What are the best countries to retire in?
Taxation of Pensions, Wealth, and Quality of Life: The Comparison That Places Andorra at the Top
Key takeaway: General-interest rankings of the best countries to retire in are based on cost of living and climate. For those with accumulated wealth, it is the long-term tax treatment of pensions, savings, and estate planning that makes the difference. In this regard, Andorra combines an income tax capped at 10%, the absence of a wealth tax and inheritance tax on direct descendants, and a double taxation treaty with France that has been in effect since 2016.
Choosing among the best countries to retire in isn’t just a matter of comparing the price of a cup of coffee or the number of sunny days. Nearly 1.2 million French retirees already live abroad, and the trend is accelerating every year. But behind the promise of regained purchasing power lies a more fundamental question: how will your pensions, savings, and assets be taxed, year after year, in the country you choose? That’s where the real differences lie—differences that amount to tens of thousands of euros over the course of a full retirement.
This guide applies five measurable criteria (cost of living, access to healthcare, residency procedures, quality of life, and taxation) to the most frequently cited destinations in 2026, and then explains why Andorra stands out as the top choice when wealth is a factor.
Your retirement plan deserves a detailed financial analysis
Pension taxation, residency, estate planning, banking compliance: every situation is different. Our experts compare your options using figures tailored to your specific situation and ensure every step is handled properly.
Taking Stock of My Retirement: €24,000 exempt
, or direct inheritance
ation to the Fons d'Habitatge
in the heart of the Pyrenees
Why More and More Retirees Are Moving Abroad
More than 1.2 million French retirees currently receive their pensions outside of France, according to the National Old-Age Insurance Fund. The number of pensions paid abroad has increased by more than 30% over the past decade, and nearly one in five working people plan to move abroad once they retire. This is no longer a marginal phenomenon, but a fundamental trend.
These motivations often overlap. There are a few key factors that consistently emerge in the projects we support:
- Increased purchasing power thanks to a lower cost of living.
- A milder climate, conducive to daily well-being.
- A superior quality of life: peace of mind, space, and the environment.
- Lower taxes on pensions and assets.
- The thrill of a new adventure, far from the daily grind.
A couple spending 3,200 € per month in France can live comfortably on 1,900 to 2,100 € in several European destinations—a savings of up to 40% on their monthly budget. But this immediate benefit can be offset, or even wiped out, by tax implications on retirement income and assets that were not properly anticipated. Tax considerations do not come after the decision—they determine it.
The pitfall of focusing solely on budgetary considerations: a cost of living that is 30% lower does not offset a pension taxed at the local progressive tax rate, nor does it offset double taxation resulting from the absence of a tax treaty. The key metric is not monthly spending, but net after-tax income over the course of retirement.
Moving abroad also means planning for your social benefits. Health coverage, pension payments, and social security enrollment vary depending on the country you choose, as noted in the social protection section of France Diplomatie. Choosing the best country for retirement is therefore as much a matter of the heart as it is of the mind: an attractive tax environment cannot replace a place where you feel at home, but it does provide long-term security for your plans.
The Five Criteria for Identifying the Best Countries to Retire In
Five criteria are used to rank the best countries for retirement: cost of living, access to healthcare, residency requirements, quality of life, and tax policies. Each deserves a quantitative assessment, not just a subjective impression. Rankings such as those by International Living or Retraite Sans Frontières cross-reference this data each year: they serve as a starting point, never as a final verdict for your specific situation.
Is the cost of living really lower?
Compare your actual budget, not a general index. A cost of living that’s 30% lower on paper can shrink depending on your lifestyle. A retiree who travels frequently or buys imported goods can quickly offset that difference, whereas someone living a local lifestyle can maximize savings. The categories to compare one by one: housing, food, transportation, recreation and dining out, and personal services.
How can we assess access to healthcare?
Health becomes the deciding factor after age 65. A pleasant climate can never make up for hospitals that are far away or under-equipped. Your top priorities should be to check the local health coverage and wait times for specialists, whether there is a bilateral agreement with the French Social Security system, the suitability of an expatriate health insurance plan, and the modernity of the hospital infrastructure.
Visas and Residency: What Steps Do You Need to Take Based on Your Status?
Your nationality makes all the difference. As a citizen of the European Union, you can freely settle in Portugal, Spain, or Italy without a visa. Outside the EU, a residence permit is required, and non-EU countries often require proof of a steady income. Andorra, which is not a member of the European Union, follows this second approach: it offers a residency program specifically for people who do not work there—known as “passive residency”—which we’ll discuss in more detail later.
Climate, Safety, and Culture
Living abroad is a success when you feel comfortable there on a day-to-day basis. Climate, safety, and cultural affinity are just as important as tax policies. An accessible language and an expat community make integration easier: isolation remains the number one reason for returning home. Consider the amount of sunshine, political stability, the local lifestyle, and proximity to France.
Taxation: The Factor That Sets the True Winners Apart
This is the criterion most often overlooked by consumer rankings, and the most decisive factor for accumulated wealth. Three questions sum it up: How will my pension be taxed? Will my savings and assets be subject to a wealth tax? And will my heirs have to pay inheritance tax? A destination may be inexpensive on a day-to-day basis but costly from a tax perspective. The opposite is also true.
The Best Countries to Retire In in 2026
Here are the destinations that come up most often when comparing them to France in terms of cost of living, healthcare, climate, and conditions for settling in. This overview reflects the day-to-day appeal of each country. The tax aspect, discussed next, then changes the equation for those with significant assets.
| Country | Cost of Living vs. France | Health | Climate | Installation |
|---|---|---|---|---|
| Portugal | -30 % | Public: decent; private: excellent | Mild, oceanic | Free (EU) |
| Spain | -25 % | Intended Audience | Mediterranean | Free (EU) |
| Italy | -20 % | A loyal audience | Mediterranean in the South | Free (EU) |
| Greece | -30 % | Average public, reliable private | Mediterranean | Free (EU) |
| Panama | -35 % | Lacking in quality | Tropical | Pensionado Program |
| Mexico | -40 % | Affordable private lessons | Varied, sunny | Temporary resident |
| Andorra | comparable | Classified system, proximity | Mountainous, dry | Passive house |
Portugal: A Safe Bet for European Retirees
Portugal remains a top destination: mild climate, relaxed lifestyle, and proximity (a 2.5-hour flight from Paris). EU citizens are free to settle there. However, the tax regime for non-habitual residents—long considered a hallmark of the country—has been overhauled and is no longer available in its traditional form: the tax benefit on pensions is no longer automatic and must be assessed on a case-by-case basis.
Spain: Proximity and the Art of Living
Spain offers a combination of proximity, a mild climate, and a public healthcare system recognized as one of the best in Europe. In terms of taxation, however, pensions are taxed at progressive rates, and a wealth tax exists in several autonomous communities—a factor that should not be underestimated for those with significant assets.
Italy and Its Decision on Foreign Pensions
Italy attracts retirees with a special tax regime: retirees who settle in certain municipalities in the south (Puglia, Calabria, Sicily, Sardinia) are eligible, under certain conditions, for a flat tax rate of 7% on their foreign-source income for a limited period. The Mezzogiorno offers sunshine, cultural heritage, and a lower cost of living, but this benefit is temporary and subject to certain conditions.
Greece, Panama, Mexico: The Cost-of-Living Factor
Greece combines sunshine with an affordable cost of living, offering a residency permit through investment for non-Europeans. Panama offers the Pensionado program, one of the most generous in the world (discounts on leisure activities, transportation, and services, subject to a lifetime pension of approximately 1,000 USD per month). Mexico has a cost of living that is about 40% lower than in France. These destinations maximize purchasing power, but they take you far from France and shift the focus to health coverage and tax treaties.
What the cost of living doesn't reveal: none of these destinations combines, as Andorra does, a low-tax pension, no wealth tax, no inheritance tax on direct descendants, and close proximity to France. It is this combination—not any single criterion—that determines a country's suitability as a retirement destination for those with accumulated wealth.
Why Andorra Is the Ideal Choice for a Wealth-Focused Retirement
Andorra is rarely mentioned in general rankings because it doesn’t rely on having the lowest cost of living or a tropical climate. Instead, it focuses on what really matters when you have a substantial net worth: a sustainable tax system for income and estate planning, combined with a safe living environment just two hours from Barcelona and three hours from Toulouse. For a well-off retiree, the Principality isn’t just another destination—it’s often the most sensible choice.
A pension subject to low taxes
Andorran personal income tax (IRPF) is capped at 10%, with an income exemption of up to €24,000 per year. For an Andorran tax resident, a pension is therefore taxed at a maximum rate of 10%, a far cry from the progressive tax brackets in France or Spain, where rates can rise well beyond that. When applied to a full retirement income, this tax difference represents a considerable amount of capital saved.
No wealth tax or inheritance tax on direct descendants
Andorra does not impose any wealth tax. Financial and real estate assets are not taxed annually simply by virtue of ownership. Inheritance is just as favorable: there are no inheritance or gift taxes for direct descendants. While France may levy up to 45% on an inheritance between parents and children, the Principality allows assets to be passed on without this tax. For those planning for retirement while also thinking of their heirs, this is a decisive factor.
A tax treaty that safeguards trade flows with France
The double taxation treaty between France and Andorra entered into force in 2016. It allocates the right to tax between the two countries and prevents the same income from being taxed twice. This is a major difference compared to destinations that do not have such a treaty, where a pension may be taxed in both the country of origin and the host country. A careful review of this treaty—particularly regarding the treatment of private and public pensions—is an essential part of the planning process before any move.
A supportive living environment and healthcare system
The Principality boasts one of the lowest crime rates in Europe, a healthcare system that consistently ranks highly, modern infrastructure, and comprehensive fiber-optic coverage. When it comes to retirement, safety and the quality of healthcare are just as important as tax advantages. Andorra checks both boxes without requiring residents to travel far from major destinations.
| Tax criterion | ★ Andorra | France | Spain | Portugal |
|---|---|---|---|---|
| Taxation of Pensions | 10% max | rate up to 45% | tax bracket up to 47% | scale, revised plan |
| Exempt portion | 24 000 € | limited deduction | variable | variable |
| Wealth tax | None | Real Estate IFI | up to 3.5% | None |
| Lineal Descent | 0 % | up to 45% | varies by region | exempt (stamp duty) |
| Tax Treaty with France | Yes, since 2016 | Not applicable | Yes | Yes |
The picture is clear. No other country combines a pension capped at 10%, no wealth tax, and no inheritance tax on direct descendants. It is precisely this combination that sets Andorra apart from other top retirement destinations when it comes to managing one’s assets.
How to Become a Resident in Andorra for Retirement
A retiree who does not work on-site qualifies for passive residency, sometimes referred to as residency without gainful employment. This status is specifically intended for individuals who wish to live in Andorra on their pensions, investment income, or savings, without engaging in any professional activity there. There are several options available, depending on the individual’s circumstances.
Passive Residence (Inherited)
To live off the income without having to work on-site. A minimum investment of 1,000,000 € is required, a portion of which may be allocated to the Fons d'Habitatge housing fund.
The Housing Fund
Up to €400,000 of the required investment may be invested in this public housing fund, which is now one of the options for obtaining a passive house.
Filing with the AFA
The procedure requires an unpaid deposit with the Andorran Financial Authority, which is refunded at the end of the stay. The amount depends on the household composition.
Actual attendance
Passive residency requires a minimum level of actual presence in the area each year. It is not merely a mailbox address; it requires a genuine point of connection.
A point that often comes up: one sometimes reads that Andorran passive residency can be obtained with an investment of €600,000. This figure is incorrect. The reference amount is €1,000,000, of which up to €400,000 can now be allocated to the Fons d’Habitatge. Verifying the exact amount and its breakdown before committing funds will help you avoid any unpleasant surprises when you submit your application.
The choice of path depends on your financial situation, your family structure, and your life plans. A passive retirement home is the most natural choice for a retiree, but setting it up requires coordinating the investment, the AFA application, health coverage, and insurance, followed by submitting the application to the authorities. Planning ahead helps avoid back-and-forth communication and delays.
Case Study: Solveig and Bernard's Retirement in Andorra
A young retired couple is relocating their pensions and assets
Solveig and Bernard, aged 63 and 66, are leaving the Lyon area. They receive comfortable pensions, have an investment portfolio and a rental property, and want both to optimize their income tax situation and prepare to pass their assets on to their two children. Portugal, which they had considered because of its former tax regime, no longer offers the expected advantage. Spain subjects them to a wealth tax. They are looking for a stable solution, close to France, and one that will remain reliable over the long term.
After conducting an audit of their situation, Engage mapped out the transition to a passive residency, structured the required investment and the application to the AFA, coordinated health insurance and the opening of a bank account, and reviewed the France-Andorra agreement to ensure the proper processing of each type of pension. The transfer of assets was reevaluated in light of the absence of inheritance taxes for direct descendants.
We were comparing countries based on the cost of groceries. No one had explained to us how tax policies on pensions and estates would actually change over a twenty-year period. That calculation was the deciding factor.
This is a fictional, illustrative case. Each individual’s financial and family situation requires a customized analysis, particularly regarding the exact amount of the investment, how various pensions are treated under the agreement, and whether the individual is actually present in the country.
Steps to a Successful Retirement Abroad
A successful move depends on a handful of steps that must be taken in the right order, several months before departure. These steps apply to any destination and are then tailored to the specific country you’ve chosen.
Notify the French tax authorities of your departure
Notify your tax office and arrange to transfer your tax residence—a step that determines everything else.
Check Your Pension Payments Abroad
Check with your pension funds to confirm the payment terms for the country of your choice and the required supporting documents.
Read the bilateral tax treaty
Determine how each type of pension is taxed in France and the destination country. Without a tax treaty, there is a real risk of double taxation. With Andorra, the 2016 tax treaty governs these payments.
Organize Your Health Insurance
Choose between a local system, a bilateral agreement, and expatriate insurance. CLEISS explains your rights based on your country of residence.
Prepare the residency application
For Andorra, gather the required investment, the deposit with the AFA, health insurance, and civil status documents, and then submit the application for passive residency.
Open a local bank account
The account is used to receive income and pay for day-to-day expenses. Financial institutions operating in Andorra include Andbank, MoraBanc, and Creand.
Try it out before you commit: a stay of several weeks—ideally during the off-season—will give you a true sense of what daily life is like in a destination (climate, services, local life) before you make any irreversible commitments.
Mistakes to Avoid
Choosing Based Solely on the Cost of Living
A lower monthly budget may mask a heavily taxed pension and costly estate. The right benchmark is net after-tax income over the long term, not current expenses.
Ignore the tax treaty
Moving to a country that does not have a double taxation treaty with France means that your pension may be subject to taxation in both countries. Verifying the existence and content of the treaty is essential to the viability of the plan.
Relying on an incorrect residence amount
For Andorra, the required investment for a passive house is €1,000,000, of which up to €400,000 must be invested in the Fons d'Habitatge—not €600,000. Committing funds based on an inaccurate figure will delay or block the application.
Ignoring the actual presence
Andorran passive residency requires a minimum actual presence in the country. Treating it as a mere nominal residence undermines its status and its tax benefits.
Comparing seven countries across five criteria can be overwhelming when it comes to one’s own financial and family situation. We assist retirees and those approaching retirement who want a clear, consistent, and sustainable plan. The process always begins with the same assessment: calculating net income and estate planning, country by country, before taking any formal steps.
For further reading
Ready to choose the best country for your retirement?
Pension taxation, passive residency, estate planning, health insurance: Our experts compare your options using figures tailored to your specific situation and ensure every step of your relocation goes smoothly.
Schedule an appointment with an expertFrequently Asked Questions About the Best Countries to Retire In
What are the best countries to retire in 2026?
It all depends on your priorities. In terms of cost of living, Mexico, Panama, and Portugal come out on top. When it comes to the quality of healthcare, Spain and Portugal are well-regarded. But for those with accumulated wealth, it’s the long-term tax advantages that make the difference: Andorra offers a pension taxed at a maximum of 10%, no wealth tax or inheritance tax for direct descendants, and a tax treaty with France—all just two hours from Barcelona.
How are pensions taxed in Andorra?
For a tax resident of Andorra, pensions are subject to personal income tax (IRPF), capped at 10%, with an exemption for income up to €24,000 per year. The exact allocation of taxing rights between France and Andorra depends on the nature of the pension (private or public) and is determined in accordance with the double taxation treaty in effect since 2016.
How much does it cost to build a passive house in Andorra?
The reference amount is €1,000,000, of which up to €400,000 can now be allocated to the Fons d'Habitatge housing fund. The figure of €600,000 sometimes cited is incorrect. In addition to this investment, a non-interest-bearing deposit must be made with the Andorran Financial Authority, which is refunded at the end of the residency; the amount of this deposit depends on the household composition.
Is there an inheritance tax in Andorra?
No. Andorra does not impose inheritance or gift taxes on direct descendants, that is, between parents and children. This is a major difference from France, where transfers between close relatives can be taxed at rates of up to 45%. Combined with the absence of a wealth tax, this rule makes the Principality an attractive place to plan for retirement while considering the transfer of one’s estate.
Is a tax treaty necessary to avoid double taxation?
Yes, it’s essential. Without a double taxation treaty between France and your host country, your pension may be taxed twice. France and Andorra are bound by a treaty that entered into force in 2016, which allocates the right to tax and ensures the smooth flow of funds. Verifying the existence and content of this treaty is crucial to the financial viability of any plan to retire abroad.
How much can you save by moving abroad for retirement?
In terms of cost of living alone, a couple spending 3,200 € per month in France can get by on 1,900 to 2,100 € in several destinations—a savings of up to 40%. But the most sustainable savings come from the tax system: a pension taxed at a flat rate of 10% instead of a progressive tax scale, and inheritance tax-free transfers to direct descendants, result in significantly more capital retained over the course of retirement.
Is Andorra a safe and well-equipped country for retirees?
Yes. The Principality boasts one of the lowest crime rates in Europe, a healthcare system that consistently ranks highly, modern infrastructure, and comprehensive fiber-optic coverage. Its location in the heart of the Pyrenees—about two hours from Barcelona and three hours from Toulouse—allows residents to remain close to France while enjoying a safe, mountain-style lifestyle.
