Whether it's Germany's Alps and sea views, the Federal Republic's cultural offerings, easy European travel connections, relatively good quality healthcare or quality of life - Germany has plenty to tempt American pensioners looking for a place to spend their retirement years.
And between the American military bases, Berlin's start-up scene, and the Yankees who moved to Germany for love - the Federal Republic already has a huge presence of Americans living here - at around 120,000. Of those, 32,000, or about a quarter of the Americans in Germany, are 60 years of age or over.
READ ALSO: Where in Germany do all the Americans live?
So how do American retirees living here support themselves?
Alongside private savings and potentially investment or rental income, pension and social security entitlements are a critical part of making the dream of retiring in Germany a reality. Also, knowing how much pension you can expect is key, as it will impact how much you have to pay for things like public health insurance in Germany.
As non-EU nationals, Americans looking to retire to the Federal Republic need to apply for a retirement visa and register their residence.
You'll have to register for public health insurance if you don't have available private coverage. Again, the contributions you'll need to pay are based on your income, including pension entitlements. There's no clearcut rule or number on how much you should have in Germany, but you should certainly be taking in more than the poverty line, which is €1,200 a month.
The local area you choose to live and apply for a residence permit in will also make judgements on whether you have enough income based on cost of living there. Thus, living along the Ostsee is likely to require less than central Munich - for example.
EXPLAINED:Â Do your pension contributions abroad count in Germany?
Collecting your American pension in Germany
The United States and Germany have had a longstanding Social Security Agreement since 1979. Germany has around 20 such agreements with non-EU countries.
The social security treaty with the US covers issues like pension payments if someone has worked in both countries over the course of their career, and it's designed to prevent double taxation on social security benefits.
Generally speaking, the country where you paid into your pension pot will be the one that actually pays your benefit - regardless of where you choose to live. However, the country where you reside is where you'll pay tax on this income. So an American who's worked their whole career in the US but retires to Germany will receive the social security payments from the US but pay German tax on them - without having to pay American tax on them. If they've also spent time working in Germany and receive German pension payments, they will also pay tax on these only in Germany.
Again, those American social security payments will also be taken into account for deciding contributions to German public health insurance.
But there are some conditions
There's a few caveats to be aware of.
Even if your American social security contributions are taxable in Germany, that doesn't mean you can dodge filing an American tax return.
Also, you still have to meet the basic requirements to be eligible for American social security - meaning you need to have worked a minimum of ten years in the US.
If you have worked in the US but haven't hit the ten-year mark, the agreement allows for years spent contributing to a German pension to count toward putting you over the line. It also counts in reverse, where time spent working in the US and contributing to social security could potentially aid someone who has worked for less than five years in Germany, pushing them toward being eligible for a German pension.
If you've worked in both Germany and the US; for example for 15 years in the US and 25 years in Germany, you'll receive proportional payments from both German state pension and US social security. You'll then need to declare both these payments for tax purposes - potentially both in Germany and the US. Again, this reporting requirement may exist even if you're only actually taxable in Germany.
READ MORE:Â How can pensioners from abroad retire in Germany?
How much are American pensions taxed in Germany?
State pensions from any country are treated as earned income in Germany. So American pensions being paid to a resident of Germany - regardless of their citizenship - are subject to progressive German tax rates ranging from 14 percent to 45 percent.
Again though, these will generally fall under the US-German Social Security Agreement. So if you pay your tax in one country, you shouldn't need to pay it in another - even if you have to report your income to both. There are cases though where you may need to prove that you've already paid tax on the income - so keep your documents in order.
There may also be some specific differences depending on your situation, so be sure to ask for professional advice if you think you need it.
Please note, we are at The Local are not financial experts. The information above is designed to help, but if you are unsure of what steps to get yourself in order tax-wise, seek professional advice.
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