Retiring in France (#4)  
 Basic check-list for would-be retirees in France    The French retirement system

For many foreigners, retiring in France may seem appealing. Indeed it may be a good idea but it must be carefully studied. Among the issues to consider :

  • EU or not EU : everything is much simpler if you are a citizen of a EU country because of the high number of reciprocity treaties covering most fields (taxes, health, diplomas, etc). If you are American, it's more difficult.

  • Health : you must be covered by a Health program. More about the French health system and read a (very favourable) American opinion about it.

  • Working : you can work as a consultant ("travailleur indépendant " or "auto-entrepreneur") but do not underestimate the complexity of the process. You must have a "carte de travail " (working permit) and be affiliated to health ("Sécurité Sociale") and retirement ("URSSAF") organizations. Check everything with a specialist.

  • Taxes : you must pay French taxes, even on income made outside France

  • Community life : EU citizens can vote and be elected in local elections ; others cannot (but President Hollande elected in 2012 said he would make it possible for non-EU citizens).

  • Buying property is easy and many real estate agents are specialized in foreign buyers

  • Language : are you ready to learn French and use it daily? Do you wish to have French friends and share their way of life? Your stay will be enourmously enriched by learning the language.

  • If you need help for administrative tasks : Imagic2015 provides the best service for foreigners, guiding them through French administration processes in a smooth and serene manner (Administrative forms assistance, secretarial tasks, writing, …)

  • More to come.

For US citizens :

  • Check with the Federal Benfits Units at the US Embassy in Paris : you can cumulate (partly) US and French benefits (there is a bilateral agreement) but it is very complicated and it often changes. About the French (minimum) pension system, check the CNAV site.

  • Read "Vital Issues : How to Survive Officialdom While Living in France", regularly updated by AAWE

  • visit the Retire Europe site
 

In France, the general rule is that you must retire at age 67 and you can retire from age 62, as long as you have worked 41 (now) then 42 years. According to a 2008-law, which was strongly opposed by the Left, you are now permitted to retire later (until age 70) , but only if you wish. However, in some professions, people can retire as early as 55 (public transport) or even 50 (bus or train drivers, miners,...) and many early retirement public programs have been established. Women gain two years per child. After big strikes, it has been decided in 2003 that civil servants, who needed only 37,5 years work when private sector needed 40 would follow the general rule (but very progressively). In October 2010, in spite of huge strikes, the system was changed and the ages were modified from 60 to 62 (minimum age) and from 65 to 67 (normal age).

The pension system in France :

  • For all salaried workers and civil servants : a national system which grants 50 to 55 % of the income (if you have worked 41 years) This system is totally different from the US system. It adds a Social Security pension and a system of Retraite Complémentaire. Everybody is entitled to the first one, which is based on the concept of "repartition", instead of "capitalization". Each year, it distributes what has been collected among active people : it is, therefore, sensitive to demography and employment (less people, less money) but disconnected from the financial market (which makes sense, these days...). Read more about it. The second one concerns mostly "cadres" i.e. people over a certain income, and is also based on "repartition" and therefore totally independent of the future of the companies you worked for.

  • Plus : corporate plans or personal plans (close to the American system of "capitalization") depending on the company.

  • For the French it is just unthinkable that the pension you get could depend on the failure of your employer or past employer (nobody could believe the Enron story).

Retiring in France and taxes

  • If you decide to settle in France permanently and become a French resident, you'll have to become à taxpayer in France. Of course, you'll pay taxes on the products you buy (the VAT), on the property you rent (taxe d'habitation) or you own (taxe fonciere etc.) but also you'll have to pay the income tax (on any level and any form of income, in France or abroad) and the tax on wealth (ISF : impot sur la fortune, above 1.3 million Euros total assets). This is the French law: all citizens living in France are taxpayers in France. Paying tax is associated with residence.

  • But : prospective retirees in France, beware of FATCA! The US law is different from the French law : all US citizens are US taxpayers, wherever they live. Paying tax is associated with citizenship. From July 2014, for all US citizens living in France, the US Foreign Assets Tax Compliance Act requires all US citizens to declare all their bank accounts and financial assets worldwide and of course all their income. This creates many constraints for non-American banks and many of them prefer to close the accounts of their American customers.

  • This is a pathetic example of the way American lawmakers mistreat their compatriots living abroad (read more about it).

DID YOU KNOW THAT….? Taxwise, the US situation is almost unique : except Russia, the USA is the only country in the world which considers double taxation as unavoidable : all the other countries base their taxes on residence and not on citizenship. Even if Section 911 of the US Tax Code grants an exemption for income below a threshold (currently : $95,000), it is taxable above that amount and the threshold could change any day.

USEFUL TIP……. Filing for taxes is easy in France and, other thanvery rich people, very lazy people and people with a very complicated form of income or wealth, very few people need to pay someone to help them to file. It takes only a few minutes and a large majority of people do it online. Nothing in common with the craziness of American tax bureaucrats who, with so many ridiculously complicated tax forms and tax laws, deliberately push taxpayers in the arms of various lawyers, tax advisors and accountants.

 
  • The demography being what it is in Europe (weak and relatively high unemployment), maintaining the current level of pension is at stake and will be one of the major issues of European governements for the years to come. Although the demography in France is one the most dynamic in Europe, French governments have been trying to make changes in the system to adjust it to demography and economy, through a very painful process, with huge strikes : increasing the number of working years for the private sector from 37,5 to 40 (1993), trying in vain to extend it to the public sector (1995) and finally succeeding (2003), trying to put an end to the "régimes spéciaux" which are very advantageous exceptions to the system (2007).

  • See figures about the huge difference between the system for employees of private companies and the (very advantageous) system for civil servants and employees of public utilities. At a big political cost, president Sarkozy reformed it toward a (slow) convergence of the two systems (2008).

  • More to come

 

 

 

 

 

 

A few facts and figures ....

Activities.... To be developped

Miscellaneous suggestions :

USEFUL TIPS..... Most universities offer a program called "Université du Troisième Age" (University for Seniors) : they are generally quite good. In most cities, there is a "Maison des Associations" which is an information center and a meeting place for most associations, for all kinds of hobbies. Like in the US, if you are over 60 or 65, you qualify for many small benefits : a Carte Senior (25% off on trains), a reduced fee on urban public transport (but not in Paris), a reduced or free access to many museums, you pay no yearly TV tax (if over 70), etc... In 2008, an interesting survey established that the feeling of happiness is maximum between age 65 and age 70 : people enjoy being retired !

 
  •  Average age at which men stop working in various countries (Source : OECD 1995)
    • UK : 63,6
    • Sweden : 63,3
    • Spain : 61,6
    • Italy : 60,6
    • Germany : 60,5
    • France : 59,2 (only 15% of people between age 60 and 65 are still working : the lowest % in Europe)
    • Netherland : 58,8
    • Belgium : 57,6
    as compared to :
    • USA : 63,6
    • Japan : 66,5
  • The French pension system " retraite par répartition " illustrates that the French prefer a social (redistributing) mechanism to an economic (investing) process. The French system has not much in common with the U.S. system : it is based on the idea that the money collected among active people is not invested but immediately redistributed to retired people.

    • Pros : The system is by nature independent from inflation and from the stock market and retirees can go without harm through any economic or social crisis
    • Cons : it is sensitive to declining demography and to the increase of longevity, which deteriorate the ratio (contributing actives) / (benefitting retirees)
  • Pension systems similar to what Americans are familiar with do exist ("retraite par capitalisation " i.e. pension funds) but they contribute to a smaller part of the income of retirees and moreover, their development is very strongly opposed by the left wing, for which it is considered a typical example of "globalization".

  • At the death of a spouse, the surviving spouse is entitled to "pension de reversion" i.e. unless the survivor already benefits from a high pension (this maximum level varies) he/she receives HALF of the pension of the deceased until his/her own death.

To related pages : life in Paris (#1), to what Americans like (#2) and to meeting the French (#3), intercultural differences, etc...

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For more on intercultural differences, order Harriet Welty Rochefort's books :

  • "Joie de Vivre", Secrets of Wining, Dining and Romancing like the French, St.Martin's Press, New York, 2012
  • "French Toast, An American in Paris Celebrates The Maddening Mysteries of the French", St.Martin's Press, New York, 1999
  • "French Fried, The Culinary Capers of An American in Paris", St.Martin's Press, New York, 2001

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