Is Retirement Math Different in Spain?

Upon moving to Spain, many Americans learn that calculations they'd made in the past are no longer accurate. Retiring abroad means living in two tax and financial systems simultaneously. Calculations that may have worked in the U.S. don't work in both.
Here’s why:
The Currency Problem. Most Americans retire with dollar-denominated assets: funds, 401(k)s. But in Spain, their grocery bill and utilities are in euros. Imagine if their U.S. portfolio returned 7%, but the dollar weakened 10% vs. the euro. Their real purchasing power would have fallen because they spend in euros. That's a risk most American retirement projections never model.
The Additional Tax Bill.  Spain taxes the worldwide income of anyone who resides inside its borders. The U.S. taxes Americans no matter where they reside.
For Americans living in Spain, they're the lucky recipient of two tax bills every year. 
The Insurance Coverage That Stops at the Atlantic Ocean. Most insurers underwrite risk based on the legal and regulatory environment of a specific country. When you leave that country, you've left the environment the policy was built for, and coverage either disappears or becomes unreliable.
The Complicated Investment Picture. An American in Spain might walk into a local bank, receive financial advice, and invest in the same mutual funds as his neighbors. But that may trigger a little-known IRS rule governing Passive Foreign Investment Companies (PFICs). When gains are realized in an investment that’s considered a PFIC, the IRS often treats them as “excess distributions.” The result can be income taxed at the highest historical marginal rates and interest charges applied retroactively. Each PFIC investment typically requires filing a highly technical form which requires specialized tax preparation and increases accounting costs.
The Bottom Line. When you change countries, don't just pack your bags—recalculate your retirement. A cross-border financial advisor can help.

Story originally published in Advisorpedia. 

https://www.advisorpedia.com/next-chapter-retirement/the-retirement-math-nobody-told-you-about-before-you-moved-to-spain/