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Top Things to Know Before Retiring Abroad
July 13, 2022
When you consider your future retirement, you may have specific ideas and preferences in mind. Perhaps one such preference is retiring in another country. While doing so can be full of fascinating possibilities and great happiness, there are specific things to be keenly aware of when structuring your successful retirement plans.
• Buying or Renting Property
When buying real property in a foreign country, you have to consider a number of expenses beyond the initial purchase and closing costs (which can be as high as 10% in some countries). You must understand all associated carrying costs of any foreign property investment, and you want to do this before you make a purchase.
Renting could be a safer option—at least while you explore where you might like to settle. When searching for properties, double check whether they come with furnishings, such as kitchen appliances and bathroom vanities, as is often standard in America. You may need to set up a local bank account before paying a security deposit or your first month’s rent.
Exploring your options with the help of a lawyer who understands the local market will be helpful in understanding your options and the possible restrictions you’ll encounter.
• Professional Services
Leaving the United States does not exempt U.S. citizens from their U.S. tax obligations. While some retirees may not owe any U.S. income tax while living abroad, they generally must still annually file a tax return with the IRS. This would be the case even if all your assets were moved to a foreign country.
The bottom line is that you may still be taxed on income regardless of where it is earned. It’s best to line up an accountant with a deep understanding of international tax law so you’re not caught paying penalties.
• Estate Planning
If you are a U.S. citizen living abroad, you may wonder if the will or trust you executed in the United States will still work for you. Depending on your individual circumstances, your U.S. executed will may continue to work for your overseas assets. However, there is a good chance that you might need to update your estate plan. A review with an estate planning attorney well versed in international estate law will be helpful here in your preparation.
• Citizenship Requirements
Certain foreign nations will grant citizenship to American citizens—but not all will do so. Typically, the American wanting citizenship will have to make a “donation” to the country where they are relocating; others ask that the incoming citizen buy real estate (and some countries ask for a combination of both).
• Visa Requirements
If citizenship isn’t an option, it’s important to understand the visa requirements of your dream country. Visa types and requirements vary widely: A temporary residency permit might be limited or renewable and will come with application and renewal fees. You’ll often have to live in the country for a certain number of years before you are granted permanent residency. Some requirements may be necessary to qualify such as income level or a local real estate purchase.
There are other factors to consider when thinking about retiring abroad, but this general list here highlights some of the most important. You want your retirement to be as relaxing and carefree as possible, so proactively focusing on the above items will help you make the most informed decision about your future. You should also be cognizant of your cash flow needs when determining where, when, and how to retire. Reach out to your Sand Hill Wealth Manager with your questions about retiring abroad.
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