Americans in Austria - retirement investing
Posted by Local_Water_3784@reddit | expats | View on Reddit | 34 comments
Hi! I'm wondering if there are any middle-class Americans who have moved to Austria and are willing to tell me about their experience with taxation of US retirement products (e.g. Roth IRA). I've really reached a dead end of what I can learn from the internet on the topic and it's stressing me to no end.
Remarkable_Emu_5620@reddit
Did you ever get an answer on this? I’m in the same situation now. Myexpatinvest had no knowledge of Austria specific issues when I had my consultation. I was surprised since they are based in Austria. The person I spoke to was in France and advised me on non-Austria specific issues, which wasn’t really helpful. I’ve contacted a lawyer in Vienna who specializes in US-Austria tax law and he’s asking for 550 euros plus 20% VAT for a 30 minute consult. It’s all very discouraging.
Remarkable_Emu_5620@reddit
To update myexpatinvest has reached out and say they will help me work on my portfolio to be up to speed specifically for Austria. Lets hope there’s a way. 1% annual commission, which seems reasonable for it being a complex issue.
Dartholit@reddit
Man I feel you here. My wife is a State Department employee over here now and we love it. We’re talking about retiring here, and we know theres an agreement between our countries for embassy staff who wish to retire in each others countries. But the tax situation is whats killing us. We both max our Roth IRAs, with the plan on only using the dividends generated, her retirement, and my VA comp for our retirement; so we can leave the actual underlying funds to our kids. But no one here knows how to deal with my VA comp as it isn’t taxed and doesn’t even need to be reported. We have no issue being a little poorer to feel healthier, but we don’t want to screw our children :/.
Strict-Armadillo-199@reddit
R/ExpatFinance may be of some help. I'm in Germany, and do know that these issues are considerable problems for at least DACH expats. I had a nightmare of aime with German laes around US trusts. Luckily I discovered the situation while it could still be changed and I didn't own taxes on money I hadn't even inherited yet, since my parent is still alive.
Local_Water_3784@reddit (OP)
Thanks, just posted there. Austria seems to be somehow worse than Germany!! I'm so glad you caught your issue before it became a problem.
grogi81@reddit
You see, any private retirement money is considered rich on Germany or Austria. People generally don't have much on funds like that.
Local_Water_3784@reddit (OP)
Yes, but these people also don't need to retire in the US with no safety net.
proof_required@reddit
What do you mean about lack of safety net in USA? Don't you guys have social security and Medicare? This is literally what's offered in Germany. There isn't some hidden safety net. Especially as someone who started working late in Germany, I can't afford to own apartment and my salary is taxed so much, I can't really build any wealth. The pension will be like sub 2k. That's far from the safety net if I don't own any housing.
Local_Water_3784@reddit (OP)
Someone else might know a lot more about this than me – and believe me, I am aware of the problems in Europe – but someone making a salary that is high in Europe (e.g. 60k) will get US social security of about 2k/month. Medicare can be really expensive. For example:
"In 2022, Medicare beneficiaries spent a total of $6,330 out of pocket on health care costs, on average, including premiums for Medicare and costs for Medicare-covered services and services Medicare doesn’t cover, like dental, vision, and hearing services and long-term services and supports, while average per capita income from Social Security was $16,157" https://www.kff.org/medicare/health-costs-consume-a-large-portion-of-income-for-millions-of-people-with-medicare/
Retiring even a little bit well in the USA requires your own savings. I'm just trying to figure out if a move from the country I am in to Austria will be financially devastating to me, given my personal situation.
proof_required@reddit
That's exactly how it works in Europe too. Public pension except maybe France and Italy are really paltry. In Germany the average pension is like 1501/month. As cheap as Americans might find Europe, it's not 1500 cheap in countries like Germany/Austria. Lot of European safety net is actually inheritance.
These aren't covered under European health insurance either. I don't know about hearing services but dental and vision aren't for sure.
Local_Water_3784@reddit (OP)
Yeah, I know it is a problem.
What I'm saying is that this (Roth IRA) is the only way I've been able to save for retirement (if you don't believe me, look up the rules for American citizens investing in non-US funds), and I don't want to mess it up. I wish I could fix everybody's retirement problems, including my own, but the fact that I can't do that doesn't mean I should purposely make decisions that ruin my financial future. I'm just trying to make an informed decision based on my circumstances, not pass judgment on other countries' tax & retirement programs.
proof_required@reddit
By the way did you try to find some local Austrian tax advisor? Might be worth paying someone to figure it out.
Local_Water_3784@reddit (OP)
Yes, I did, and their initial ideas were far from encouraging.
grogi81@reddit
You will be taxed through the roof if your funds are not Tax reporting in Austria...
Local_Water_3784@reddit (OP)
Thank you! This is what I have heard, but I have no idea how to get around it, or if it's even possible, and if this means I should avoid even moving to Austria
Complete-Paint529@reddit
US citizens certainly can invest in UCITS-compliant funds. If your broker doesn't offer these, then a rollover to a Roth with a broker who does may be in order. There should be no tax implications with this rollover. See:
https://www.ucits-etfs.com/equity-etfs/
If you need to change brokers, you *might* do well with Interactive Brokers (IBKR). This is a very large, globally-focused brokerage. I picked this brokerage because of its size, low fees, and international orientation.
Local_Water_3784@reddit (OP)
Thank you for this information! Am I understanding you correctly that there UCITS-compliant funds that don't trigger the US-based penalties for citizens on PFICs?
Complete-Paint529@reddit
If you go to that link, at the very bottom, you'll see examples of UCITS-compliant funds including iShares and Vanguard options. I don't know for a fact that these are exempt from PFIC tax penalties, but I'd be shocked if they didn't clear this hurdle. Such funds would be impossible to market to Americans.
Local_Water_3784@reddit (OP)
Well, I don't know for sure, but I think Americans will need to be very careful not to trigger PFIC penalties in the US.
One thing I have learned is that new financial products are being put together by MyExpatInvest that Americans living abroad should be able to invest in. What I don't know yet, though, is whether they are considered reporting funds in Austria.
grogi81@reddit
Are they though?!
In most cases it is ok to directly invest in US securities. It is just Austria and Switzerland that have some additional reporting requirement...
Local_Water_3784@reddit (OP)
Is this link relevant information? I feel like such an idiot with all this. https://www.bogleheads.org/wiki/US_domiciled_ETFs_that_are_UK_HMRC_reporting_funds
This seems to be specific to UK, though, which is not EU...
grogi81@reddit
Can you cash out all Roth IRA at once?
Local_Water_3784@reddit (OP)
I guess in theory, but wouldn't that also mean no gains in all the years we are in Austria, i.e. also damaging for retirement?
Local_Water_3784@reddit (OP)
Btw we can't buy any European financial products due to being US citizens
grogi81@reddit
I think best way would be: IBRK account and purchase of o dividual stocks...
If you purchase 2-3 per sector - so roughly 30 in total - you should have not that different performance to an index fund... Requires more work obviously, but is doable.
Local_Water_3784@reddit (OP)
What about the tax reporting in Austria of that kind of portfolio? The people at Deloitte made it sound like that would also be very difficult and expensive (i.e. they would charge a lot for it, and I truly do not have the expertise for figuring it out).
grogi81@reddit
Pure stocks - so no reporting really. You pay regular CGT on dividend
Local_Water_3784@reddit (OP)
Thanks. I don't know if they were purposely making it sound complicated or what. They were mentioning about differences in the number of times per year dividends are paid on individual stocks, etc., and how all of that would need to be reported.
grogi81@reddit
If you have Austrian broker, they will report automatically the dividends...
Local_Water_3784@reddit (OP)
Hmm, this might be a way to go. It would mean giving up the Roth IRA totally and irrevocably, though, which seems like a big deal.
FrontJelly1111@reddit
im thinking about moving there on a work visa, can you elaborate the whole destroying the ability to retire thing?
Local_Water_3784@reddit (OP)
I mean, I might be catastrophising, I just can't get any good information. Austria will take at least 2.75% of the amount of your full retirement account (that they consider non-reporting ETFs) every year, plus possibly an exit tax which I don't fully understand. So it's just a huge tax burden, if you keep the account. But loss of income in the account if you don't keep it.
FrontJelly1111@reddit
They have the authority to touch american accounts?
grogi81@reddit
As tax resident in Austria , you pay taxes on global assets according to Austrian rules.
They are not touching your assets, they just demand cash.