Retiring to a different country is a conversation we've been hearing more frequently at the office recently.
Last month, Bill and I were doing his annual review. One of his big retirement dreams has always been to retire to the beach -- nothing like the smell of salt air and the sound of waves crashing on the beach 24 / 7 to put a smile on his face all day long.
He and his wife had been doing some research on their own and found that they could buy a beach house in Mexico for half the cost of a smaller property in Florida. Plus, he could even hire people to help with the maintenance for far less than he is currently paying on his current property.
It sounds like a win-win for him all the way around.
Retiring to the beach, a cabin in the woods with a mountain view, or even a luxury condo in the middle of a cultural hub, many folks dream of doing that their entire working lives.
When it's time to retire, some people deal with the sticker shock and buy their unique slice of retirement heaven in the U. S; others decide to get more with their money and move to another country.
Where you decide to live when you retire is a very personal decision based on a lot of different considerations:
- you want to be closer to your kids and grandkids
- maybe you can't think of living anywhere other than where you are right now -- the kids and grandkids can visit
- you love your healthcare providers
- your home is PERFECT for your retirement
- maybe you are more than ready to go on the adventure of a lifetime and are thinking about retiring abroad
Why Do People Want To Retire Abroad?
There are some substantial incentives for retiring abroad.
People want to create new experiences for themselves during this next phase of their life. Life without snow or big-city noise and traffic is very compelling.
Retiring abroad can also help make your money go further.
People often find that housing and food are less expensive outside of the United States. This is especially important for someone retiring on a fixed income and receiving Social Security benefits.
Healthcare is another important consideration. Unlike the U.S., many countries worldwide offer low- to no-cost healthcare to their residents, including Canada, Costa Rica, and Ecuador.
In some cases, retirees can utilize a mix of Medicare and international private healthcare insurance to cover their healthcare costs.
You Have To Do Your Homework First
Several of our clients are enjoying successful retirements outside of the U. S. The one thing they all have in common is that they did their research first.
It's one thing to have a blissful 2-week vacation in the Caribbean at a 5-star resort and another to live there full time when the mosquitoes are swarming and tornado season is in full swing.
Some of them decided to live where they wanted to retire for part of the year while they lived here the other part of the year.
They rented their house here while making that transition to be absolutely sure that's where they want to be long-term before they sold their residence here.
You also need to check on residency requirements because they can be different. Temporary residency, long-term residency, and permanent residency are all different. Establishing permanent residency does not mean citizenship.
The amount of time it takes to establish residency, retiree age requirements, and the amount of annual passive income you're required to prove varies from place to place.
For example, in Ireland, you have to show $60,000 of passive annual income and substantial savings for residency to even be an option.
Visa requirements vary from country to country, even though those associated with retirement are usually relatively easy to obtain.
Do You Still Have To Pay Income Tax If You Are An Expat?
U.S. citizens are always required to file taxes with the I.R.S., even if they have retired abroad. Retirement pensions, 401(K)s, and Social Security benefits are common types of income that remain taxable, even though you may no longer be working.
And, you may have to pay taxes in the country you're living in.
The rules are different for each country, so you need to do your research to find out what that is going to look like.
The U.S. has tax treaties with some countries, including Greece, Italy, and Japan, allowing expats to be either taxed at a reduced rate or entirely exempt from foreign taxes, meaning any income earned abroad.
Choosing to live abroad as a retiree is a big decision. You need to do your homework before you commit to it long-term. And you have to understand there is going to be an ongoing learning curve. Working with professionals who are familiar with the process can help streamline the process.