A growing number of Americans are choosing to spend their golden years abroad.
Living overseas offers a sense of adventure and, often, a reduced cost of living.
Yet most people–and their advisors–don’t realize how much planning is needed to make the move a success.
It’s hard to say how many Americans have retired abroad. The State Department doesn’t keep track
of the numbers, and the U.S. Census Bureau doesn’t count Americans overseas.
The Social Security Administration sends checks to more than 260,000 retired workers abroad,
but this represents only a fraction of the total because many overseas retirees have their
Social Security checks deposited in the U.S.
Despite the lack of statistics, anecdotal evidence suggests an increase in the number of retirees overseas.
Many U.S. citizens going abroad assume they’ll encounter the same legal and tax systems as those back home.
They don’t realize the complications that can arise if they don’t do the proper planning.
Retirement income calculations take on a new complexity when you live abroad.
It’s not enough simply to convert dollars into the local currency to see how much the client will need to live on.
You should count on currency fluctuations of 10% to 20% in either direction. You also need to consider the
stability of the country you want to move to.
In the past, several Latin American countries have been very popular as the currency conversion has
given many US expatriots more for their money. This is quickly changing.
Often, countries prized for their low cost of living get pricier as their popularity among retirees grows.
For example, housing prices skyrocketed in Guadalajara, Mexico, over the past 10 years as that country’s
second-largest city turned into an expat haven.
Yet even with the added expense, the cost of living is still lower in Mexico than in the U.S..
Retirees there can spend less than they would at home and get more for their money, including the
service of maids and gardeners. Retirees who have become frail and need in-home assistance
could particularly benefit from this kind of purchasing power.
eaving the country doesn’t exempt U.S. citizens from their home-country tax obligations.
Retirees may not owe any U.S. income tax while they’re living abroad, but they must still file annually with the IRS.
This is the case even if a U.S. citizen moves all of his or her assets to a foreign country:
U.S. citizens are taxed on their worldwide income and, when they die, on their worldwide estate.
The benefits of living abroad can be attractive, but if you are unprepared, it could become a real challenge
financially. Ask your coach what things you will need to consider when contemplating a move to retire
outside the U.S.
No comments yet.