Retiring Abroad Can Be Less Tricky With These Tips
Every year more and more newly retired people are choosing to spend their Golden Years beyond the border of the U.S. To get there you may think it means scrimping and saving, but many places abroad are actually pretty cost-effective places to settle down in. As long as you play it smart and follow a few tips and tricks, the world is your oyster, when it comes to your retirement.
1. A Secondary Account
Due to the Foreign Account Tax Compliance Act, opening a bank account in whatever country you decided to settle down in may be tricky. Depending on the amount of money you have and how many assets you own on foreign soil, different tax codes could apply you to.
Instead of looking to open a foreign bank account, you should consider opening a secondary bank account on in the United States, both of which should permit you to take money out of an ATM without any fees. The reason for the two accounts is because of emergencies, whether your card gets lost, or your bank information is stolen.
2. Treaties and Other Hidden Tax Breaks
If you are a U.S. Citizen, it doesn’t matter where you live: you still have to pay the same income, estate, and gift taxes. And depending on the country and the length of your residency, you could possibly owe that government money at the end of the year too.
You would fair well to set up a meeting with a financial advisor before you embark and let them know what country you’re planning on moving to, so they can help you review the tax code for that country and search out any potential treaties or other hidden tax breaks.
Make sure you also keep fastidious records of all your receipts and expenses while you live abroad to make sure you aren’t ever paying taxes twice by accident.
3. Investing Abroad Can Be Perilous
Other than equity in the house or domicile in which you’ll be living, you should take care when investing abroad. You can still invest your money in American stocks and funds even if you are living in another country.
Regulations can be very different, depending on where you end up, and there may not even be an official organization overseeing any transactions to make sure everything is legitimate.
4. Keep a Record of All Your Income
Many people keep working after retirement, and if you are doing some self-employment or gig work in another country, you could be the recipient of a foreign earned income exclusion, wherein you can take part of your money made on foreign soil from your federal taxes due in America. In 2019, that dollar amount is $105,900, not including things like Social Security or any pension payments.
Keeping a record of all your income, days, and amounts can help you to know if you are eligible for the foreign earned income exclusion.
