Italy is one of the most popular European destinations for Americans moving abroad. Whether it’s the dream of retiring in Tuscany, working in Milan or enjoying a slower pace of life in Puglia, the attractions are obvious.
But before you make the move, it’s essential to understand the financial implications of moving abroad.
Without careful preparation, investments, pensions, inheritance rules and currency fluctuations can create unnecessary stress and have a significant financial impact in both the short and long term.
This guide focuses on the areas most likely to affect Americans relocating to Italy: investments, pensions, currency and estate planning. We also touch briefly on tax, property, and cost of living, which you’ll want to explore further with professional advice.
Disclaimer
The information in this article is provided for general informational purposes only and is designed to help you begin your research when considering a move to Italy. It should not be taken as financial, legal, investment, or tax advice. Every individual’s circumstances are different, and regulations can change. Before making any decisions regarding your finances, investments, pensions, estate, or residency, you should seek personalised advice from a qualified professional with experience in both the United States and Italy.
Investments and Wealth Management
For many Americans, the most complex aspect of living in Italy is how to manage their investments. While it may be tempting to buy into Italian funds or products, these often create reporting headaches in the United States.
PFIC rules: Most Italian mutual funds and ETFs are treated as Passive Foreign Investment Companies by the IRS. This can lead to highly punitive tax treatment. For this reason, many Americans continue to hold US-based investments even after moving abroad.
Access challenges: Once you inform a US broker that you’re no longer resident in the United States, you may lose access to certain investment products, particularly US-domiciled ETFs. Some international brokers provide solutions, but these should only be used under guidance from an adviser who understands both US and Italian rules.
Currency risk: If your portfolio remains dollar-based but your living costs are in euros, you may see your effective returns eroded or boosted by exchange rate swings. Many expats choose a mix of dollar and euro-denominated investments to balance this risk.
Planning horizon: Retirees often prefer stable, euro-linked income, while younger expats may take a more global approach with gradual rebalancing toward euro exposure as they settle long term in Italy.
Pensions and Retirement Income
Retirement income planning is a cornerstone of moving abroad, and Italy is no exception.
Social Security: The US–Italy Totalization Agreement ensures you don’t pay into both systems at once and helps you qualify for benefits. Payments can be received while living in Italy, but will be in dollars, leaving you exposed to exchange rate changes.
US retirement accounts: Withdrawals from IRAs, 401(k)s, and annuities remain taxable in the US. Treatment in Italy depends on the bilateral treaty and your residency status, so timing and structuring withdrawals is critical. Currency movements also matter, a poorly timed withdrawal could reduce your spending power.
Italian pensions: If you work in Italy, you may contribute to the Italian state system. Combined with US entitlements, this can strengthen your long-term position, but it requires forward planning.
Withdrawal strategy: Many expats build a strategy that aligns their distributions with both tax obligations and the euro cost of living. Spreading withdrawals or waiting until exchange rates are favourable can make a significant difference over time.
Currency Management and Long-Term Planning
The dollar–euro relationship is one of the biggest financial variables for Americans in Italy. Even small shifts in the exchange rate can affect your daily life.
Short-term impact: Monthly expenses can rise or fall sharply if you’re transferring dollars to cover euro-based costs.
Long-term trends: Over ten years, a sustained shift in exchange rates can erode savings if everything is kept in dollars. For example, a 10% fall in the dollar against the euro would cut your local spending power by 10%.
Managing exposure: Many expats keep both US and Italian accounts. Multi-currency accounts and specialist FX services help minimise transfer costs and provide flexibility.
Balancing currencies: Holding some assets in euros can provide natural protection against volatility, especially for those planning to stay long-term.
Estate and Inheritance Planning
Estate planning is often overlooked, but Italy’s rules differ significantly from those in the US.
Forced heirship: Italian law imposes restrictions on how assets are passed on. Close family members are entitled to fixed shares, limiting how freely you can distribute wealth through a will.
Cross-border Wills: It’s strongly recommended to have a valid Will in both the US and Italy. This ensures clarity across jurisdictions and avoids drawn-out disputes for heirs.
Inheritance tax exposure: Both the US and Italy can apply inheritance or estate taxes, which means your estate could be exposed twice without careful structuring.
Property succession: Owning property in Italy automatically places you within Italian succession law. Early estate planning avoids surprises and ensures your wishes are respected.
Other Considerations
US-Italian Tax Considerations
Americans remain taxable by the IRS on worldwide income, and Italy taxes residents on global income after 183 days or official registration. The US–Italy treaty helps, but specialist advice is essential. We cover this topic in detail in our dedicated article on US tax obligations for American expats.
Property
Buying property is possible for Americans, but mortgages can be challenging without Italian income. Ownership involves municipal taxes, service charges, and ongoing maintenance. Renting is often a practical first step.
Cost of living
Living costs vary widely. Rome and Milan are among the most expensive areas, while smaller towns and southern regions are more affordable. Food and transport often cost less than in the US, but imported goods and utilities can be higher.
Checklist for Americans Moving to Italy
- Review your US investments for PFIC exposure and consider euro diversification.
- Develop a retirement income strategy, including Social Security and US accounts.
- Open euro and US accounts; consider multi-currency options.
- Plan for short- and long-term exchange rate fluctuations.
- Create/update Wills in both jurisdictions and plan for Italian succession rules.
- Seek advice on inheritance tax exposure and estate structuring.
- Understand the basics of US–Italy tax interaction and get expert advice
- Budget realistically for property, housing, and living costs.
Frequently Asked Questions
Can Americans keep their US investments while living in Italy?
Yes, many Americans keep US-based investments, but Italian products can create US tax complications. It’s best to review your portfolio with a cross-border adviser to avoid PFIC issues and manage reporting.
Will my US Social Security still be paid if I live in Italy?
Yes, Social Security can be paid while living in Italy. Payments are made in dollars, so exchange rates will affect the amount you have available in euros.
Do I need a separate Will for Italy?
Yes, it’s recommended to have a valid will under Italian law in addition to your US will. This ensures clarity and avoids disputes under Italy’s forced heirship rules.
How much money do I need to live comfortably in Italy?
This varies by region and lifestyle. Major cities like Milan and Rome are more expensive, while smaller towns and rural areas can be significantly cheaper. Many expats find they spend less on food and transport than in the US, but more on utilities and imported goods.
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