Moving to Germany as an American creates unique wealth management challenges. This guide explains how US and German financial systems differ, the hidden risks of PFIC investments, advisor and brokerage restrictions, long-term currency exposure, and cross-border estate planning. Learn how to build a compliant, flexible wealth plan to protect your assets and optimise long-term financial security.
Relocating to Germany as an American creates new cultural and professional opportunities, but it also brings a layer of financial complexity that many people underestimate.
While most expats expect to deal with language barriers or different ways of working, fewer anticipate the challenges that come from managing wealth across two very different financial systems.
The US and Germany each have their own traditions of wealth management, shaped by different regulatory environments and tax regimes.
What works seamlessly in one country can create unnecessary costs, compliance risks or tax complications in the other. For Americans moving to Germany, understanding these differences, and how they affect long-term financial planning, is essential before you move or make any financial decisions.
This article explores the hidden challenges around investments, advisory services, currency management and long-term wealth strategy, with practical insight into how to avoid costly mistakes.
This article is intended as a general guide only and does not constitute financial advice. Every individual’s circumstances are different, and rules may change over time. Before making any financial, investment, or tax decisions, you should seek professional advice from a qualified cross-border specialist.
Americans tend to be familiar with retirement accounts such as 401(k)s, IRAs, Roth IRAs, and brokerage accounts.
The US system is traditionally built on tax incentives for long-term saving, supported by a financial services sector regulated by the SEC and FINRA. Advisory models are also well-established, with financial planners typically working on a fee-based or assets-under-management model.
Germany, by contrast, has a culture built around savings and security. Many households prefer insurance-wrapped investment products, state pension contributions, and local funds. Financial advisors are often tied to banks or insurance providers, with a commission-based sales approach playing a much larger role.
For an American arriving in Germany, these differences can be jarring.
A product that looks standard in Germany, such as an investment fund recommended by a local advisor, may have unintended consequences for US taxpayers.
Conversely, US-style investment portfolios may not always integrate smoothly with German financial structures.
Perhaps the most significant trap for Americans abroad is the IRS treatment of Passive Foreign Investment Companies (PFICs). In simple terms, a PFIC is any foreign mutual fund, ETF, or similar pooled investment that falls outside US regulation.
A large proportion of all German retail investment funds fall into this category.
The problem is that PFICs are subject to extremely punitive US tax rules.
Gains can be taxed at the highest ordinary income rate, with interest charges applied on top, and the reporting requirements are notoriously complex. What looks like a standard long-term savings vehicle in Germany can quickly become a financial and administrative burden for an American taxpayer.
The lesson is clear: while local funds may be popular with German investors, they are rarely appropriate for Americans. Before committing to any product recommended by a local bank or advisor, it is essential to check whether it would be classified as a PFIC and if so, avoid.
Another common issue is access to appropriate financial advice.
In the US, financial advisors are tightly regulated and must be licensed with bodies such as the SEC or FINRA. Many American expats assume they can continue working with their existing advisor after moving abroad, only to discover that regulatory restrictions prevent US-based advisors from servicing clients in Germany unless they are specifically authorised for cross-border work.
In Germany, financial advisors often specialise in local insurance-linked investments or funds. While suitable for domestic investors, these products are usually inappropriate for Americans because of PFIC rules or reporting obligations. German advisors also tend not to be familiar with IRS requirements, FATCA reporting, or the practical challenges faced by US taxpayers abroad.
A less obvious but equally important issue is how US brokerage accounts behave once you are no longer resident:
This combination of regulatory and operational hurdles leaves many Americans caught in a gap: unable to access US advice in the same way as before, yet poorly served by German alternatives.
The most robust solution is to work with a specialist cross-border advisor who is licensed to operate in both jurisdictions and can design compliant, tax-efficient strategies that integrate US and German wealth structures.
Such an advisor can help keep existing US investments aligned with IRS rules, navigate brokerage restrictions, and coordinate with German planning needs without compromising compliance.
Wealth management is not only about what to invest in, it’s also about how to manage currency exposure.
For Americans living in Germany, currency plays a central role in long-term planning.
Salaries, pensions and living costs are usually in euros, but US investments, pensions, and tax obligations remain in dollars. Exchange rate movements between the two currencies can have a significant impact on wealth over time.
For example, transferring US retirement income into euros during a period of dollar weakness can erode purchasing power. Similarly, saving aggressively in euros only to repatriate later in dollars can introduce volatility into retirement planning.
Therefore cross-border money management requires a proactive strategy:
The importance of currency planning also depends on the expected duration of the stay.
For those in Germany temporarily, keeping wealth anchored in the US and managing efficient transfers for living costs may make sense. Currency fluctuations are still relevant, but typically over a shorter time frame and can be managed with careful timing or short-term hedging.
For long-term or permanent moves, currency takes on a far greater role.
If most of your wealth remains in US dollars while your lifestyle and future spending will be in euros, multi-year or decade-long movements in the EUR/USD exchange rate can significantly influence your real purchasing power. For example:
Longer stays call for active currency strategy as part of the overall wealth plan:
In short, the longer you expect to live outside the US, the more currency management becomes a core element of wealth preservation, not just a logistical detail. Planning early, before or soon after relocating, helps ensure that long-term exchange rate trends work for you rather than against you.
Retirement planning is another area where cross-border complexity arises.
US retirement accounts such as 401(k)s and IRAs remain tax-advantaged under US law and should usually be left intact while abroad. Withdrawals, however, may be treated differently in Germany and the interaction between US and German taxation can be complex.
For employees in Germany, contributions to the state pension scheme (Rentenversicherung) are generally mandatory.
These contributions can provide long-term benefits, but they may not fit neatly into a US-centric retirement strategy. For self-employed Americans, opting into the system may or may not be advantageous depending on long-term plans.
The key challenge is coordination: ensuring that US retirement accounts, German pension entitlements, and other savings vehicles all contribute to a coherent long-term plan, rather than existing in isolation.
For Americans who eventually plan to return to the US, repatriation strategy should be considered early to avoid being locked into products that don’t translate well back home.
Estate planning often sits at the back of the queue when people move abroad, but for Americans in Germany it requires careful attention.
The US applies estate tax on worldwide assets for its citizens, regardless of residence. Germany also applies inheritance tax on worldwide assets once you are considered resident. This creates the potential for double exposure unless planning is in place.
Cross-border Wills can help, but they must be drafted carefully to be valid in both jurisdictions. Beneficiaries may face conflicting rules or unexpected tax liabilities if planning is neglected. Including estate planning as part of the broader wealth management conversation ensures that wealth is preserved for the next generation without unnecessary leakage.
With so many moving parts, the most effective strategy is to build a cross-border wealth plan that integrates US and German considerations and to begin creating this plan before leaving the US. Key principles include:
A joined-up approach ensures that wealth grows efficiently without being eroded by hidden tax, compliance, or currency costs.
Living in Germany as an American is an exciting opportunity, but it comes with financial challenges that go far beyond everyday budgeting.
Wealth management structures, investment rules and regulatory barriers differ significantly between the two countries, and ignoring those differences can lead to costly mistakes.
The good news is that with proactive planning and advice from specialists who understand both sides of the Atlantic, these challenges can be turned into opportunities.
Whether you plan to stay in Germany for a few years or for life, building a financial plan that integrates both systems will provide stability and protect your long-term wealth.
If you are moving to Germany and want to review your financial options, Experts for Expats can connect you with trusted cross-border financial planners who specialise in supporting Americans abroad.
