Retiring in France: A Practical Financial Checklist for U.S. Citizens

France offers an attractive lifestyle for many retirees—excellent healthcare, beautiful cities and countryside, a rich culture, and a slower pace of life. However, moving overseas also introduces new financial, tax, healthcare, and investment considerations.

This checklist highlights some of the most important issues Americans should understand before retiring in France.

1. You'll Still File U.S. Tax Returns

One of the biggest surprises for Americans moving abroad is that leaving the United States does not end their U.S. tax filing obligations. As a U.S. citizen, you generally must continue filing annual U.S. income tax returns, regardless of where you live.

At the same time, most retirees who make France their primary home become French tax residents. This means you may be subject to both U.S. and French tax rules. Fortunately, the U.S.-France tax treaty helps prevent many cases of double taxation.

A few important points:

• U.S. citizens generally continue filing U.S. tax returns for life.
• French tax residents typically must file French tax returns as well.
• The Foreign Earned Income Exclusion applies only to earned income such as wages or self-employment income—not Social Security benefits, pensions, or most retirement account withdrawals.
• French bank and investment accounts may need to be reported to the U.S. government once certain account value thresholds are exceeded.

Cross-border tax compliance can be complex, so we encourage retirees to work with a tax professional familiar with both countries.

2. Should You Sell Your U.S. Home Before Moving?

Many retirees struggle with whether to keep or sell their U.S. home. From a tax and planning perspective, selling before the move is worth considering. Current U.S. tax rules allow many homeowners to exclude a substantial portion of the gain from the sale of a primary residence:

• Up to $250,000 of gain for single filers.
• Up to $500,000 of gain for qualifying married couples filing jointly.

To qualify, you generally must have:

• Owned the home for at least two years, and
• Lived in it as your primary residence for at least two years during the five-year period before the sale.

Selling before relocating may make it easier to meet these requirements. Good recordkeeping is essential. Improvements, selling expenses, and prior rental use can all affect the taxable gain on a future sale.

3. Health Insurance in France

Many Americans are surprised to learn that Medicare does not cover healthcare received in France. As a result, retirees moving to France need to plan for coverage that works in France and decide whether to maintain or decline Medicare coverage in the United States.

Delaying enrollment in Medicare Part B can result in permanent premium penalties if you later return to the United States and need coverage. Consequently, one of the most important decisions is whether to keep Part B. Many retirees continue paying Part B premiums even though they rarely use the coverage, because it preserves flexibility if they later return to the United States.

There is no one-size-fits-all answer. The right choice depends on your health, finances, and the likelihood that you may return to the U.S. in the future.

4. Investing While Living in France

Investment planning often becomes more complex after moving abroad. Many U.S. financial institutions impose restrictions once a client becomes a resident of another country. Some firms allow existing accounts to remain open but may limit certain transactions, investment products, or the opening of new accounts.

A few common issues include:

• Changes to brokerage account privileges after moving overseas.
• Restrictions on purchasing certain investment products.
• Additional reporting requirements for foreign financial accounts.
• Potential tax complications from owning certain non-U.S. investment funds.

Before moving, consider:

• Confirming with each financial institution whether your accounts can remain open after you become a French resident.
• Reviewing investment holdings that may create unnecessary tax or administrative complications.
• Understanding how dividends, interest, capital gains, and retirement account distributions may be taxed in both countries.

Because investment rules differ significantly between the U.S. and France, planning ahead can prevent costly surprises later.

5. Social Security Benefits

For many retirees, Social Security remains an important source of retirement income. The good news is that U.S. Social Security benefits generally continue to be paid while living in France.

Under the U.S.-France tax treaty, Social Security benefits are generally taxable only in the United States and are exempt from French income tax, though they must still be reported on a French tax return.

You may choose to have benefits deposited into either a U.S. or a French bank account in Euros. Either way, exchange-rate fluctuations can affect your spending power from year to year.

6. IRA Distributions and Cross-Border Tax Planning

For many retirees, their Individual Retirement Accounts (IRAs) represent a significant portion of retirement savings. Understanding how IRA withdrawals are taxed after moving to France is an important part of retirement planning.

Under the U.S.-France tax treaty, distributions from many U.S. retirement accounts, including traditional IRAs and 401(k) plans, are generally treated as U.S.-source pension income. As a result, these distributions are often taxable in the United States rather than in France, though they must still be properly reported to French tax authorities.

Because the treaty rules are complex—and Roth IRAs and certain other retirement arrangements can raise additional questions—retirees should seek cross-border tax advice before making large withdrawals, Roth conversions, or other significant retirement-account transactions.

 A few practical considerations:

• Traditional IRA withdrawals are generally taxable as ordinary income in the United States.
• Required Minimum Distributions (RMDs) continue to apply under U.S. rules once you reach the applicable age.
• Roth IRA treatment is more complicated. While qualified Roth distributions are generally tax-free in the United States and in France, French tax treatment of Roth conversions can be less certain and should be reviewed before moving.
• Large IRA withdrawals can push you into higher tax brackets and may affect Medicare premiums if you later return to the United States.

 Planning opportunities may exist before the move:

• Some retirees consider partial Roth conversions while still U.S. residents.
• Others spread withdrawals over multiple years to avoid large spikes in taxable income.
• The years immediately before retirement or relocation are often the best time to evaluate these strategies.

Because IRA taxation involves both U.S. tax law and treaty provisions, professional guidance is often worthwhile before making large withdrawals.

7. Estate Planning and Administrative Preparation

Before relocating, take time to update important legal and financial documents.

Key tasks include:

• Reviewing beneficiary designations on retirement accounts, insurance policies, and investment accounts.
• Updating powers of attorney and healthcare directives.
• Adding trusted contacts to financial accounts where appropriate.
• Creating a secure digital file containing tax returns, estate documents, account information, passports, and other important records.
• Building a team of professionals—including a cross-border financial adviser, tax professional, and estate-planning attorney—before the move.

Having the right professionals in place before problems arise can make life significantly easier once you're settled overseas.

Final Thoughts

Retiring in France can be a wonderful lifestyle decision, but it requires thoughtful planning. Taxes, healthcare, investments, housing, and estate planning all become more complex when two countries are involved. Our list of issues is not exhaustive, and we encourage those considering retiring in France to seek professional help. Additionally, the earlier you address these issues, the smoother your transition to life in France is likely to be.

Considering a move? We're here to help.

BOOK NOW

One of Bristlecone Value Partners’ principles is to communicate frequently, openly and honestly. We believe that our clients benefit from understanding our investment philosophy and process. Our views and opinions regarding investment prospects are "forward looking statements," which may or may not be accurate over the long term. While we believe we have a reasonable basis for our appraisals, and we have confidence in our opinions, actual results may differ materially from those we anticipate. Information provided in this blog should not be considered as a recommendation to purchase or sell any particular security. You can identify forward looking statements by words like "believe," "expect," "anticipate," or similar expressions when discussing particular portfolio holdings. We cannot assure future results and achievements. You should not place undue reliance on forward looking statements, which speak only as of the date of the blog entry. We disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. Our comments are intended to reflect trading activity in a mature, unrestricted portfolio and might not be representative of actual activity in all portfolios. Portfolio holdings are subject to change without notice. Current and future performance may be lower or higher than the performance quoted in this blog.

References to indexes and benchmarks are hypothetical illustrations of aggregate returns and do not reflect the performance of any actual investment. Investors cannot invest in an index and returns do not reflect the deduction of advisory fees or other trading expenses. There can be no assurance that current investments will be profitable. Actual realized returns will depend on, among other factors, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing of the purchase.

Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there can be no assurance that a portfolio will match or outperform any particular index or benchmark. Past Performance is not indicative of future results. All investment strategies have the potential for profit or loss; changes in investment strategies, contributions or withdrawals may materially alter the performance and results of a portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client's investment portfolio.