Marc from ProTax Consulting Services
Planning your golden years is an exciting task and you’re probably looking forward to traveling or moving to a country with your ideal weather. Or possibly, the opportunity to live close to family and friends. Whatever your reasons, know that there are also financial benefits to retiring abroad. When working out your destination, do factor in how to manage your assets. You’ll also want to figure out your 401k and IRA withdrawals, and Social Security receipts. Work with your expat tax consultant to figure out your dues since you’ll continue to pay taxes in the US.
- You’ll Have a Lower Cost of Living
The more affordable cost of living is one of the fundamental reasons to consider retiring abroad. Depending on the country you’ve chosen and your expected standard of living, you can expect to spend anywhere from $1,200 to $2,200 per month on a comfortable lifestyle. Other factors that can influence your expenses include settling in an urban or rural locale, local taxes, travel, and insurance. With a little smart thinking, you can invest the money that you have left after deducting expenses and build wealth.
- You Can Expect Affordable Healthcare
Healthcare costs in the US are not only extremely high, but they seem to be skyrocketing as the years pass. Statistics show that a 65-year old couple choosing to retire in the US can expect to pay around $606,337 to get proper healthcare. Many countries have a public health system available associated with very reasonable costs. Do keep in mind that any US Medicare coverage that you have before moving abroad may not cover your medical expenses in a foreign country. However, you can get Medicare to cover any emergency expenses incurred while visiting your hometown.
- You Can Take Advantage of Monetary Incentives
Several countries offer benefits to retiring US expats. A good example is Panama’s Pensionado program. It offers incentives to retirees who wish to live in the country as long as they meet a reasonable income criteria. Accordingly, you can expect discounts on expenses like healthcare, utilities, mortgage payments, and various others. If you choose to live in Ecuador, you can expect to get 50% discounts on public transportation and on tickets for movies and sporting events. These savings can translate into valuable financial benefits.
- You Can Get Deductions on Income Tax
US expats can take advantage of various income exclusions. The most important among them is the Foreign Income Earned Exclusion (FEIE) that allows you to pay income tax over and above a specific income level. The IRS sets up a limit each year. For instance, this income slab is $107,600 for 2020. Additionally, you can claim deductions for the living costs that you incur while living in foreign countries by way of the Foreign Housing Exclusion. Your tax consultant can advise you best on the tax and financial benefits of living abroad.
- You Can Continue to Get Social Security
If you qualify for Social Security at the time that you move out of the US, you can continue to receive the benefits as long as your chosen destination is on the approved list. The IRS requires notification of your move and that you maintain a US bank account for receiving the SS checks. As long as you’re aware of the applicable fees for making purchases and ATM transactions, you should be good to go.
Settling overseas after retirement has a bunch of benefits. Make sure to do your homework when planning your move and take advantage of substantial savings.