Retiring abroad

[Santana]

Is anyone considering retiring abroad? Or are you already retired abroad?

What factors should you consider when deciding which country to move to?

[Alan]

We retired to England, which was easy enough for us as we have dual Citizenship.

The complications come from tax treaties, what is taxable in which country.

[Bryan Barnfellow]

The usual things you would consider if relocating within the US--cost of living, crime, strength of the economy, political stability of (local) government--all apply. But if you dig a bit deeper, there are some additional things to consider. The 8 that I list below are decidedly negative; however, they can be outweighed by the many, many positives.

We moved to southern Switzerland for a job opportunity for me and then after a half dozen years FIRED here. Now, 6 years later we love it even more than ever. I would pay attention to several key issues:

1. Exchange rate. We chose to maintain our US investments (best market in the world, highly transparent, abides by the rule of law). We move funds during the year from the US to our Swiss bank (NOT that kind of bank). In our case the US dollar has, at times, fallen appreciably below the Swiss Franc (CHF), which is highly overvalued as well. So, we have to maintain a cushion in budgeting. I create our budgets using the mid point between best and worst cases in the Dollar/CHF from the last five years. This generally produces a surplus at the end of the year, which is nice. I also track trends in the Dollar/CHF exchange pair, and move quickly when I perceive an opportune time to move some money. This requires daily tracking; but I have grown to kind of enjoy it so far. It's like a game of wits and I have become good at it.

2. As Alan mentioned above, there is a lot of confusion among even so-called experts about which income is taxable only in your country and which is taxable in the US, or both. The "savings clause" in the US treaty with Switzerland (which is very much like that of most other countries) says that at the end, basically ALL income is potentially taxable by the US, making most of the favorable paragraphs in the treaties null and void. Arggh. The only good thing is that you get most (sometimes not all) of the taxes you paid in the new country counted against your US tax bill. Also, it depends on whether your new country's tax rates are higher or lower than those in the US. Swiss taxes are overall lower than the US, so we usually end up paying the IRS as well as Switzerland. It can be complicated on both ends, so we pay consultants to do our taxes.

3. The Patriot Act signed into law just after 9/11 specifies that holders of mutual funds and brokerage accounts in US banks must be resident in the US. So, many US expat investors had to sell their holdings, pay capital gains, and move them to the new country. Except, see below for the gotcha on this. One way around this is to use a friend's address as your own...but isn't a perfect long term solution. Another is to utilize a remailing agency in the US that gives you a postal address in the US. Just be sure it is in Texas or Florida or any other of the very few which do not have a state income tax.

4. Banking. The US extends its long arm rather forcefully into the financial affairs and systems of countries where expats live. We must fill out an annual form, the FBAR, under penalty of law, detailing all of our bank accounts--account numbers, highest value in the preceding year, name/address of the banks. OK, I'm fine with this as we are not rich, money hiders; BUT, two things irk me: the US refuses to reciprocate with all these countries. So, it is well known, for example, that Brazil has been trying for years to get the US to turn over information about Brazilians holding cash in Miami banks, with no result. Second, and this sounds petty, but the form we fill out is part of the Financial Crimes Enforcement Network (FCEN) in the US government, and this is highlighted on the web page where you fill in the form. It irks me no end to look at this form and it's parent office that I am reporting to. I am no criminal.

5. The aforementioned long arm of the US IRS reaches into the financial systems of your new country with burdensome annual reporting requirements on your accounts (savings, payment accounts, mortgages, etc.) such that in many countries, Switzerland included, most banks, rather than comply with the costs of doing this reporting for their relatively few Americans, instead just forced them out as customers over the last decade. In some cases, they cancelled local mortgage loans, making the outstanding balance due immediately. Also, they stopped taking new American customers. In our case we were asked to cancel our account at a major Swiss bank by the following day (!). We were saved by the Swiss Postal Service, which serves as a bank as well. They are required by charter to serve any person resident in Switzerland, regardless of nationality. It turns out to be a great bank as well. I think that UBS also has created a "walled off" section for American customers.

6. Going back. If you decide to return to the US, you may get a nasty surprise. Some states (e.g., California) will charge you with state income back taxes for the intervening years, unless you prove conclusively that you never planned to return. Even maintaining a safe deposit box in your old state may be enough for them to charge these back taxes. So, be aware.

7. You, like the other 7-8 million of US expats will not longer have any representation in the US congress. There is an expats advocacy group trying to help with things like taxation--only the US, North Korea, and Eritrea tax their expats, no matter where they live, no other countries do--without congressional representation we are out of luck.

8. Last, depending on where you are located, friends and family may find it harder to visit you (and vice versa, of course). On the other hand, we've come to find that many friends and family find the prospect of visiting us in Switzerland to be irresistible, at least once anyway. So that's nice. We even offer them free accommodation at Hotel Barnfeather!

All of these negatives may seem overwhelming at first; but for my wife and me the advantages of living in a beautiful country in the middle of Europe with easy travel access to so many places we love to visit, plus the personal safety, excellent health system, and sane government it offers makes our choice mostly a slam dunk. We just budget carefully and hope for the best!

I should add that in our original FIRE planning, we in no case had listed Switzerland as our RE destination! It just worked out that way and we found we didn't really want to ever leave.

I hope this helps.

-BB

[HenryD]

Quote:

Originally Posted by Santana Is anyone considering retiring abroad?

Mostly driven by a desire to leave and experience new environments. We plan several years of boat travel before settling again. Currently favoring Central America, but willing to change based on political/economic developments what else we find out there.

Our tax residency will change to Florida when we start making use of a mail service there. Midwest house will be sold and LLC shut down.

We plan to have some kind of rest-of-world catastrophic HI (not US evac) but otherwise pay out of pocket. We have no current health concerns. I am a UK dual citizen, so that is an option.

[NYEXPAT]

Retired for 34 years. Spent the first 1/2 in and around NYC and the second 1/2 in Lima, Peru. We are back in the USA now for Covid-19 and the political climate. Hoping to return to Peru in the future, but we will see.

[Ramen]

Quote:

Originally Posted by Bryan Barnfellow But if you dig a bit deeper, there are some additional things to consider. The 8 that I list below are decidedly negative; however, they can be outweighed by the many, many positives.

Bryan, that's an amazing post above. Thanks for sharing so much great info.

How about the cultural adaptation? Do you guys speak any of Switzerland's official languages? Or is English enough to get by? I've had a nearly lifelong interest in certain parts of Europe but have not yet pursued any for lack of time to learn new languages. Plus some anxiety about culture shock and an inability to communicate.

[rt-texas]

Quote:

All of these negatives may seem overwhelming at first; but for my wife and me the advantages of living in a beautiful country in the middle of Europe with easy travel access to so many places we love to visit, plus the personal safety, excellent health system, and sane government it offers makes our choice mostly a slam dunk. We just budget carefully and hope for the best! I should add that in our original FIRE planning, we in no case had listed Switzerland as our RE destination! It just worked out that way and we found we didn't really want to ever leave. I hope this helps. -BB

BB has some great points.

A couple of things we did that you might consider as well...

We have a rental contract with BIL and use it as our legal US residence. Have rental insurance, umbrella policy and keep a vehicle insured and located there. Did this because we initially planned on traveling the world, covid said otherwise. Have changed our drivers license to this address.

Yes it cost a little $$$ but at the time we figured we were going to be back every six months or so as we re-positioned. Have a car to drive when there and cost no more than a couple of car rentals.

If you chose a country look very carefully at what constitutes being a "tax resident" in that country. Look at how Roth IRA's are treated.

Last, do your homework before you leave the USA. Know gringos where we are that have only one CC or one ATM card that suddenly gets cut off. Have an acquaintance who purchased a house here, so he emailed VG and changed his address to outside the US. VG immediately liquidated all his accounts and he had to go back to the US and set up other options as well as deal with the tax ramifications.

We also keep a US phone number for two-step authorization when needed.


So it can be a challenge, but definitely worth it. Just need to do as much as possible before you leave the states to smooth the process.

[Bryan Barnfellow]

Quote:

Originally Posted by Ramen Bryan, that's an amazing post above. Thanks for sharing so much great info. How about the cultural adaptation? Do you guys speak any of Switzerland's official languages? Or is English enough to get by? I've had a nearly lifelong interest in certain parts of Europe but have not yet pursued any for lack of time to learn new languages. Plus some anxiety about culture shock and an inability to communicate.

Ramen, we both had been travelling a lot over the years to Italy, so we had already been picking up the language, and took some courses in the US. That said, becoming fluent in Italian is a must if you are going to live here (as opposed to visit for a week as a tourist). Permanent residence permits (which we have) require that you can speak, read, and write Italian. We also both studied French in university and use it in our travels. Personally, I think it is nearly impossible to learn a new language without regular use in your day-to-day life. One thing to keep in mind, it is light years harder to learn a new language after age 55-60...the memory requirements alone can be daunting. However, we both moved here in our mid-50s and identified acquiring a new language as one of the positive aspects! You can force your brain to grow new neurons for language (these are generally left to atropy after a certain age and disappear from non use, I've read). So, it was a definite challenge, and remains so!

Culturally, the Italian Swiss are closer to Italy in some respects than to northern (Swiss German) cantons. This seems to be true to some extent as well for the French speakers of the Romandie cantons. Most Swiss are comfortable with at least two of the national languages and, increasingly, English is becoming more common, especially among the young and the university educated. The Swiss as a whole are considered a bit hard to get to know. We've succeeded in some cases in making strong friendships with native Swiss, but it took a while. Above all else, the Swiss are a rule-driven people. They have little patience for those who break rules of society, laws, etc. As it turns out, this fits well with us. And Italy is a few kilometers away if we want to let our hair down! :-)

I would suggest that you don't let your fears/anxieties hold you back. You can work on the language grammar beforehand and then put it to use once you are in Europe. Services like Lingoci allow you to have one-on-one sessions with native speaking tutors at a fairly low cost via zoom, skype, etc. Once here you will have an immediate motivation to learn to communicate quickly and well. And there are immersive language programs everywhere. Most Europeans speak several languages routinely and are generally quite patient with those who struggle with one that they speak well. They realize that they are in the same situation themselves in other countries.

Go for it!

-BB

[Dd852]

Some great points made already. We’ve found taxes to be the big negative - not because of amount, just the complexity. I’d say professional help Is a must and it can be costly. The other thing to consider is medical - if you’re eligible fir a local system, great. But if not or if you want to have the option to go private that will cost you too. We have had a great experience overall, but nothing is paradise!!

[Bryan Barnfellow]

Quote:

Originally Posted by rt-texas We also keep a US phone number for two-step authorization when needed.

Absolutely good practice and advice. We have a Google virtual number using the same area code as our "residence address" in the US. It is vital for two-step authorization from the US side and occasional calls from the US brokerage/bank.

Also, rt-Texas makes an excellent point about qualified IRAs, like Roths. Switzerland does not recognize them as such and so expects me to pay tax on any withdrawals from Roths as ordinary income! But as I wrote earlier, the US IRS does allow a lot of credit for these taxes against your US tax bill. Also, Switzerland does not have a capital gains tax. Look carefully into these things in the country you are considering--there may be both negative and positive surprises.

-BB

[Bryan Barnfellow]

Quote:

Originally Posted by Dd852 Some great points made already. We’ve found taxes to be the big negative - not because of amount, just the complexity. I’d say professional help Is a must and it can be costly. The other thing to consider is medical - if you’re eligible fir a local system, great. But if not or if you want to have the option to go private that will cost you too. We have had a great experience overall, but nothing is paradise!!

Good point. But we live in a city next door to Paradise, so can vouch for its existence! :-)

Google: "Paradiso, Switzerland"

-BB

[Ramen]

Quote:

Originally Posted by Bryan Barnfellow One thing to keep in mind, it is light years harder to learn a new language after age 55-60.

Thanks, Bryan! Guess I'd better start soon. For reasons that are mostly mysterious to me, I'm interested primarily in Norway, the Netherlands, and Estonia. English is already official in the Netherlands. And I hear Norwegian is not so hard for native English speakers to learn, so I could start there as well.

Quote:

Originally Posted by Bryan Barnfellow Above all else, the Swiss are a rule-driven people. They have little patience for those who break rules of society, laws, etc. As it turns out, this fits well with us.

This is music to my ears. I would fit right in.

[braumeister]

Quote:

Originally Posted by Ramen I'm interested primarily in Norway, the Netherlands, and Estonia. English is already official in the Netherlands. And I hear Norwegian is not so hard for native English speakers to learn, so I could start there as well.

I don't know anything about the requirements for living there, but Norway and the Netherlands stand out for me in terms of English. It's extremely common to find local people in those countries who speak English with absolutely no trace of any accent. Close your eyes and you could be talking with your next door neighbor -- it's quite remarkable.

[Ramen]

Braumeister, I've heard the same thing. But I've also read that you need to know the national language if you're going to do anything official, such as apply for a job, residency, citizenship, heath coverage, etc.

I'm also curious about the logistics of moving abroad. For those of you who have done it, did you hire overseas movers? Or purge your large items and move with suitcases?

[Alan]

Quote:

Originally Posted by Ramen Braumeister, I've heard the same thing. But I've also read that you need to know the national language if you're going to do anything official, such as apply for a job, residency, citizenship, heath coverage, etc. I'm also curious about the logistics of moving abroad. For those of you who have done it, did you hire overseas movers? Or purge your large items and move with suitcases?

We did some purging but moved back with enough possessions to 3 quarter fill a 20’ container. We got quotes from 3 international movers, all USA companies

[braumeister]

I've known several people who have retired in other countries, but in all those cases it was due to marrying a national from that country. That simplifies things enormously.

For others, the hurdles can be quite high in most cases.

[Bamaman]

That Schengen Agreement is a tough one to deal with.

One of our relatives is a U.S. citizen, but she got German citizenship and passport because her grandmother lived in Dresden until 1939. The German authorities were on their heels when they got on that ship in Hamburg--trying to take'em to a concentration camp. She's in Tennessee this week and lives in Portugal. The grandmother was 98 years old yesterday.

Staying in the EU 90 out of 180 days is sometimes difficult if you're living there full time.

[rodi]

Quote:

Originally Posted by Bamaman That Schengen Agreement is a tough one to deal with. One of our relatives is a U.S. citizen, but she got German citizenship and passport because her grandmother lived in Dresden until 1939. The German authorities were on their heels when they got on that ship in Hamburg--trying to take'em to a concentration camp. She's in Tennessee this week and lives in Portugal. The grandmother was 98 years old yesterday. Staying in the EU 90 out of 180 days is sometimes difficult if you're living there full time.

I'm confused by this. Your relative is a dual US/German citizen. So she can live anywhere in the schengen region, right? Why does she have to worry about staying in the EU 90 days out of 180 days?

I'm asking because my husband and sons are duel US/Italian citizens... Decent chance one or both sons might try living in the Schengen region at some point - either to pursue graduate studies, or to work. I'm wondering if there is a rule that I am unaware of.

[oiseux]

I'm a bit confused as well, an EU passport holder should be able to move freely.

We've purchased in France but will not be full-time residents for a while. (Also lived in Switzerland for two years -- the French speaking part -- and some time in the UK -- but on expat gigs)

To the above excellent advice, I will add or reinforce
* Also check wills and inheritance laws in the country.
* In the tax treaty, look not only at the treatment of all types of income, but real estate, wealth and inheritance taxes.
* The countries vary quite a bit in VISA requirements, but not working makes it a lot easier
* If you have not lived in Europe, consider a three month stay at the onset.
* This is a personal thing, but check your transport links. Part of the pleasure of Europe is the ease of exploring new cultures and countries in a short, inexpensive journey. Also, don't go too remote unless you can speak the local language well.
* Check how easy it is to get a driver's license
* Consider how life will evolve as you age.

[martyp]

I retired in 2011 and then moved to Thailand in 2017. I would say that the considerations to move abroad is roughly the same the considerations to retire. Financial considerations are obviously important and are what most people talk about most of the time. I would say that non-financial considerations or social life are equally important. In the case of moving abroad I would say that the culture of the country you are moving to is important.

With enough money you could transplant your home country lifestyle and live in a bubble and somewhat more cheaply in another country. It won't be as cheap as you think. Many though, adapt to the culture of their new country. It is a compromise but being drawn to the culture and being accepting of the differences will go a long way to making the move more successful.

I've seen plenty of comments in discussions on this topic where people say that they won't move to any country that won't allow them to buy land and become a citizen. My own views here in Thailand is that I couldn't care less about becoming a citizen. I also can't own land but I can own a condo (easy to buy, hard to sell) However, in a country where the cost of housing is so low the choice to rent forever makes a lot of financial sense. In addition to accepting the culture of your new home there is also consideration of relinquishing some of the culture you've lived all your life. How you make that compromise and balance is up to you.

Moving from somewhere like the US to England and most of the EU is going to be much different than moving from the US to Central America or Asia.

I've been in Thailand for 4 years. I have no feelings of homesickness at all. I returned to the US a couple of times with plans to go back once per year pre-Covid. For some people the cost and distance to travel back to the US (or home country) will be a consideration.

I know many expats in Thailand have fears about keeping money in Thai banks. I don't harbor the same fears and I have found my Thai banking experience to be mostly the same as in the US. I keep the bulk of my funds in the US but have money here too. Ease of banking is an important consideration.

Another cultural consideration is going to be language. Seasoned travelers know you can survive just about anywhere. When thinking about a permanent move you need to consider the expat community where you plan to live. Personally, I find it very satisfying to socialize with westerners in my own language several times a month.

There are actually some excellent resources on YouTube that can help you think about moving abroad and moving to a particular country. Some of these channels you have to take with a grain of salt and often focus on living as rock bottom cheap as possible. Some are geared to those who are still working. But there are some that have good advice. It is worthwhile to do some YouTube research.

There is also the consideration about whether you plan to ship all your worldly possessions to your new home or just show up with a few suitcases. I came to Thailand with 2 suitcase and a few boxes of stuff I left in my sister's house in the US. Then there is the issue of whether you have pets.

Research the Immigration rules for your prospective country. Arriving is one thing. Staying is another. You will find immigration rules to be strange, senseless in some cases, and possibly intimidating. Don't worry. If you are organized and stay calm it all works out. There are probably Facebook groups that specialize in immigration issues for the country you are considering. There is one for Thailand that is well moderated and doesn't tolerate trolls and gives out accurate information. Beware of general expat Facebook groups. These groups can harbor the worst of social media trolls. If you are careful Facebook groups can be very helpful.

This should be obvious but being retired or moving to a new country is not like being on vacation. Your vacation experience is about 2% of what life will be after the transition. Do your research and be flexible mentally.

These are just a few thoughts . . .