How Should U.S. Retirees Manage Taxes, Pensions, Investments, and Social Security From Spain?
Lately, I’ve never seen such a surge in interest from retirees looking to relocate to Spain. A recent survey of my subscribers revealed that nearly 60% of those who filled out the form are actively considering Spain as their destination within the next 12 months.
Most of these inquiries are from U.S. retirees looking to move to Spain in search of a better quality of life.
Recently, I spoke with Cynthia, a retired professional who relocated from the U.S. to the Basque Country with her husband. While they'd done their research, Cynthia shared that they still ran into unexpected hurdles, especially around taxes, investment transfers, and ongoing banking issues.
“I knew Spain’s taxes would be higher than the U.S.—but I didn’t expect to be taxed on every detail of my retirement accounts, or to have to declare each stock I hold. It’s been a crash course in international finance,” she told me.
So if you’re planning on making the move, starting 12 months ahead is a smart choice. Relocating to a new country is a big decision, and it’s not just about the excitement of moving to Spain. It’s about making sure your financial and practical needs are in place.
With that in mind, many retirees reach out with these type of questions:
What happens to my U.S. investments when I retire in Spain?
How will my taxes change once I’m living in Spain?
Can I still receive my U.S. Social Security while living in Spain?
What are the tax implications of my U.S. IRA, Roth conversions, and Social Security benefits in Spain?
How do I handle estate planning and inheritance issues between the U.S. and Spain?
To help answer these, I recently spoke with Jake Barber, Principal of SJB Global. Jake has extensive experience working with retirees, helping them manage their finances, taxes, and investments across both the U.S. and Spain. His expert insights are crucial for anyone looking to retire in Spain with confidence.
Let’s dive into the top financial concerns that retirees face when moving to Spain, and how to address them effectively so you can enjoy a smooth transition into your new life.
1. How Do I Handle Spanish Tax Reporting as a U.S. Retiree?
One of the first challenges you'll encounter when moving to Spain is understanding the tax reporting system. As a resident, you will need to file several annual forms, and failure to comply can result in severe penalties. The most critical forms are:
Modelo 720: Used to report foreign-held assets exceeding €50,000. This includes real estate, bank accounts, and investments.
Modelo 714: Used for wealth tax reporting. Spain taxes your wealth if it exceeds certain thresholds.
Modelo 650: Covers gifts and inheritance reporting.
Jake emphasized that non-compliance with these forms can lead to substantial fines. His advice? Seek professional help early on to ensure you're following the correct procedures.
Cynthia shared that the process felt far more invasive than she expected:
“You don’t just report your income—you report your entire financial picture. Every account, every fund, every dividend. It’s a lot to prepare if you don’t have help.”
2. Will My U.S. Retirement Accounts Still Be Tax-Advantaged in Spain?
Many U.S. retirees are concerned about the status of their tax-advantaged accounts like Roth IRAs, 401(k)s, and HSAs once they move to Spain. Unfortunately, Spain does not recognize the tax-deferred or tax-free status of U.S. accounts. When you withdraw funds from these accounts, the distributions are taxed as regular income in Spain.
Jake’s special consideration here is to be aware of the different tax treatment. He suggests planning for this by having a tax strategy in place and being proactive about managing your withdrawals. Strategic withdrawals and understanding the U.S.-Spain tax treaty will help minimize the tax burden.
3. Can I Still Invest in U.S.-Domiciled Funds While Living in Spain?
Spain’s MIFID II regulations restrict EU residents from investing in U.S.-domiciled mutual funds and ETFs. This can make portfolio diversification challenging. Jake stressed that investment restrictions like these can be one of the biggest annoyances for Americans living in Spain. However, it is still possible to structure your portfolio efficiently.
He also pointed out that alternative investment vehicles, such as EU-compliant funds and ETFs can't be used either due to PFIC rules (Passive Foreign Investment Companies), which means you may only be able to buy direct shares and bonds.
4. Can I Receive My U.S. Social Security Benefits While Living in Spain?
Here’s some good news: You can receive your U.S. Social Security benefits while living in Spain. The U.S.-Spain bilateral totalization agreement ensures that your contributions in both countries count toward your benefit eligibility.
Jake’s expert insight: The totalization agreement prevents you from being taxed twice on your Social Security income, which can significantly reduce your overall tax burden. Make sure to apply for Social Security benefits early to avoid delays in payments.
Cynthia confirmed this from experience:
“I still receive my Social Security payments, no problem—but I had to make sure the bank I used didn’t hit me with a huge conversion fee. I now convert through a U.S. institution before sending euros to Spain.”
5. Are Spanish Financial Products Good for U.S. Citizens?
While Spanish financial products, such as life insurance and private pensions, may be favorable in Spain, they can create significant complications under U.S. tax law. Many of these products only offer UCITS funds which would be treated as foreign trusts or PFICs (Passive Foreign Investment Companies), leading to additional tax reporting and negative tax consequences.
Jake recommends avoiding investments that might fall under these classifications, as they will require complicated reporting under the FATCA rules. Working with a dual-licensed financial advisor is key to ensuring you make the right choices.
6. How Does the Lack of an Estate Tax Treaty Between the U.S. and Spain Affect Me?
One of the most overlooked issues when moving to Spain is the lack of an estate tax treaty between the U.S. and Spain. This can result in double taxation on your estate. In 2025, the U.S. estate tax exemption is $13.61 million, with rates up to 40% beyond that. Non-U.S. citizens who hold U.S.-based assets exceeding $60,000 may be liable for U.S. estate taxes, while Spain taxes inheritance based on the beneficiary's residence. If the beneficiary is a non-resident, they are taxed only on assets located in Spain.
Jake advises that estate planning should be a priority. By setting up your estate plan in advance, you can reduce the likelihood of double taxation on your assets. Consider speaking with an estate planning attorney who specializes in cross-border estate issues.
7. Do U.S. Trusts Work in Spain?
If you're connected to a U.S. trust, whether as a settlor or beneficiary, it’s important to know that Spain does not recognize trusts due to its civil law system. Any income, gifts, or inheritances flowing through the trust may be taxable in Spain, and you will likely face complicated reporting requirements.
Jake’s special recommendation: Review your trust structure before moving to Spain, as it may lead to costly reporting requirements and higher taxes. Consulting with a cross-border estate planning attorney can help you understand the potential tax implications.
8. What Is the Beckham Law, and Does It Apply to Me as a Retiree?
The Beckham Law offers new residents of Spain the opportunity to pay a flat 24% tax on their Spanish income for the first six years, excluding foreign income from taxation. However, this only applies to employment income, not self-employment or passive income.
Jake noted that for retirees, the Beckham Law might not offer the same benefits since most retirement income (pensions, social security, etc.) will not be covered by the law. It’s worth considering whether your situation qualifies for this benefit or if there are other tax planning strategies that may better suit your needs.
9. Do I Still Need to File U.S. Taxes if I Move to Spain?
As a U.S. citizen or green card holder, you are still required to file U.S. tax returns no matter where you live, including Spain. This includes reporting foreign financial accounts (FBAR), complying with FATCA, and paying U.S. taxes on worldwide income. Additional reporting may apply depending on what assets you hold.
Jake advises that understanding the implications of U.S. tax law while living abroad is crucial to avoid penalties and double taxation. It’s essential to stay compliant with both U.S. and Spanish tax obligations.
10. How Does Spain’s Tax System Affect My Retirement Income?
Spain taxes worldwide income, including income from the U.S. While the U.S.-Spain tax treaties help prevent double taxation, the tax rates in Spain—especially for wealth, income, and inheritance taxes—can be significantly higher than those in the U.S. This is especially relevant for retirees relying on pensions or savings.
Jake’s insight: Tax planning in Spain is essential to minimize your tax burden. He suggests retirees should work with professionals who understand both systems to structure their income and assets efficiently.
Are You Ready to Make Your Move?
By now, I hope this post has helped answer some of the pressing questions you might have about retiring to Spain and managing your finances abroad. If you’re still feeling uncertain about how to navigate the financial and tax complexities, I highly recommend scheduling a consultation with Jake Barber’s team at SJB Global.
SJB Global has been praised by clients for their trustworthiness, clarity, and exceptional customer service. They provide personalized financial planning to clients worldwide, always working from a core belief that a better world can be created through transparent and holistic advice. Unlike other firms, they operate on a set fee rather than commission, meaning you’ll always know exactly what you're paying. In fact, their charges are often 50% cheaper than those of competitors—another reason why so many retirees trust them to help manage their finances.
If you're ready to dive deeper into your specific financial situation and feel confident about your move to Spain, Jake and his team are here to help. Just let me know, and I can help set up that initial consultation.
