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Brush Up Your Knowledge: A Refresher On Retiring Outside the U.S.A. Here With Additional Links & News!

 

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I wrote a blog post about tax and financial implications of retiring abroad for the first time in 2018! I also wrote about applying for Social Security Benefits in 2015. These posts seem like were written an eon ago! {Link to older posts in Bibliography below-[1]}. 


We are going to go over a few points below that have changed since then from a tax and financial point of view for U.S Citizens and Green Card holders. However, so much more has changed in terms of social impact, travel and the urge to explore for many, many. It goes without saying that the pandemic permanently changed our world view, the urge to travel, explore the world , and for many the desire to find friendlier places to live in terms of political views, health insurance options, and definitely the cost of aging and health insurance. 


The 2024 U.S Election results has seen an increase of 1500% in people searching for topics on retiring outside the U.S. In fact, this topic has received so much interest that Investopedia has recently added a page about it! [2]


Since we have had so many readers and requests reaching out to us with questions about this and related topics, I thought it will be good idea to write a refresher. 


Retirement is an important step in one's life, no matter where you live. Hence, when stepping into the unfamiliar, this major life decision takes on additional complexities. 

So, how do you start planning for this major step?


I. Visas, Residency Requirements and Local Laws: 

At the top of the list is the requirement to check visa and residency requirements. Although, Americans can travel freely with a U.S passport to many countries in the world, a longer stay will require a visa and certain residency requirements. [3]

 United States citizens can become dual citizens of countries that offer this option without any impediment. They do not have to choose between the U.S. or the other country. 

Citizens also have the option to request evacuation from another country in times of crises. This comes with conditions that one should keep themselves aware of. [4]

It is very important to be mindful of local laws in the country where you plan to settle. In addition to finding English speaking professionals, if you are not proficient in the local language, put a plan into place by working with legal professionals who are local experts including the following: 

  • Make sure your trust, will, estate plan and powers of attorney work in the other country. 
  • If you plan to continue to work, make sure the visa you are on allows that. If it does, check if your occupation needs local licensing and take care of that. 
  • Check if you need to reapply for a driver's license if you will need that. 
There are reports of people who have left the U.S to live in other countries only to return after not being able to cope with this change or simply because they did not even know they had to obtain visas before they could start living in the other country. {Story linked in Bibliography below- [5]}. 


II. Life Outside the United States. 

  1. Healthcare - If you have Medicare, you cannot use it overseas. You will have to buy local health insurance or health insurance in the US that covers expenses overseas. Explore local health systems and check how to qualify or if you can qualify for them. 
  2. Disability & Accommodations - This can be challenging if you are looking at a country where this is not available. 
  3. Voting - Make sure you have taken the right steps to continue to vote from outside the country if you want to stay connected. 
  4. Passport -  Keep your passport current and know where your nearest US consulate or embassy is situated. 
  5. Emergency - Know how to stay connected with alerts from the US government. 
  6. Scams - Be aware of financial, romance or other scams. 


III. Tax and Financial Steps to take: 

We have talked about the following points in great detail in our 2019 post:

  • Continued tax filing requirement for U.S. citizens or green card holders even if living abroad. In brief, a Citizenship-Based-Taxation regime requires this to be so. Hence your obligations to report income and other financial information does not stop just because you have left the country. 
          Refresher: This requirement has not changed. The President-elect at this time has promised that he will be changing these requirements. Many experts concur that change is not easy, if not impossible.
 
  • Retirement income from the U.S. We spoke about various forms of income earned by retirees including Social Security benefits and making arrangements of repatriating US dollars to your resident country. 
        Refresher: As you think of repatriating your US dollars and are planning for it, be aware of the exchange rates and the fee for the exchange. Think of using apps like Xoom/ Remit (not sponsored) for better exchange rates than what traditional banks can give you. Some other banks like Wise (also not sponsored) will also give you good exchange rates without the add-ons. Also be aware of the local jurisdiction's rules & regs to repatriate money. 

  • Getting back to work while abroad. The 2019 blog post covered working abroad and being able to mitigate some double taxation by claiming foreign tax credits and Foreign Earned Income Exclusions. 
          Refresher: Make sure to plan for this if your income (after USD conversion) is going to be more than the annual FEIE exclusion for that year. This will also need regular estimated tax payments if you do not have taxes paid in the local country. Good idea to make sure you are working with experienced accountants in both the countries- even better if you have connected them to each other! FYI: FEIE for 2024 is $ 126,500 per person.  

  • Tax Treaty provisions or Double Tax Avoidance Agreements.  Tax treaty/ totalization agreements and how they can help you avoid double taxation. 
           Refresher:  Not much has changed here. Please be sure that you are taking advantage of the treaty benefits if you are eligible. 

  • Filing State Taxes. Some U.S states require you to continue filing taxes there especially if you have established domicile in that state or have income sourced to that state. 
        Refresher: This can be true for you if the states are California, New York or Virginia. Please research states and make sure if you have moved out of a state like this before moving abroad, that you do not have any residual filing requirements. 

  • More tax/ financial challenges while living abroad. Difficulties of accessing US bank and other financial accounts from outside the country and the effect of FATCA on local banks refusing to work with US citizens was discussed on the 2019 post. 
         Refresher: This is getting a tad better where it comes to banking but brokerage firms still have rules in place for accessing accounts from overseas. 

  • Relinquish U.S. citizenship or surrender your Green Card. If you are thinking of doing this, be aware that you will have to take concrete steps in order to relinquish your citizenship or surrender your green card. 
        Refresher: Make sure that you are aware of the time required to get this in place. Different consulates and embassies have different schedules and timelines. What has not changed is that you should work with a professional. 

If this blog post has helped you as an individual about steps to take if planning to retire abroad or if you are finance professional who is looking for a tax advisor, please contact us. Or do subscribe to our Newsletter to get the blogs delivered to your Inbox! 

Always make sure to work with an experienced cross-border tax advisor. 



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Location: Plymouth, MI 48170, USA

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