Stretching retirement dollars by living abroad


The percentage of older Americans who have retired has increased during the pandemic, according to a third-quarter 2021 Pew Research survey. The survey found that 50.3% of U.S. adults age 55 and older said they were retired, compared to 48.1% of the same age group in 2019. Broken down by age group, 65-74 year olds, 66 .9% reported being retired, compared to 64% in 2019. Inflation has also risen recently, resulting in a double whammy for retirees with a reduction in income at steeper prices.

But there is a bright side. The value of the US dollar is at its highest in 20 years, meaning people abroad can get a lot more for their dollar. For retirees looking to increase their retirement capital while making the most of their retirement life, traveling abroad or retiring abroad could be the answer.

Whether it’s learning a new language – which studies have shown correlates with a lower risk of Alzheimer’s and dementia – exploring new cultures or just taking part in interesting and fun activities (think wine tasting in the French countryside, roaming the beaches and vineyards Portugal, exploring temples in Thailand or scuba diving in Fiji), the strong dollar makes 2022 and 2023 a good time to get out and enjoy life. For those wondering what it would be like to settle in another country where the cost of living is significantly lower and excellent health care is cheap and available, now is the time to give it a try – for several months or a year to spend or two traveling across Europe, Asia or Central or South America to determine if the culture and affordability are right for retirement.

health care

European and Asian countries are often cited as having the best healthcare systems in the world. With a European Health Insurance Card (EHIC), citizens and residents of the European Union (EU) can get free or discounted government healthcare anywhere in the EU. There are no costs associated with applying for an EHIC.

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However, as a visitor to the EU, a person must have their own health insurance and several reputable companies offer such insurance to people traveling or living abroad. For example, for a 66-year-old US citizen traveling in Spain, Cigna Global Insurance cites a monthly health insurance premium of $512 for a high-end plan with a $1,500 hospital deductible, $500 outpatient deductible, and 0% Cost-sharing (ie, no other expenses), with a total performance limit of $500,000 and a limit of $250,000 per condition. Another policy with lower total benefit limits is $363 per month.

It’s important to note that Medicare typically doesn’t cover healthcare while traveling or outside the United States, even if there’s a medical emergency. Although some Medigap supplements cover urgent care situations abroad if they occur during the first 60 days of a trip, and certain Medicare Advantage plans cover medical emergencies, most U.S. citizens who retire or travel abroad will need a take out separate health insurance.

Student and pensioner visas

While going abroad generally limits a visitor’s length of stay in a country, that time can be extended by applying for a student visa or, for those old enough and with a certain monthly income, a pensioner visa. Spending time in another country to learn its language is an interesting and fun way to find out if that country is the right place to settle, especially if the program includes social activities.

For example, in Barcelona, ​​Spain, Spanish language school Expanish offers 3-, 6-, 9-, and 12-month immersion programs for $2,484, $3,806, $5,536, and $6,440, respectively. The school also helps its students to find rooms or private apartments and assists them in applying for a student visa. Rental housing in the city is quite affordable. Apartment Barcelona, ​​​​a website for long-term apartment rentals, offers one- and two-bedroom apartments near the beach for $1,400 to $1,800 per month. And at one of the city’s top tapas restaurants, Cervecería Catalana, a grilled beef tenderloin baguette is $8.90 and a Spanish omelette baguette is $4.75. Good bottles of wine cost less than $12.

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As an alternative to student visas, pensioner visas are available for many countries if certain income and residency requirements are met. And for many countries, the income requirements are quite low. For example, Spain offers a non-working (non-lucrative) residency visa, which is only available to people who do not work or have a work-related income and are in the country at least 183 days a year. To obtain this visa, a person must be living on savings or passive income such as pensions, interest, dividends or individual pension distributions and have a minimum monthly income of €2,316.08 for 2022. Neighboring Portugal offers a D7 visa for people with a minimum monthly salary of €705 minus all social security deductions for 2022 with a per capita increase for each family member.

Thailand, a long-time favorite with expats, offers a one-year visa for people aged 50 and over, provided the person has a bank deposit of 800,000 baht (US$21,600) or more or an income statement showing a monthly income of no less than 65,000 baht ($1,755) or a deposit account plus a monthly income of at least 800,000 baht ($21,600). A 10-year visa is also available for those aged 50 and over who have at least 3 million baht (US$81,000) in Thailand or a bank account of 1.8 million baht (US$48,600) or more and annual income of at least 1.2 million baht (32,400 USD). .

On the other side of the world and closer to home is Belize, where the cost of living is low, the official language is English and the currency is pegged to the US dollar. The small island of Ambergris Caye is one of the most popular places to retreat to, and transportation around the island is by golf cart! There are beaches, Mayan ruins, wildlife sanctuaries, fishing, sailing, golfing and diving among other sights and activities. Belize allows for full foreign ownership of real estate, no capital gains tax, and low property taxes. The country has a qualifying retirement program that allows eligible individuals who meet the income requirements to reside and retire permanently in Belize. In general, the program applies to anyone 45 years of age or older with at least $2,000 monthly (or $24,000 annually) in retirement income from a source outside of Belize in an approved currency (e.g., the US dollar).

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Dual citizenship

Instead of obtaining a student or pensioner visa, becoming an EU citizen through dual citizenship allows a person to travel freely anywhere in the EU and access its superior healthcare systems. Individuals can keep their US citizenship and become citizens of an EU country at the same time. One of the easier routes to dual citizenship is through descent. Individuals born in the United States may have a foreign-born parent or grandparent that confers citizenship on the offspring. Nations that grant citizenship based on blood descent when a parent or grandparent was a citizen include Ireland, Italy, Spain, Poland, Lithuania, Latvia, Germany, Luxembourg, Hungary and Greece.

In general, double taxation is not a problem for a dual citizen because when the United States has a treaty with a foreign country where taxes are paid, the foreign tax credit is applied to avoid US tax on the same income.


resources

Expat communities are everywhere and are a good source of additional information about living in a given country (see The Expat Magazine). YouTube video testimonials can also be helpful.

For a tax perspective, see Ovaska, “How to Help a Client Retiring Abroad Think About Taxes,” JofA (3 Aug 2020).

To learn more, listen to this AICPA PFP section podcast episode on international and cross-border financial planning.


Barbara Bryniarski, CPA (inactive), MST, is Senior Editor at Parker Tax Publishing. To comment on this article or to suggest an idea for another article, contact Dave Strausfeld at [email protected].





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