Should you retire overseas

[nun]

I know that threads can take on a life of their own but this is turning into a tax thread. Is this really the place for that or should someone with a big interest in the tax issues of retiring overseas, not start a new thread on that specific topic and leave this thread for other issues related to retiring overseas? An equally as complicated topic would be pension implications which could be a separate thread or combined with a tax thread.

I certainly didn't start this thread to try and go into issues that require very specific and expert knowledge. Again, such issues need only be looked at once you have made the initial decision that you are interested in retiring overseas.

LARS, think carefully about the move from a house to a townhouse or condo. My wife found it unbearable to live in a condo. There were 3 main reasons. Sound proofing is rarely 100%, no private outdoor space, rules that either you don't like or someone else ignores and you don't like that.

Re travel insurance, there are plenty of providers but the devil is in the detail of the policy. You must read it. Most don't. Some require you to return home to make a claim for example. Not much fun if you have a big hospital bill to pay out of pocket while you are travelling. Some do not cover what you thought they covered. Most complaints about travel insurance are actually a result of the traveller not knowing what they were and were not covered for. You hang a camera on a chair arm in a restaurant and it gets stolen. Not covered. Yes, you had coverage for the camera being stolen but you did not have coverage if you did not exercise 'due caution'.

Again, not a topic to do with 'should you retire overseas'.

I think all those topics are relevant. For US citizens taxes loom larger than for other nationalities and if cost of living and making your money go farther are considerations taxes are important. But there are obviously other considerations too that might be more important in getting people initially interested. However, a holistic approach is required to successfully in move abroad.

 

[nun]

But wait I thought the UK didn't tax income earned outside the UK? That's why there are so many russian oligarchs (kleptocrats) and Arab sheikhs living in London?

UK taxes people that are ordinarily resident in the UK on their worldwide income. You can live in the UK for extended periods but be formally resident elsewhere and avoid tax on non-UK income and you can also pay a fee of 30k GBP to avoid UK tax. That's small change to most oligarchs so the UK is a popular place for them.

 

[LARS]

If you intend to spend considerable amounts of time overseas you need to look at residency considerations, your health insurance and how they interact with the ACA and the IRS form 8965. If you maintain residency in the US you could buy an ACA plan that covers you overseas or just have a plan that works in the US and buy an extra repatriation and catastrophic plan piecemeal for wherever you visit.

I am assuming that 3 to 4 month stints (then returning to US) will not trigger any tax issues and you avoid all the residency/tax compliance nightmare being discussed. Am I wrong?

Quickly reviewed Nomads (thanks, Alan) and from what I saw it looks to be an Accident policy. In other words, if you have a heart attack, which isn't related to travel, they will not cover.

It would seem that you need to really understand what your US policy covers overseas for extended visits.

 

[Alan]

UK taxes people that are ordinarily resident in the UK on their worldwide income. You can live in the UK for extended periods but be formally resident elsewhere and avoid tax on non-UK income and you can also pay a fee of 30k GBP to avoid UK tax. That's small change to most oligarchs so the UK is a popular place for them.

+1

The time I spent 7 months in the UK I was very careful not to become formally resident, and I did this in part by having the 7 months spread over 2 UK tax years (UK tax year is April 6 to April 5) and while there we also took a couple of vacations abroad to Europe and to Ireland.

After returning to the US I got a letter from my UK bank who had noticed from ATM withdrawals that I been in the UK for a long period and I had to complete an HMRC form stating the number of days I'd been in the UK that year and the previous 4 years. The letter was quite apologetic really, saying that HMRC required banks to monitor customers who were non-resident for tax purposes and rat them out if they thought they had slipped back in. (I'm paraphrasing here )

 

[Alan]

I am assuming that 3 to 4 month stints (then returning to US) will not trigger any tax issues and you avoid all the residency/tax compliance nightmare being discussed. Am I wrong?

Absolutely correct for the UK.

Quickly reviewed Nomads (thanks, Alan) and from what I saw it looks to be an Accident policy. In other words, if you have a heart attack, which isn't related to travel, they will not cover.

It would seem that you need to really understand what your US policy covers overseas for extended visits.

Ah, not looked at WorldNomads in detail, just heard about it.

I'm very fortunate that one of the options I have with my retiree insurance is a PPO plan that covers foreign travel. To be quite honest I am sure BCBS would rather we got sick while abroad. We had lunch recently with a couple of friends from where I used to work. He is also retired on the same HI policy and while in Austria his wife took ill and required treatment. He had to pay up front and was amazed, a) how cheap it was, and b) that the HI claim he put in on return to the US paid in full (no co-pay).

 

[Meadbh]

To be quite honest I am sure BCBS would rather we got sick while abroad.

My experience as a HCP in Canada supports this. On the rare occasion when we had a US patient insured by BCBS, they really really wanted the patient to complete their hospital stay in Canada.

 

[Alan]

My experience as a HCP in Canada supports this. On the rare occasion when we had a US patient insured by BCBS, they really really wanted the patient to complete their hospital stay in Canada.

I'll bet they did

 

[Meadbh]

I'll bet they did

I phoned them every day for 10 days until they eventually agreed to transfer a patient just to get rid of me!

 

[LARS]

Absolutely correct for the UK.



Ah, not looked at WorldNomads in detail, just heard about it.

I'm very fortunate that one of the options I have with my retiree insurance is a PPO plan that covers foreign travel. To be quite honest I am sure BCBS would rather we got sick while abroad. We had lunch recently with a couple of friends from where I used to work. He is also retired on the same HI policy and while in Austria his wife took ill and required treatment. He had to pay up front and was amazed, a) how cheap it was, and b) that the HI claim he put in on return to the US paid in full (no co-pay).

Just checked my BCBS documents and they refer to BlueCard Worldwide for coverage outside of US. I will call during working hours to see if the plan we currently have provides BlueCard. If not, will have to figure what policies do.

 

[nun]

I am assuming that 3 to 4 month stints (then returning to US) will not trigger any tax issues and you avoid all the residency/tax compliance nightmare being discussed. Am I wrong?

Quickly reviewed Nomads (thanks, Alan) and from what I saw it looks to be an Accident policy. In other words, if you have a heart attack, which isn't related to travel, they will not cover.

It would seem that you need to really understand what your US policy covers overseas for extended visits.

If you just go somewhere on a tourist visa there will be no tax consequences, but make sure you understand the max number of days you can stay. You'll have to keep ACA compliant health insurance and if you want one that covers you worldwide you'll probably have to get a more expensive one that covers out of network hospitals....I know mu Unicare policy covers me for emergencies overseas, but would not pay for the costs of a medical flight back.

 

[LARS]

If you just go somewhere on a tourist visa there will be no tax consequences, but make sure you understand the max number of days you can stay. You'll have to keep ACA compliant health insurance and if you want one that covers you worldwide you'll probably have to get a more expensive one that covers out of network hospitals....I know Blue Cross has plans that cover you outside the US.

We have Silver so will see if that gets coverage (thru BlueCard Worldwide) overseas.

 

[explanade]

If you overstay your tourist visa, you'd have immigration problems before tax issues would you?

I don't know how common it is but supposedly some Europeans overstay their tourist or student visas in the US.

Do a lot of Americans do the same?

And banks will rat you out based on your ATM withdrawals? How would a foreign bank contact your unless you opened an account with them?

If an American stayed beyond whatever the threshold is before some other country tries to tax him and the only financial transactions he's doing in some EU country is withdrawing money at ATMs, would the banks put two and two together and conclude a particular American has overstayed? That's even assuming he's used the same bank's ATM every time?

 

[george76]

We have Silver so will see if that gets coverage (thru BlueCard Worldwide) overseas.

I am not sure if I want to move overseas. I am going back and forth on the issue. But I have gone thru the planning process. One of the things I have done is check with US health insurance companies as to whether they would cover us abroad. What I was told by BCBS in my state was that they would only cover us if we remained residents of our state, with a US address. In other words, they would cover long-term travel (I pay and they would ultimately reimburse). But they would not cover us if we became residents of a foreign country.

If you find out otherwise, I am all ears. But if you are just going to be there short-term, you should be fine.

 

[LARS]

I am not sure if I want to move overseas. I am going back and forth on the issue. But I have gone thru the planning process. One of the things I have done is check with US health insurance companies as to whether they would cover us abroad. What I was told by BCBS in my state was that they would only cover us if we remained residents of our state, with a US address. In other words, they would cover long-term travel (I pay and they would ultimately reimburse). But they would not cover us if we became residents of a foreign country.

If you find out otherwise, I am all ears. But if you are just going to be there short-term, you should be fine.

Thanks for info.

I am going to try and call BCBS tomorrow and see what is what for our plan. I will report back.

 

[Alan]

If you overstay your tourist visa, you'd have immigration problems before tax issues would you?

I don't know how common it is but supposedly some Europeans overstay their tourist or student visas in the US.

Do a lot of Americans do the same?

And banks will rat you out based on your ATM withdrawals? How would a foreign bank contact your unless you opened an account with them?

If an American stayed beyond whatever the threshold is before some other country tries to tax him and the only financial transactions he's doing in some EU country is withdrawing money at ATMs, would the banks put two and two together and conclude a particular American has overstayed? That's even assuming he's used the same bank's ATM every time?

I'm sure immigration issues would be paramount if one overstayed a tourist visa.


My uk bank ratted me out because I have accounts with them and my address is in the usa plus they don't withhold tax as a non resident does not pay UK tax

 

[explanade]

OK makes sense.

There wouldn't be a reason to get foreign bank accounts except if you get a long term rental and you had to establish services like utilities, phones, Internet, etc.

 

[Sojourning]

I think you are getting things a bit mixed up explanade. Alan referred to his 'UK bank' which means he has an account in a UK bank and his ATM withdrawals from that bank triggered things. Making withdrawals from your US bank account using ATMs in Europe will not trigger anything. No country is going to look to tax you unless you are legally resident in that country or somehow earning money in that country.

However, I think you need to understand that as a US citizen you can only stay in almost all of Europe for only 3 months at one time. You need to read up on Schengen and the Schengen rule. What you will find is that you can stay 90 days in any 180 calender day period, in all of the Schengen countries combined.
http://www.schengenvisainfo.com/schengen-visa-countries-list/

So, you cannot for example stay in France for 4 months unless you get a visa that allows you to stay in France for more than the 90 days you are allowed visa free as a tourist. You could stay 3 months in France and then 3 months in the UK however as the UK is not a member of Schengen.

As for overstaying your welcome, some people do and some people don't get caught but you then need to understand the potential consequences if you are caught. They range from a slap on the wrist to being declared 'persona non grata' for 7 years in all of the Schengen countries. The other factor to consider with an overstay is that no insurance you buy will cover you if you are doing something illegal and that includes overstaying.

You also seem to have World Nomads coverage mixed up somehow although I'm not quite sure I understand what you meant about travel and a heart attack. If you have a heart attack while travelling then your hospitalization for that would be covered. It would not be covered if you had a pre-existing heart condition however and did not tell them about it.
I think you are getting things a bit mixed up explanade. Alan referred to his 'UK bank' which means he has an account in a UK bank and his ATM withdrawals from that bank triggered things. Making withdrawals from your US bank account using ATMs in Europe will not trigger anything. No country is going to look to tax you unless you are legally resident in that country.

However, I think you need to understand that as a US citizen you can only stay in almost all of Europe for only 3 months at one time. You need to read up on Schengen and the Schengen rule. What you will find is that you can stay 90 days in any 180 calender day period, in all of the Schengen countries combined.
http://www.schengenvisainfo.com/schengen-visa-countries-list/

As for overstaying your welcome, some people do and some people don't get caught but you then need to understand the potential consequences if you are caught. They range from a slap on the wrist to being declared 'persona non grata' for 7 years in all of the Schengen countries. The other factor to consider with an overstay is that no insurance you buy will cover you if you are doing something illegal and that includes overstaying.

So, you cannot for example stay in France for 4 months unless you get a visa that allows you to stay in France for more than the 90 days you are allowed visa free as a tourist. You could stay 3 months in France and then 3 months in the UK however as the UK is not a member of Schengen.

LARS, you seem to have World Nomads coverage mixed up somehow although I'm not quite sure I understand what you meant about travel and a heart attack. If you have a heart attack while travelling then your hospitalization for that would be covered. It would not be covered if you had a pre-existing heart condition however and did not tell them about it. It is certainly not just an 'accident' policy. Travel Insurance – What’s Covered

World Nomads is generally considered the gold standard for long term travel, by which all other travel insurance is judged. The most common users are 'backpackers' on a Gap Year or someone on say a year long RTW trip. Their policies are designed for that specific market. They offer several features that not all other travel insurance providers do.

They allow you to extend the policy if you decide to travel for longer than you originally planned. They allow you to claim online/phone while still travelling, not have to wait until your return to claim. They cover medical evacuation. They cover your 'stuff'. They cover trip cancellation. They cover risky activities such as bungee jumping, hang gliding, etc.

Travel insurance policies cover 2 areas. 1. The travel itself and associated risks like cancellations or theft of goods. 2. Medical coverage and associated costs. Some policies cover only one or the other and some cover both. Nomads covers both, while your US medical coverage if it has a overseas component covers only the second.

However, someone looking at going to stay somewhere else in the world for a period of time may not want travel insurance. They may want to look at expat insurance instead and that is different again. Those policies could be attractive to someone planning to live overseas for a longer period or indefinitely. For 3 months I'd buy travel insurance, for longer expat insurance.
Expatriate insurance - Wikipedia, the free encyclopedia

Another factor those looking at retiring overseas may want to consider is what passports do you have access to. The USA is a young country with a lot of immigrants and descendents of immigrants. Therefore, a lot of people may have access to another passport and not even realize it.

If you have a parent or grandparent born in another country, you may be able to claim citizenship and get residency or a passport from that country. That can then become a factor in looking at where you can easily move to. Generally speaking, getting legal residency is the biggest stumbling block to living overseas.

Let's say you have a Polish grandparent. (I'm using this as an example, I don't know what the laws of Poland say) You may be eligible to apply for either residency in Poland OR for a Polish Passport. If you get a Polish passport, then you can legally live in any of the EU member countries as Poland is a member.

Being able to legally live in say Jamaica only gets you the right to live in that one country. But being able to live in an EU country gets you all EU countries. I consider a passport from an EU country to be the most valuable passport you can have if you want to retire to another country or spend longer periods of time somewhere. You get a lot to pick from.

I have a UK passport as well as a Canadian passport. You ask about overstaying in Europe explanade. I can't overstay in the EU, I'm allowed to legally live and work in any EU country. That's why I could and did go to Greece for a week and just stayed for 7 years. So what is your ancestry explanade? You may have an opportunity to get another passport somewhere. And as for taxes, nada, zilch, zero if you stay under the radar. I made withdrawals from ATMs in Greece for all 7 years from a UK bank account without anyone coming to ask me to pay taxes in Greece and I also had a Greek Residency Card during all that time. I also stayed in the UK for 6.5 years used UK bank accounts, was registered with the NHS (government health care), etc. and never once had anyone come to ask me to pay taxes. Just don't earn an income in the country.

I consider much of the commentary about taxes pretty close to scaremongering. There are ways around it, but you need to have lived it to know how.

 

[Alan]

OK makes sense.

There wouldn't be a reason to get foreign bank accounts except if you get a long term rental and you had to establish services like utilities, phones, Internet, etc.

Exactly.

BTW, my UK bank will also rat me out to the IRS because FATCA requires all foreign financial institutions to report account holders who they believe are either US residents or US citizens. (I do pay US taxes on my UK bank interest and on my UK private pension so I have no worries that the IRS is going to come knocking).

 

[LARS]

LARS, you seem to have World Nomads coverage mixed up somehow although I'm not quite sure I understand what you meant about travel and a heart attack. If you have a heart attack while travelling then your hospitalization for that would be covered. It would not be covered if you had a pre-existing heart condition however and did not tell them about it. It is certainly not just an 'accident' policy. Travel Insurance – What’s Covered

World Nomads is generally considered the gold standard for long term travel, by which all other travel insurance is judged. The most common users are 'backpackers' on a Gap Year or someone on say a year long RTW trip. Their policies are designed for that specific market. They offer several features that not all other travel insurance providers do.

From Nomads: "The Company will reimburse benefits up to the Maximum
Benefit shown on the Confirmation of Coverage if You
incur Covered Medical Expenses as a result of
Emergency Treatment of a Sickness that first manifests
itself during the Trip.

Emergency Treatment means necessary medical
treatment that must be performed during the Trip due to
the serious and acute nature of the Sickness."



http://www2.worldnomads.com/files/DocPDF/20140618/N300S-NSHTC2500-AL-06-14-A.pdf


My initial reaction is that this could be subject to tremendous interpretation by Nomads as to whether you get coverage. I think this is especially something to be careful about as someone in his late 50's on his way to 60.

Again, based upon my initial (albeit quick) read of Nomad policy.

To me, it appears initially that it is better to try and get a BCBS policy that includes BlueCard Worldwide.

 

[Aus_E_Expat]

Interesting thread (although it got a bit off topic in the middle on US tax issues).

I am an Australian citizen but have lived outside Australia for most of the last 28 years.

I now find I am spending more and more time back in Australia as I move closer to retirement (or semi retirement).

My loose plan is to move to a situation where I spend about 50% of my time in Asia (working), 35% in Australia and 15% travelling. This is spread over the year so not one block of 6 months in Asia but 2 weeks every month.

Between my wife and I we have homes (not investment properties) in 3 countries.

In my full retirement I expect I will be living in Australia, simply because that is where our children are and there is free universal health care.

I enjoy living in Asia - it is exciting, financially rewarding but don't expect to find a good quality of life cheaply.

You could live cheaply if you lived like a poorer local - but why would you want to? They all aspire to be richer and have a better quality of life so why would a foreigner want to "retire" to their standard of living. You can find cheaper places to live, travel by motorbike or bus, eat in local food stalls - but if you want to live in a nice house or apartment, have a maid, have a reasonable car (I don't mean a BMW or Mercedes) and driver and go to a nice restaurant once a week, have a gym membership, it will cost you as much as it does in developed countries.

I will eventually retire in Australia. Some of my friends will remain in Asia for the rest of their lives (some have Asian wives, some don't).

I agree with Sojourner's argument to try somewhere for an extended period (6 months or more) before deciding to sell up and take up residence.

 

[nun]

I also stayed in the UK for 6.5 years used UK bank accounts, was registered with the NHS (government health care), etc. and never once had anyone come to ask me to pay taxes. Just don't earn an income in the country.

I consider much of the commentary about taxes pretty close to scaremongering. There are ways around it, but you need to have lived it to know how.

There is a lot of scaremongering about taxation, but its also best to follow the basic rules. As a UK citizen returning to the UK you should have informed HMRC. You would probably have been considered ordinarily resident and liable to tax on your worldwide income and certainly there would be tax on any income remitted to the UK. Yes you can fly under the radar and sometimes little tax is due, but if you are considering retiring overseas income will be coming from pensions and investments and you might also be on a visa so the rules have to be followed.

As a US/UK dual citizen I will certainly be following the rules if/when I return to the UK or other EU country. tax evasion is fun when you are getting away with it, but a real pain when you get caught and with FATCA that's almost inevitable for the US citizen.

 

[Sojourning]

George76, if you decide to move, "I am not sure if I want to move overseas.", then you will not be maintaining medical coverage in the USA. Either you are moving or you are just visiting. If you move, you need to look at expat insurance at least to begin with and also what government healthcare is available that you will have access to as a legal resident of that country. In some countries all you will need is to get on the government program while in other countries you will want to have private coverage beyond that.

LARS, World Nomads have a phone number. Simply call them and ask. I can tell you that your fear is unfounded but if you don't want to believe me then phone and speak to the horse's mouth. You can talk to BCBS if you want but they only provide medical cover, not travel related cover for things like flight cancellations, stolen property, lost luggage, etc. You are not comparing apples and apples.

If you are only interested in medical coverage and are willing to risk your luggage going missing or having something stolen, or having an emergency at home that requires you to immediately return and cancel your trip, then fine, just get medical coverage.

Aus_E, good to hear from someone else with extensive experience in living overseas. Re your plan to end up in Australia, I didn't plan to end up back in Canada but have arrived at that point simply over time. If someone has asked me 25 years ago if I would return to live in Canada I would have given a definite no. It is only after 25 years of experience that I have come to realize that it's the best choice for me as I get past the traditional retirement age. Few countries compare to Australia or Canada when it comes to advantages for senior citizens and healthcare is the reall biggy.

Your comments about living like a local in a poor country are spot on. The assumption a lot of people seem to make is that they can live as they do at home for less money. They don't realize that that isn't true if they really want things to be the same. For example, when living in the UK, I found a place that sold Motts Clamato Juice, that's a Canadian product which might sell for $2 a bottle in Canada and for which they wanted $10 in the UK. I had to settle for drinking Bloody Marys rather than Caesers. Mott's Clamato Classic Caesar recipe - Canadian Living

Nun, I think I have heard enough about US tax issues. Nor do I need you to tell me what I should do in the UK. I am now in my 26th year of retirement and doing fine. I've learned how to deal with taxes and finances and obviously have done so successfully for 25 years now. You talk hypothetically, I talk from experience. You are free to pay as much tax as you want, to anyone you want to pay it to. I know the difference between tax evasion and tax avoidance. The first is illegal, the second is not. I am not about to explain to you how I go about avoiding tax. That is NOT why I started this thread.

Do you have any comments to make on 'should you move overseas' that are not tax related? If so, I welcome them, if not, I'm not interested in comments that are US centric only and only about FACTA and taxes. As Aus_E wrote, " Interesting thread (although it got a bit off topic in the middle on US tax issues)." You were responsible for that. I do not like thread hijackers.

 

[Aus_E_Expat]

A lot of research needs to be done on where you plan to live.

If you plan to live in a major resort area like Phuket or Bali then most things are available - but at a cost.

If you live in other areas, things like a bottle of wine (which you may like to enjoy in retirement) is almost impossible to find or if you can find it, it will cost US$35 (and that is the take away price).

Retirement should be about living a comfortable life, not scraping by on the basics.

 

[explanade]

There was a House Hunters International where a Brit working in Tokyo was looking for a vacation getaway in Bali. He said it was only a few hour flight but it still sounded like a long distance away.

He chose a villa for about $350k. It wasn't huge but had a pool right off the living space and everything was brand new.

Now I don't know about the location, seemed pretty remote so don't know how far he'd have to go for restaurants and markets.

 

[iac1003]

I moved from a lifetime in New York City to Texas just about 5 years ago. Being here is like living in a foreign country to me. J/K but not really.

We have vacationed in Puerto Vallarta Mexico for 15 years & despite everything on the news, the dysfunction of the government (and the US government isn't?), the Mexican people are warm, friendly, big-hearted, hard-working and the ocean is beautiful. We are now entertaining moving there for 8-9 months a year but keeping a small condo in the US for the hot and rainy season. Being a resort area, it isn't that much less expensive in terms of day to day living expenses but housing for sale is much cheaper and is really the lowest we have seen in years.

Our plan was to rent for 6 months next year if we can find a place. Having just been there we found that long term rentals are not that easy to find but cheaper condos for sale are plentiful.

The health insurance issue is a big one for me. Both of us are healthy and take no medications now. DH is older than I am and it is unclear what kind of ex-pat plan he could get. Most ex-pats we have met there have catastrophic and emergency flight insurance, paying out of pocket for regular and specialty medical care and not bothering with a private or public Mexican HI plan. It is still cheaper than what one would pay for a HDHI plan in the US with its high deductible. Those we know have kept their American insurance intact. I will be on COBRA starting in April which is expensive but has more doctors than the ACA plans where I now reside. If I have to have 2 expensive plans for a short while that's fine with me, it's in the budget. I will look into an ACA-compliant plan with an international component but it depends on the state where one lives.

I look upon this as an adventure to be had while still able to enjoy it. If it doesn't work out, we can always move back. And we realize there will most probably be a time when we would not be able to live independently there.


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