or passive income from investments to meet their minimum income requirements. The threshold is different for every country.
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Ireland doesn’t win in this category. Its minimum income requirement is 50,000 euros per person per year. That means a retired couple has to show 100,000 euros of passive income annually. At the other end of the scale is Portugal, where a single person can qualify by showing as little as 15,000 euros of income a year and a couple by proving just 18,000 euros annually.
If you have the means, a Golden Visa can be an option… and it could be more affordable than you think…
Spain, Greece, Cyprus, Malta, and some others offer Golden Visa residency options that allow you to gain legal residency by investing in real estate. Sometimes other investments count as well. The investment amounts start at 250,000 euros…
In the case of Montenegro and Northern Cyprus, you can qualify simply by buying property—any property of any value. In beautiful little Montenegro, you could pick up a property for as little as 50,000 euros.
That’s the residency question taken care of… what about taxes? Aren’t they a big burden in Europe?
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Myth #2: You’ll Be Taxed To The Hilt
Europe is definitely a high-tax destination. But you have to look at what taxes you’d actually be eligible for as a retiree…
Employed people in Europe are hit with high social charges known in the United States as social security or payroll taxes. In the States, you pay 7.65% as the employee and the employer pays the same amount. In France, the employee pays 27% and the employer 42%, for example.
However, as a retiree, you won’t be liable for these social charges in Europe.
And, no, you won’t be taxed twice—once in the States and once in Europe—either.
Tax treaties mean that Social Security is typically taxed on the U.S. side rather than in the country where you’re residing. Non-government pensions would be taxed by your country of residence. Likewise your IRA distributions, meaning you may want to do some planning before moving.
Investment income would be taxed by your country of residence, as well, with tax credits on the U.S. side.
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Marginal income tax bands in Europe rival those in the States, with top bands higher than the States. However, most people don’t fall into the top band in the United States or elsewhere. In other words, the effective tax on your income probably won’t be any greater than it is wherever you’re living Stateside.
And, remember, if you move overseas full-time, you’ll no longer be burdened with U.S. state taxes.
Property taxes are generally less in Europe than you’d pay on a similar value property in the United States. In fact, in Monaco, they are zero (although, life in Monaco is already expensive enough). Ireland didn’t charge property tax either when we moved there more than two decades ago, though they’ve changed that and do now.
The property transfer tax can be what gets you in Europe. Transfer taxes range from 0% to 10%, depending on the country. The rate in Portugal is tiered, starting at 0% for properties under 97,000 euros and increasing to 7.5% for properties selling for more than 1 million euros.
One other tax to compare and consider in Europe is the value added tax (VAT), their sales tax. It’s included in the marked prices on products so it’s hidden. However, it ranges from 17% to 25%, depending on the country. Some goods are taxed at a reduced rate.
Those rates are higher than any total sales tax (state, county, and municipal) in the United States.
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Myth #3: Europe Isn’t Affordable For U.S. Retirees
Nothing could be further from the truth.
It’s true that, on average, the cost of living for expats in Latin America or Asia is going to be lower than in Europe—but again, that depends on your location… and, certainly, life in the top European retirement havens is likely to be more affordable than staying in the States.
The truth is, your cost of living in Europe can be as high or as low as you make it. Europe has discount stores. You just have to find them. European shops offer sales, historically only seasonally but this has changed.
Living in Europe for decades as we’ve done, we’ve come to think through purchases more carefully. Do we really need that new pair of boots or salad bowl? Will we actually use them? And do we have space for them?
It’s liberating.
As for groceries, a bottle of drinkable wine can be a few euros. That fancy French imported cheese you buy in Iowa isn’t an import in France.
What can push your grocery bill up is buying groceries from the small shop on the corner. Just like you wouldn’t do your main grocery shopping in a 7-11 in the United States, you shouldn’t go to your corner grocer for your weekly shop. Go to the big grocery store or better shop online and have your groceries delivered. Delivery’s usually free.
The biggest thing to consider when it comes to cost of living is housing. Again and especially in the case of where you choose to live, the cost can be as big or as small as you make it.
You can’t buy a small studio apartment in central Paris for less than 500,000 euros. However, look in the outer arrondissements and you might find something starting at 300,000 euros. Look outside the Périphérique in the suburbs and that same 300,000 euros might buy you a nice-sized place. Head to some small town in the south of France and those 300,000 euros will buy you a house.
Head to Abruzzo in Italy and you can find some absolutely cheap options… country homes in need of renovation for less than 100,000 euros.
Or you could rent. Again, the cost of a rental varies dramatically depending not only on the country but also where specifically in a country you choose to locate yourself.
The bottom line is: life in Europe can be easily within reach.
Stay diversified,
Lief Simon
Editor, Simon Letter
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