Assurance vie and retirement

[parsnips]

Originally Posted by anneteoh

Retirement should be the beginning of one's dream but the realities of making that real and beautiful is constantly fraught with uncertainties in today's economic climate. I personally would like my life to be Zen-like and paper free ( as far as possible) so I am not attracted to all the small prints in insurances and assurances. I agree with goneglobal - the literature is a mind boggle. It'll be like trying to understand cricket on radio for me.
Have you ever considered that putting your well-earned sums into bonds in a couple of good banks ; including off shore ones, can be a simpler and safer returns than taking out life assurances ( which, at maturity, are always less promising even in good times )? The question is, ' Are banks more of a guarantee to pensioners than the Life Insurance/Assurance companies?'
I find that Credit Agricole offers quite good rates of interest for their bonds and even ordinary savings at 2.25 % and slightly above. Hence, a sum of around 150,000 Euros can earn you close to 500 Euros a month. It's simple as that. Moreover, your money is secure and won't fluctuate with the bulls and the bears. The English banks offer good interest rates for savers too.
Hope this helps. Wishing you a great celebration on that day and thank you for all your current good work in this forum Bev.

Hi,
From what you say I don't think you fully understand the difference between french and UK life assurance plans. There is a lot of detailed info. on this thread.
Your example of bank interest is a little optimistic ;
The 2.25%(if you can get it) will be subject to tax and CSG . Even if you are not taxable you will certainly be subject to CSG at 12.3%, so the calculation is ;
150 000x2.25%=3375 - CSG(3375x12.3%) 415=2960/12=246.60€ p.mth.
With real inflation rising , over the long term such an investment will certainly lose purchasing power continuously.

[anneteoh]

Originally Posted by parsnips

Hi,
From what you say I don't think you fully understand the difference between french and UK life assurance plans. There is a lot of detailed info. on this thread.
Your example of bank interest is a little optimistic ;
The 2.25%(if you can get it) will be subject to tax and CSG . Even if you are not taxable you will certainly be subject to CSG at 12.3%, so the calculation is ;
150 000x2.25%=3375 - CSG(3375x12.3%) 415=2960/12=246.60€ p.mth.
With real inflation rising , over the long term such an investment will certainly lose purchasing power continuously.

Hi
You're right. I found it all too complicated. I suppose it's more so as it's not directly related to me. My suggestion is based on my own experience. I left half the above stated sum in my French bank and had 250 Euros a month for interest after tax. Obviosuly, there was no CGT involved as it was not a transfer but if I were to have the same sum of money transferred to the UK bank, there'd be no CGT under 250,000 GBP. From what I'd read of the 150,000 involved, the interest gained from a bond ( short term - 1 year bond too) amounts to almost the same as that given in annuities, sans the fluations in the market.
Regarding the long term investment, you may be right i.e. if there're no sudden crashes; though I believe the market will always pick itself up. However, what I wanted was just a simple life, at least for a year till I know what and where I really want to live and invest in. That said, the recent debacle with investment funds companies are an eye opener.
In the end, it's all about security for me and I think I rather trust the bank better than investment funds companies which advertise mouth-watering returns but not always living it up when it comes to the crunch. I just have the feeling that those days of collosal returns from the stock market are fleeting, if not gone.

[parsnips]

Hi,
If you would only read the info. you would see that french life assurance guaranteed euro funds give from 3.5%-4.2% , with absolutely NO risk, and many tax and succession advantages.

[Bevdeforges]

Originally Posted by anneteoh

In the end, it's all about security for me and I think I rather trust the bank better than investment funds companies which advertise mouth-watering returns but not always living it up when it comes to the crunch. I just have the feeling that those days of collosal returns from the stock market are fleeting, if not gone.

Ultimately, it depends upon the individual's goals and other resources. And what you define as "security" may not be the same thing I want or need as "security."

What I've been trying to find is a lifetime income (admittedly a fixed income) because the state pension I qualify for here in France is minimal at best and the US style "retirement funds" require you to play professional gambler, er, I mean "investor," even after you've retired. Plus, there is the ever-present exchange risk when dealing with retirement funds placed overseas.

For some folks, it's also necessary to consider inheritance questions, whereas for others of us, "no heirs, no headaches."

This stuff is really tricky, no matter how you look at it!
Cheers,
Bev

[anneteoh]

Originally Posted by parsnips

Hi,
If you would only read the info. you would see that french life assurance guaranteed euro funds give from 3.5%-4.2% , with absolutely NO risk, and many tax and succession advantages.

OK. You've made it clear here but is it still subject to taxation? The bonds with the banks go up 3.25 to 4.75 depending on the number of years of bondage.

[parsnips]

Hi,
Please read my post of 09/09/2010, where I set out the tax situation.

[kirikara]

Hi everyone, for american expats outhere, I do have a question.
Hubby and i both have 401ks and IRAs. We will be both french-american citizen shortly.
if we become french residents, what are our options to avoid too much taxes?

Bev, you mentionned having to pay the Us gov for withdrawing from your 401k/iras. But you are a resident of france, paying taxes to france, how does that work? isn't it part of the tax treaty?
I have read that treaty many times and I cant figure out what will happen..
It would be nice to know, so that we can switch some of our savings to a roth ira or something of the like.

anyone knows about the following situations:

1. I have an ira (pre tax money), i have reached 60, can withdraw with no penalty, i am french resident. Do i pay taxes to both the US and france?
2. I have an ira, I withdraw the money before 60, i am french resident. what kind of taxes will i have to pay.
3. I have a roth ira (money saved was post tax in the US, gain is taxable). I am french resident, old enough to withdraw with no penalty. Do I still pay french taxes on it?

thanks!!

[Bevdeforges]

Originally Posted by kirikara

1. I have an ira (pre tax money), i have reached 60, can withdraw with no penalty, i am french resident. Do i pay taxes to both the US and france?

For funds you withdraw from an IRA, your first obligation is to pay US income taxes on the full amount of the withdrawal. (Only seems fair - since you didn't pay tax on it when you put it in the IRA in the first place.)

You declare it on your French tax declaration, but you also indicate that it is a "pension" that has already been taxed by the US. The French make an adjustment for this when calculating your French taxes owed.

2. I have an ira, I withdraw the money before 60, i am french resident. what kind of taxes will i have to pay.

Again, if you withdraw before age 59 1/2, you will owe US taxes plus the 10% penalty for early withdrawal (unless the withdrawal qualifies under certain specific categories to avoid the penalty). You must report the "income" on your French return, but again, you indicate the nature of the income and the fact that it has already been taxed by the US.

3. I have a roth ira (money saved was post tax in the US, gain is taxable). I am french resident, old enough to withdraw with no penalty. Do I still pay french taxes on it?

I'm not real up on the Roth IRA's since they are a fairly recent development (since I left the US) and I've never been eligible for one since I file as married filing separately - but if I understand things correctly, you should probably declare the interest income on your French declaration as foreign source income that has NOT been taxed in the US.
Cheers,
Bev

[anneteoh]

Originally Posted by Bevdeforges

Ultimately, it depends upon the individual's goals and other resources. And what you define as "security" may not be the same thing I want or need as "security."

What I've been trying to find is a lifetime income (admittedly a fixed income) because the state pension I qualify for here in France is minimal at best and the US style "retirement funds" require you to play professional gambler, er, I mean "investor," even after you've retired. Plus, there is the ever-present exchange risk when dealing with retirement funds placed overseas.

For some folks, it's also necessary to consider inheritance questions, whereas for others of us, "no heirs, no headaches."

This stuff is really tricky, no matter how you look at it!
Cheers,
Bev

The only lifetime income that comes to mind, apart from the pensions, is buying an annuity, It might require a good number of years of paying into it or simply paying a lump sum. Parsnips will certainly know a lot more. I'm not sure if there're issues with reliability and the importance of paying into a reputable provider.

I suppose the alternatives for a shortfall in one's monthly pension will be -
1. keep working till one drops
2. start a co-op of some kind with an expat community
3. make a claim from the social welfare
4. live off one's rich husband
5. move to a country where it costs less to live
6. open a stall for market days - selling American burghers and pancakes,
pumpkin pies and coffee (?) and travel to a few market days in other towns
7. take in a lodger or two
8. run a B n B
9. start a self-sufficient life - find a house with a well, or river, with some land in the country, get a cow, some chicken, keep bees, plant vegetables and fruit. Invest in alternative energy sources e.g. solar panels, windmills etc. The council in France will pay such householders that can contribute energy sources to the community every month.

I'm sure there are other ways. To me they all sound a lot more fun than the jobs most of us were stuck in before retirement. I'm inclined to think life begins after retirement.

[Bevdeforges]

Originally Posted by anneteoh

The only lifetime income that comes to mind, apart from the pensions, is buying an annuity, It might require a good number of years of paying into it or simply paying a lump sum. Parsnips will certainly know a lot more. I'm not sure if there're issues with reliability and the importance of paying into a reputable provider.

An annuity is more or less what I had in mind, but as I've been pursuing the idea with our insurance guy and the bank, it turns out that a true annuity presents certain tax issues as it pays out. (Not entirely clear on those at this point, but I appreciated the banker bringing the issue up. Besides, I still have 10 years or so to decide.)

My issue is that I have funds in the US that are subject to "special tax treatment" on the US side. Given the wretched state of the dollar and the US economy in general, I'd like to get what's left of my "nest egg" into local currency here, with some level of guarantee for the principal amount I'm able to salvage and maybe even earn a little interest on the money before I need it for my old age. As with most things, the devil is in the details, mainly the details of how and when to declare what on which tax declarations.
Cheers,
Bev