Travel is perhaps the biggest word on the lips of soon-to-be retirees, even more so than taxes and income. I have come to understand the appreciation that we as a society have for vacation-style travel but I can’t help feeling the stress of it. Short-term travel also places a heavy burden on finances and the environment.
It’s worthwhile to consider living abroad during retirement. Some may want to live a few months out of the year in another country either to escape the weather or to take advantage of better resources in their non-native country.
Others may have dual citizenship and want to take advantage of the opportunity to live in another country without having to deal with the excessively strict visa regulations. Let me tell you, the visa thing around the world is nuts!
Advantages Of Living Abroad
I will do another post on the topic of tax saving for US citizens living overseas. From my preliminary research, there really isn’t much of a savings to be had. Furthermore, looking at taxes in other nations, US citizens enjoy some of the lowest income tax rates.
The US is the only country that I found which requires their citizens to pay US income taxes regardless of where they earn their income and regardless of who the employer is. It’s what the US charges its citizens for the privilege of holding a US citizenship.
This might be perhaps too deep of a topic for this post, but is the US lucky to have me as a citizen or am I lucky to have them allow me to be a citizen? I am hoping to answer this question for myself by living abroad for a while.
Advertised Tax savings
If you spend an adequate time outside of the US earning income in another country, you may qualify for Foreign Earned Income Exclusion. FEIE will allow you to shield some of your income earned overseas from US taxes – however, not all. And it’s assumed that you are still paying taxes on the excluded amount to the foreign country.
As with most tax scenarios, don’t make a decision based on taxes – make a sound financial decision and then work to optimize that decision’s tax implications.
Currency Conversion Rate
The simplest concept to grasp is the power of currency rates. If you go to a country where the USD is stronger, then you will get more purchasing power.
My favorite example is from my recent trip to Vancouver, Canada where I bought $5 (Canadian) Paloma drinks all night long. In fact, I was only paying $3.75 for each since the USD was stronger.
Of course, on a long enough time horizon, the prices start stabilizing and reflecting currency exchange rates. However, over 1-2 years (a short period of time), one currency’s surge can drastically increase the purchasing power in another country.
Cost Of Living
COL (cost of living) is different from currency exchange rates. Not only could you move to a country where land and products are cheaper, but you could purchase those items with your own currency which might be stronger.
Thailand, Philippines and Mexico are such examples. Canada, as of this writing in 2017, is a great example of a country where COL is high but the stronger USD can offset that disadvantage.
I have talked about consumer price indexes in previous posts and how it can give you a general sense but definitely is not an accurate measurement of the true cost of living. In the end, your spending habits can offset inflation, calculated COL’s and CPI’s.
We are told that there hasn’t been much inflation for the past few years but that doesn’t mean that COL has stayed the same. Inflation, COL (cost of living) and CPI (consumer prices index) are sometimes interchangeably used in the media but they are different.
If you are able to maintain a physical or digital presence in 2 countries, ideally on separate continents, you can strategically increase your purchasing power.
Which Country To Choose
This is going to be a decision made uniquely by the individual. You may have an easier time getting a citizenship in another country due to family connections or ancestry. Or you might be looking for a very particular train to your retirement destination.
Some countries have amazing climates and a laid back culture. Others are very hospitable to entrepreneurs. Some countries offer a lot of culture and an open-minded atmosphere. And yet others will have incredibly cheap and effective healthcare. Some countries have stable economic and political policies, such as Canada and Australia.
If you are planning on working during retirement then you can worry less about inflation. However, inflation (the sudden drop in purchasing power of your currency) is a major financial risk in some countries. By earning an income, you are likely to earn higher wages during times of inflation. If you are living off of security investments during times of inflation, then it will take a long time before the value catches up with prices.
Earning An Income Abroad
I normally wouldn’t discuss this because if you are ‘retired’ then you shouldn’t have a need for income. However, I think this blog is as much about retirement and financial independence as it is about earning money regardless of where you live.
Earning an income is as much about productivity as it is about staying involved in one’s community. The difference is that the terms of working in retirement are often set by you, not the employer or your customer.
Done With Medicine
If you aren’t interested in practicing medicine then your traditional options would be to venture into real estate either back home or in your new living destination. One advantage with real estate is that annual property taxes are fairly similar from country to country. Also, HOA dues aren’t as rampant in the rest of the world, meaning you can buy a flat with a lot less money to start and stand to make a profit.
I still think that one day I’m going to want to work a simple job like wrenching in an auto shop or being a bartender, possibly part-time. These are definitely possibly income options for the retiree. Getting a work visa, however, is a whole separate discussion.
I have an uncle who has a language school in another country, I think that’s a neat business idea. He said he’s doing quite well. Now that I understand the visa laws better, I can see why language schools are necessary and why they will be taught in a brick and mortar building for decades to come.
Practicing Medicine Overseas
I researched this a lot. The information is conflicting and I can see why. You see, many countries, especially in Europe, have rampant shortages of healthcare professionals. Politicians desperately want foreigners who are qualified to easily start practicing. However, foreigners are still… foreigners. They are still seen as a threat to the local workforce.
Doing my research for this blog revealed a very inventive digital nomad community who tactically and legally circumvents the immigration restrictions and helps spread diversity. At the same time, there is a strong sentiment on various international forums where citizens of a country are worried about their job security when it comes to importing a foreign work force.
To avoid the laws and not piss off locals, you can always practice medicine on a US military base as an American healthcare professional. However, it’s hard to predict the availability of such jobs.
Countries With Easy Pathways
There are only a handful of countries which have established pathways for US physicians to get licensed. Australia, New Zealand, Canada, Pacific Islands, Singapore and Caribbean are the countries where it’s fairly straightforward to get licensed as a physician. DO’s (osteopaths), have established pathways of practicing medicine in Australia and New Zealand.
The Rest Of The World
How about Europe and other countries? I’ve searched through various country medical board websites and it appears that they are willing to make exceptions. It helps if you are from a well-known medical school. It helps if you are in a specialty that’s highly desired (it differs from country to country).
You definitely would have to have a basic understanding of their language, so you must pass a language test, that’s for certain. After that, you may be allowed to practice without taking an exam or you may have to take your specialty’s board equivalent exam.
However, as a general rule, you cannot practice with your US medical license in most countries and unless you sit for their licensing exams and board exams, you won’t be allowed to work.
Handling Finances In The US
Legally, it’s important to figure out how many days you can spend away from the United States to no longer be considered a resident. I couldn’t get a clear answer (it’s like a fucking calculus equation with the IRS) so I encourage you to research that. And if you live in California or New York, be prepared to prove to them that you no longer live there as an expat. They notoriously will go after anyone with previous residency in their State.
And if you manage to spend enough time away to be a legit expat, you will have to deal with the residency requirement for your bank account, credit cards, and brokerage accounts. Tons of fun.
Immigration lawyers come in 2 flavors, shady as shit or insanely busy. There are quite a few horror stories online so you must choose wisely or DIY it. However, I would say that at least consulting with an immigration lawyer is the best way to get started.
Interestingly, it seems that if you decide to go to your country of choice as a tourist and during your 3 month stay decide to file for residency or a work visa, this may in fact hurt your chances. So, do your research. There are good websites out there with lawyers advertising their services.
Common Visas To Apply For
Tourist visas for Americans are usually 3 months long. For some countries, you have to go through the entire official application process. For others you simply have to fill out an online form (Australia).
There are retirement visas which are for older individuals who want to live abroad and spend their money in that country. Of course, since that country wants your money, they are likely to give you an extended visa or residency. These often have an age requirement – you gotta be old.
There are work visas which you apply for by either starting a business abroad or having an employer overseas sponsor you. These are often 1 year long or can be slightly longer. Those with professional degrees, such as technology or business or physicians have an advantage here.
Study visa or student visas are for those who enroll in education. Doesn’t have to be higher education. You can just take language classes and it seems that you can get visas for up to a year. Usually you have to be under age 35 for this.
The Big Baller Visa
Wealth visas are interesting. In case you doubted as to why we have borders and a visa system to travel between countries, the concept of a wealth visa should blatantly make this clear. Got $500k or $1,000,000 or in some cases $5,000,000 to invest in a business or a piece of real estate abroad? Well, guess what, that country is happy to take your money and give you residency.
Finally, you can buy your citizenship in some countries. Each country is different and this is a permutation of the wealth visa.
Going from the complicated world of visas to the simple mind-numbing process of having your mail forwarded. I thought this was something really easy to research but shit!!… it’s a nightmare.
Please, come rob my home!
Logistics: You decide to keep your house in the US and move overseas. You hold the mail at the post office for your cousin Ernie to pick up once a week. Guess what, the postman will slap a very obvious VACANT sticker on your mailbox and short of advertising that your home is empty and ready to be looted, make your lack of presence well-known to all.
You can have your mail forwarded internationally but the USPS charges for this – or they don’t allow it, I’m not sure, my reading level was inadequate to make sense of their shitty website. Either way they would charge for it.
Mail Forwarding Service
You can hire a 3rd party company which will take your mail, open it, scan it and upload it to a secure server. This can be really helpful so that you can filter through junk and have them ship you whatever is important. These are costly – prices ranger from $30-$150/month and the online community is all over the place with their reviews.
In Search Of A Physical Mailing Address
Logistics: You decide to sell your home, you don’t care to have property in the US. Well, quite a few of your accounts require for you to have a physical US mailing address. PO boxes don’t count. Remember that question that was so annoying to answer “What is your country of residence?” – yea, that one.
Sure, you can use a family member or friend but that isn’t always the best option for security reasons. Ideally, you’d want to pay a little extra to those mail forwarding services which will assign you an actual mailing address for a little extra.
I haven’t found the right solution. However, I would say the best is to find a friend or family member to start out with. Someone competent. And let them sort through your mail and in time, you can change your address with most companies to your new overseas address, except for the ones that require that US address – change it with them and you are sure to have your accounts cancelled.