'I store cash at home': Why Americans in Germany struggle to save for retirement

Saving for retirement can be difficult for low and middle-class income earners even in normal circumstances, but for Americans living in Germany the challenge is taken to another level.

Between added hurdles around income reporting and taxation and being barred from engaging in certain types of investments, US citizens face exceptional challenges in saving for the future while working in the Bundesrepublik.

Here's a look at why simple and secure savings options are hard to come by for US citizens in Germany, and what they have to say about it.

German banks avoid American customers

Some US citizens in Germany have reported being turned away from major German banks. For these banks, being an American is a liability.

Part of the problem is a bureaucratic requirement on the US side that puts pressure on German financial institutions. 

Another obstacle for American citizens is so-called double taxation — they must declare their income in Germany to Uncle Sam even if they've also filed taxes in Germany. Most people with normal incomes who pay taxes in Germany, won't end up owing anything more to the US, but the taxes need to be reported nonetheless.

The US is the only country in the world that taxes its citizens on income generated abroad.

READ ALSO: 'It led to divorce' - How US tax rules burden Americans in Germany

There has been some talk about ending citizenship-based taxes (or double taxation) for Americans, but as of yet the rules haven't changed.

Restrictions on investments

Another glitch affecting Americans' savings is that due to government regulations, certain investments— for instance, Exchange-Traded Funds (ETFs) — are not available to US citizens.

“Americans abroad often run into difficulties with their financial investments,” according to advocacy group American Citizens Abroad. "This most often happens when investing in foreign mutual funds or foreign pensions that are taxed as PFICs or Passive Foreign Investment Companies." .

Taken together, all these restrictions mean that many Americans living and working in Germany face a hefty disadvantage in trying to save for retirement.

'I store cash at home as savings'

A survey carried out by an organisation called Stop Extraterritorial American Taxation (SEAT) shows the financial impact all these regulations have on US citizens in Germany — especially in terms of saving for their retirement.

"I'm unable to find a bank to invest into ETFs for retirement," said one German resident from Maryland. "I cannot find a brokerage to invest in for our retirement...US-brokerages want US-residency and German
banks don’t want us due to FATCA."

Another respondent, originally from South Dakota, noted that she's been rejected from multiple banks and had to shut down her daughter's saving account (to which she was a signatory) because the interest accruing there was making it more difficult to do her tax returns.

"Now I store cash at home as savings, which I despise," they said, adding that they're also unable to sing-on with stockbrokers in Europe due to their US citizenship.

On top of limitations about where Americans are able to invest, a large number of respondents cited the headache of filing taxes and the high cost of professional tax help as a major issue.

One German resident from Pennsylvania said, "I pay high fees to a service every year to file papers and never owe any money! It is ridiculous that it costs me money to be an American just because I live abroad."

They added that they've been routinely denied bank accounts, which has hurt their small business.

Another respondent noted that both they, and their German spouse need to double-file since they file jointly in Germany. 

"Thanks to the bilateral US/German tax treaty I have been spared almost all US tax obligations given the substantial tax we pay in Germany, but the bureaucracy and filing requirements are onerous."