'No one wants us': Why Americans in Switzerland struggle to save for retirement
If you are a US citizen living in Switzerland, saving money for your retirement could be an uphill struggle, according to the many frustrated respondents to a survey of Americans in the country.
Much has been said and written about the problems Americans in Switzerland face in terms of banking.
Specifically, they must overcome several hurdles.
One is that, although Switzerland obviously has an abundance of banks, very few (if any) welcome US customers with open arms.
For banks, being an American is a major liability.
A big part of the problem is the pressure and control the US government exerts over Swiss financial institutions.
Tough requirements
Under the Foreign Account Tax Complaint Act (FATCA), which came into effect on June 30th, 2014, Swiss financial institutions must divulge to U.S. tax authorities (IRS), the assets their American clients — even those who live permanently in Switzerland — have in Swiss banks.
While the reason for this is legitimate — to prevent tax evasion — the logistics and procedures involved in providing their clients’ financial information to the IRS have made Swiss banks reluctant to open accounts for US clients.
READ ALSO: Why are Americans being turned away from Swiss banks?
Another obstacle for American citizens is the double taxation — they must not only disclose their money held in foreign banks each year, but also declare their Switzerland-based income to Uncle Sam. (The US is the only country in the world that taxes its citizens on income generated abroad).
And there is an additional glitch as well: 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." .
All these restrictions mean that many Americans living and working in Switzerland have a hard time saving money for their retirement.
‘Depressing'
A survey carried out by an organisaton called Stop Extraterritorial American Taxation (SEAT) shows the financial impact all these regulations have on US citizens in Switzerland — especially in terms of saving for their retirement.
One Swiss resident, originally from Texas said: "We are effectively unable to save for retirement through investments in mutual funds and stocks because institutions in our country of residence don't accept US persons, and also because of the punitive way they are treated under US tax law.
Another Swiss-based US resident, originally from Florida said: "I am afraid to invest my money as no one seems to either want to support me with my portfolio because I am a US citizen."
Another survey participant said: "It is depressing to have to fear building up my savings for retirement just because I am a US citizen. I feel like I need to hide all my money under the mattress."
Another person pointed out that they “cannot invest appropriately for our retirement in employer- sponsored pensions, because it will be taxed on the US side."
“My personal retirement accounts sit in interest bearing savings account with less than 1 percent interest because I cannot invest in foreign mutual funds," a Switzerland-based US citizen said, while another pointed out that he "was kicked out of a foreign retirement account in 2012 and haven’t been able to open another one since."
And it's not just savings for retirement that are an issue. As The Local reported previously, simply getting a bank account in Switzerland is problematic for US nationals.
"It took me two years to secure a basic bank account, and then only with a small mountain of paperwork, simply because I was an American," one respondent said.
Is this an exclusively ‘Swiss’ problem?
No. The IRS regulations concern all US citizens who live abroad, no matter the country.
However, the extent of the problem seems to be more significant in Switzerland than elsewhere.
The SEAT survey revealed that as many as 83 percent of Switzerland-based respondents said they can’t open bank, retirement, or other financial accounts, while 74 percent have been barred from making investments in Switzerland because of their US nationality.
At least one of the reasons is that US authorities consider Switzerland’s financial institutions to be more ‘suspicious’ than others.
"Swiss banks were the targets of the congressional investigations [in the US] that led to the adoption of FATCA,” SEAT’s co-founder president Laura Snyder told The Local.
“It is reasonable to surmise that the managers of Swiss banks feel spooked and think that the safest course for them at this point is to simply keep Americans off their client lists.”
What do Americans living abroad do to get easier access to banking services and retirement investment opportunities?
Faced with these difficulties, an increasing number of US nationals who don’t plan on returning to the United States, and who also hold a Swiss citizenship, have taken the drastic and irrevocable step of giving up their US passports.
READ ALSO: Hundreds of US citizens in Switzerland waiting to renounce citizenship
Once they are no longer American, at least on paper, many more options for saving and other financial transactions are open to them.
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Much has been said and written about the problems Americans in Switzerland face in terms of banking.
Specifically, they must overcome several hurdles.
One is that, although Switzerland obviously has an abundance of banks, very few (if any) welcome US customers with open arms.
For banks, being an American is a major liability.
A big part of the problem is the pressure and control the US government exerts over Swiss financial institutions.
Tough requirements
Under the Foreign Account Tax Complaint Act (FATCA), which came into effect on June 30th, 2014, Swiss financial institutions must divulge to U.S. tax authorities (IRS), the assets their American clients — even those who live permanently in Switzerland — have in Swiss banks.
While the reason for this is legitimate — to prevent tax evasion — the logistics and procedures involved in providing their clients’ financial information to the IRS have made Swiss banks reluctant to open accounts for US clients.
READ ALSO: Why are Americans being turned away from Swiss banks?
Another obstacle for American citizens is the double taxation — they must not only disclose their money held in foreign banks each year, but also declare their Switzerland-based income to Uncle Sam. (The US is the only country in the world that taxes its citizens on income generated abroad).
And there is an additional glitch as well: 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." .
All these restrictions mean that many Americans living and working in Switzerland have a hard time saving money for their retirement.
‘Depressing'
A survey carried out by an organisaton called Stop Extraterritorial American Taxation (SEAT) shows the financial impact all these regulations have on US citizens in Switzerland — especially in terms of saving for their retirement.
One Swiss resident, originally from Texas said: "We are effectively unable to save for retirement through investments in mutual funds and stocks because institutions in our country of residence don't accept US persons, and also because of the punitive way they are treated under US tax law.
Another Swiss-based US resident, originally from Florida said: "I am afraid to invest my money as no one seems to either want to support me with my portfolio because I am a US citizen."
Another survey participant said: "It is depressing to have to fear building up my savings for retirement just because I am a US citizen. I feel like I need to hide all my money under the mattress."
Another person pointed out that they “cannot invest appropriately for our retirement in employer- sponsored pensions, because it will be taxed on the US side."
“My personal retirement accounts sit in interest bearing savings account with less than 1 percent interest because I cannot invest in foreign mutual funds," a Switzerland-based US citizen said, while another pointed out that he "was kicked out of a foreign retirement account in 2012 and haven’t been able to open another one since."
And it's not just savings for retirement that are an issue. As The Local reported previously, simply getting a bank account in Switzerland is problematic for US nationals.
"It took me two years to secure a basic bank account, and then only with a small mountain of paperwork, simply because I was an American," one respondent said.
Is this an exclusively ‘Swiss’ problem?
No. The IRS regulations concern all US citizens who live abroad, no matter the country.
However, the extent of the problem seems to be more significant in Switzerland than elsewhere.
The SEAT survey revealed that as many as 83 percent of Switzerland-based respondents said they can’t open bank, retirement, or other financial accounts, while 74 percent have been barred from making investments in Switzerland because of their US nationality.
At least one of the reasons is that US authorities consider Switzerland’s financial institutions to be more ‘suspicious’ than others.
"Swiss banks were the targets of the congressional investigations [in the US] that led to the adoption of FATCA,” SEAT’s co-founder president Laura Snyder told The Local.
“It is reasonable to surmise that the managers of Swiss banks feel spooked and think that the safest course for them at this point is to simply keep Americans off their client lists.”
What do Americans living abroad do to get easier access to banking services and retirement investment opportunities?
Faced with these difficulties, an increasing number of US nationals who don’t plan on returning to the United States, and who also hold a Swiss citizenship, have taken the drastic and irrevocable step of giving up their US passports.
READ ALSO: Hundreds of US citizens in Switzerland waiting to renounce citizenship
Once they are no longer American, at least on paper, many more options for saving and other financial transactions are open to them.
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