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Luv2BBQ 01-25-2013 08:24 AM

Planning to be an Expat
 
Hi folks, my first post.:greetings10:

My wife and I are 54 and 49, and plan to retire in 5-7 years. We live in the US, and I've been doing much research on retiring overseas. I've followed "International Living" and "Live and Invest Overseas with Kathleen Peddicord."
We'll hopefully have at least 3k dollars/mo budget from pensions, IRA's and SS.
We're looking at possibly Central/Latin America, or maybe Ireland. We prefer being close to the water, with a warm climate.
I'd like to hear from any current Expats who made the move, where you settled, why you settled there, and any helpful tips for pitfalls to avoid.
Thanks in advance for any help.

NYEXPAT 01-25-2013 09:57 AM

Quote:

Originally Posted by Luv2BBQ (Post 1275623)
Hi folks, my first post.:greetings10:

My wife and I are 54 and 49, and plan to retire in 5-7 years. We live in the US, and I've been doing much research on retiring overseas. I've followed "International Living" and "Live and Invest Overseas with Kathleen Peddicord."
We'll hopefully have at least 3k dollars/mo budget from pensions, IRA's and SS.
We're looking at possibly Central/Latin America, or maybe Ireland. We prefer being close to the water, with a warm climate.
I'd like to hear from any current Expats who made the move, where you settled, why you settled there, and any helpful tips for pitfalls to avoid.
Thanks in advance for any help.

Welcome from a fellow expat. Here is my advice:
1. Stop reading and believing magazines that are trying to sell retirement or real estate tours.
2. Start learning Spanish.
3. Join expat forums in your target area and avoid the "hucksters".
4 Visit your targeted locales for extended periods including there "worst seasons".
5. Research residency requirements and health care options.
6. Have multiple debit cards with 4 digit pins.
7. Sell/give away everything you own and only bring what can be packed in 4 suitcases.
8. Do not buy anywhere. Rent unfurnished and only buy what you can't live without.
9. Transfer funds to Schwab International and leave standing wire instructions they also reimburse all ATM fee's.
10.Never invest your money in anything, if you can't figure out who is the "Patsy"!
11. Look for countries with a weaker currency than your own. Charge everything and pay at the EOM to capture Dollar appreciation.

CoolChange 01-25-2013 10:56 AM

Quote:

Originally Posted by NYEXPAT (Post 1275660)
...
8. Do not buy anywhere. Rent unfurnished and only buy what you can't live without....

NYEXPAT is making me feel better about my own plan since he has been living the lifestyle for a while and this advise nicely sums up my plan.

The only item in the list that I do not really understand is the the one I have quoted about never buying. I have seen this several times; but, I have also seen several examples of folks who used to preach this gospel but eventually bought anyway. Paul and Vicki Terhorst, who were my introduction to the real possibilities of ER and perpetual travel, even took the plunge for a while; but, it appears that they are done with home ownership again. Maybe I should take that fact as evidence that this is good advice.

Full disclosure: I have never owned my own home; maybe it is like owning a convertible, just something some people have to do once to get it out of the system.

Luv2BBQ 01-25-2013 10:58 AM

Quote:

Originally Posted by NYEXPAT (Post 1275660)
Welcome from a fellow expat. Here is my advice:
...7. Sell/give away everything you own and only bring what can be packed in 4 suitcases.

NYEXPAT,
Looks like great advice in your list. I found #7 to give me a quick chuckle.

Can I ask why you chose Peru to settle?

bondi688 01-25-2013 11:24 AM

How do you maintain a US connection? Don't you need at least a mailing address in the US? Do you have to pay state income tax in your former state of residency?

Texas Proud 01-25-2013 11:27 AM

Why would you rent unfurnished???

If you are going someplace to stay full time, I can see you wanting to buy your own furniture etc., but if you are going for 3 to 12 months that seems like it would be expensive buying at every stop...

kramer 01-25-2013 11:46 AM

Quote:

Originally Posted by bondi688 (Post 1275707)
How do you maintain a US connection? Don't you need at least a mailing address in the US? Do you have to pay state income tax in your former state of residency?

I live abroad and will try to answer your questions from my perspective.

No, you don't need to pay income tax in your former state of residency . . . any more than if you move to another state you don't need to keep paying income tax in your previous state.

I maintain a permanent USA address to receive snail mail (basically a forwarding company). I get an emailed picture of all the mail I receive the day I receive it. I can forward the mail to any address at any time or I can have any piece of mail scanned and emailed to me. I get almost nothing of value in snail mail anymore (and anything of value is already available online), so I only forward it to myself when I am in the USA. Maybe three times in five years I have had important items scanned, two were from the IRS. I also maintain a permanent USA phone number via Skype. My total annual costs for mail forwarding and permanent USA phone number are under $150.

I return to the USA at least once a year. Actually, I have returned twice each year to visit friends and family although I expect to visit just once in 2013 for a single longer visit. I also maintain a cultural connection by downloading movies and shows over the internet and watching them on my TV and reading books by American authors, watching USA television (my regular cable is actually mostly USA-based programming), etc.

Once you have established residency abroad you will not be forced to buy USA health insurance under ObamaCare or pay the tax penalty associated with that. Here are the IRS tests for residency abroad (and this is apparently what ObamaCare uses at its guideline -- you must meet at least one of these two criteria):

Foreign Earned Income Exclusion - Bona Fide Residence Test

Foreign Earned Income Exclusion - Physical Presence Test

I plan to file 2012 income taxes from abroad via Turbo Tax using my address abroad as my residence but using my mail forwarding address as my mailing address.

nun 01-25-2013 11:57 AM

Quote:

Originally Posted by kramer (Post 1275717)

No, you don't need to pay income tax in your former state of residency . . . any more than if you move to another state you don't need to keep paying income tax in your previous state.

Be careful as each state has it's own residency/domicile rules. A mailing address, driver's license etc can trigger some issues.

Quote:


Once you have established residency abroad you will not be forced to buy USA health insurance under ObamaCare or pay the tax penalty associated with that. Here are the IRS tests for residency abroad (and this is apparently what ObamaCare uses at its guideline -- you must meet at least one of these two criteria):

Foreign Earned Income Exclusion - Bona Fide Residence Test

Foreign Earned Income Exclusion - Physical Presence Test

I plan to file 2012 income taxes from abroad via Turbo Tax using my address abroad as my residence but using my mail forwarding address as my mailing address.
Health care and insurance is a perennial issue for the expat. You can pay out of pocket or you might qualify for local insurance with residency. If you think you will ever return to the USA make sure you understand the implications of Medicare Part B deferral or acceptance when you reach 65.

How you are taxed will depend on where you are resident and the tax treaty in place with the USA. As a US expat you need to understand US and local tax law and their interaction. There are also sometimes restrictions on where and how you can invest that you have to understand. Also you will run into US financial reporting requirements if you have substantial offshore funds (anything over $10k).

kramer 01-25-2013 11:57 AM

Quote:

Originally Posted by Texas Proud (Post 1275709)
Why would you rent unfurnished???

If you are going someplace to stay full time, I can see you wanting to buy your own furniture etc., but if you are going for 3 to 12 months that seems like it would be expensive buying at every stop...

Yes, I agree. It seems like one year is about the break even point for this when all is considered, I would go unfurnished if I was pretty sure I was staying more than one year.

Also, it takes awhile to figure out where you really want to live (city and country-wise). And once there, where in the city, and then awhile to figure out how and where to buy things, etc.

I was traveling a lot for 4 and half years, lived in four countries during that time. I finally rented an unfurnished place in the Philippines when I was sure I would be there for awhile. Although I felt like I was getting married . . . also furnishing an apartment in a developing country is more work than in the USA, my place did not come with curtains or curtain rods, refrigerator, screen doors, hot water, stove, stove stand, light bulbs, A/C . . . and I had to replace all the door locks and add some security, sign a long term contract for internet and cable with deposit, knowing that my situation was finally more permanent I brought over a suitcase full of stuff from the USA on my last trip (basic tools that I owned, extra clothes and shoes that I had, . . .), etc.

When I rented furnished I never had to bother with these things.

bondi688 01-25-2013 12:27 PM

kramer
Thanks for the very detailed answer. I think nun may be right, some states do require you to pay state tax as the last state of residency before you live abroad unless you give up every link, including driver license.

NYEXPAT 01-25-2013 12:46 PM

Quote:

Originally Posted by CoolChange (Post 1275690)
NYEXPAT is making me feel better about my own plan since he has been living the lifestyle for a while and this advise nicely sums up my plan.

The only item in the list that I do not really understand is the the one I have quoted about never buying. I have seen this several times; but, I have also seen several examples of folks who used to preach this gospel but eventually bought anyway. Paul and Vicki Terhorst, who were my introduction to the real possibilities of ER and perpetual travel, even took the plunge for a while; but, it appears that they are done with home ownership again. Maybe I should take that fact as evidence that this is good advice.

Full disclosure: I have never owned my own home; maybe it is like owning a convertible, just something some people have to do once to get it out of the system.

My YW owns Investment properties but in the 10 years I been here, have rented 5-6 different unfurnished places. I would only own assets that throw off cash flow and have the potential for serious appreciation. As most of LAM is in a property bubble right now, I would not advise buying.

As LAM has a history of changing rather rapidly, Renting provides maximum freedom to walk away. Furnished or unfurnished is a personal choice. Furnished to American standards comes at a tremendous Premium commonly referred to as "Gringo tax". My YW's Oceanview 1600sq/ft Penthouse cost 100k and rents for $2k-4k/month. Buying locally made furniture is usually cheaper and buying from expats who failed to transition is even cheaper. If you fail, you can easily sell on the local expat website.

NYEXPAT 01-25-2013 01:14 PM

Quote:

Originally Posted by Luv2BBQ (Post 1275692)
NYEXPAT,
Looks like great advice in your list. I found #7 to give me a quick chuckle.

Can I ask why you chose Peru to settle?

Glad you enjoyed it, if you bring a container in and see what you owe in aduanas for your junk, you'll appreciate it a whole lot more.

In general I chose "Miraflores" (a small part of Lima) for the Jungle girls,COL,Jungle girls,Climate,Cheap Ocean front property,Jungle girls,Lack of critters/bugs,Jungle girls, First world city living w/jungle girls, low cost medical care administered by beautiful young Jungle girls, Best cuisine in the America's served up by beautiful young Jungle girls,centrally located with good travel options.

I chose Peru for the convenience of hassle free "border hopping", getting off the grid, Triple/now dual currency economy, Lax regulations on moving money into or out of the country,less gov't intrusion over all.

boatfishandnature 01-25-2013 01:27 PM

Good list from NYEXPAT. I subscribed to International Living for a few months and cancelled... found it too superficial and optimistic.

On the other hand... my wife and I have lived in 5 countries. We find that the greatest secret is to recognize up front that every country is going to have advantages and disadvantages. It is up to us to adapt our lifestyles to make use of the advantages, otherwise you will only have the disadvantages... We enjoyed every one of the very different 5 countries.

Ed_The_Gypsy 01-25-2013 01:34 PM

Quote:

Originally Posted by CoolChange (Post 1275690)
Paul and Vicki Terhorst, who were my introduction to the real possibilities of ER and perpetual travel, even took the plunge for a while; but, it appears that they are done with home ownership again .

"How you going to keep them down on the farm after they have seen Pa-ree?"

The life of a Permanent Traveler can be addicting. Once you make that break, where do you stop? Beware the freedom of the road.

I was surprised when they bought that house. Not surprised anymore. I salute the Terhorsts. They are truly Rolling Stones.

Luv2BBQ 01-25-2013 02:30 PM

These are great inputs, folks. TYVM!

Does anyone have any Expat horror stories, or even an encouraging story they can share?

Any WOW (words of wisdom)?

Alan 01-25-2013 03:47 PM

Kramer, the links you provided on establishing bone fide and physical presence residency and the IRS forms from those links are concerned with foreign earned income.

how about if you have no foreign earned income? Are you still restricted to having to be out of the USA for 330 days a year?

Reason I ask is that we are considering moving back to the UK, but we would want to visit our kids in the USA and spend at least 3 months in the USA when we visit.

theOAP 01-25-2013 04:28 PM

Quote:

Originally Posted by Alan (Post 1275819)
Kramer, the links you provided on establishing bone fide and physical presence residency and the IRS forms from those links are concerned with foreign earned income.

how about if you have no foreign earned income? Are you still restricted to having to be out of the USA for 330 days a year?

Reason I ask is that we are considering moving back to the UK, but we would want to visit our kids in the USA and spend at least 3 months in the USA when we visit.

The substantial presence test from the IRS site:
Substantial Presence Test

lhamo 01-25-2013 04:34 PM

Quote:

Originally Posted by Alan (Post 1275819)
Kramer, the links you provided on establishing bone fide and physical presence residency and the IRS forms from those links are concerned with foreign earned income.

how about if you have no foreign earned income? Are you still restricted to having to be out of the USA for 330 days a year?

Reason I ask is that we are considering moving back to the UK, but we would want to visit our kids in the USA and spend at least 3 months in the USA when we visit.

Alan, my understanding is that if you do this in the first year after you move back to the UK, you will not qualify for the physical presence test. You may or may not qualify for the bone fide residence test -- I would be cautious and not claim it the first year. But once you have been back in the UK for a full tax year (Jan 1-Dec31), you can refile your taxes retroactively and claim the bone fide residence status dating back to the day of your move.

This is what we did when we relocated to China in 2002. We moved in February, so we weren't out of the country for a full tax year, and with a trip back in the middle of the year that blew our chances for physical presence test. So we didn't claim the FEIE. We DID claim it in 2003, however. When we filed our 2003 taxes we also filed an amended return for 2002, and got back the tax we had paid for that year as well. We had some nice tax returns come back to us in Summer 2004!

I'm not a tax professional so take this advice for what it is worth. But we haven't had any issues with the IRS since we've been claiming the FEIE (knock wood). In several years they've actually pointed out we were owed more money back than we claimed due to various tax credits, etc.

lhamo

theOAP 01-25-2013 05:00 PM

Easy folks, this topic has broken down into apples and oranges.

There are the bona fide residence test and the physical presence test that relate to 'earned income' under the FEIE. If you live abroad and your only source of income are pensions, interest, etc., you do not have any earned income, only unearned income, and you wouldn't be filing under the FEIE. You would only be allowed foreign tax credits or treaty exemptions. As I understand, in the case of a true retiree, your US tax presence/foreign presence falls under the substantial presence test for a US residence liability (see my previous post). That's why all the Canadian snow birds have to be very careful.

Alan 01-25-2013 05:08 PM

Thanks for responses to my questions folks, I expect the substantial presence test is what applies to my case.

nun 01-25-2013 07:13 PM

Quote:

Originally Posted by theOAP
Easy folks, this topic has broken down into apples and oranges.

There are the bona fide residence test and the physical presence test that relate to 'earned income' under the FEIE. If you live abroad and your only source of income are pensions, interest, etc., you do not have any earned income, only unearned income, and you wouldn't be filing under the FEIE. You would only be allowed foreign tax credits or treaty exemptions. As I understand, in the case of a true retiree, your US tax presence/foreign presence falls under the substantial presence test for a US residence liability (see my previous post). That's why all the Canadian snow birds have to be very careful.

Excellent point. If you are a US citizen expat with no earned income you will have to use foreign tax credits and the relevant tax treaty to avoid double taxation. The FEIE is irrelevant.

Also how much you pay to the US and your residence country will depend on the type of income or gains and how it is treated in the treaty. Pensions, IRAs, ROTHs, capital gains and dividends will have to be treated separately as different levels of tax will probably apply and you'll have to account for US mandatory withholdings too.

kramer 01-25-2013 09:52 PM

Alan, after living in the UK for a full tax year, you could use the bona fide residence test for establishing your residence in the UK. Then you could refile those taxes and get your ObamaCare penalty back. I am assuming you would not have earned income but, if you did, you could refile with the FEIE. You can use the Bona Fide resident test even if you spend more than 30 days per tax year in the USA but read the rules that I posted carefully. The reason I posted those rules is because they are the same rules used for the ObamaCare penalty, according to what I have read.

I, like all American expats that I know or have met, pay USA income taxes on all my passive income. I have never heard of anyone paying local income taxes on passive income earned abroad (in practice). But there are a few countries that require this of permanent residents, usually after 5 years of permanent residency (France and Colombia are two examples that I know of). So you should research this for any country you are interested in. I am in the Philippines and there is no requirement to pay income taxes on money earned outside of the Philippines. If you were in this situation, you could use the foreign tax credit on your USA return for taxes paid abroad, but it is complicated and you usually don't end up ahead because taxes are paid different ways in different systems and not always fairly credited.

Because I have no earned income, the only reason I care about the residency tests is to avoid the ObamaCare penalty. This is a new complication for expats. Otherwise, my federal income taxes are identical no matter where I live.

When you leave a state and file a non-resident income tax form the following year (your last), you will probably not be able to renew your driver's license there and still claim you are not a resident (although you can probably keep your license until it expires). You can still vote there in federal elections. You can have a mail forwarding address anywhere, although I would suggest establishing that in a no-income-tax state just to be extra cautious. Personally, I established residency in Texas before leaving and I maintain a driver's license there (and it can usually be renewed remotely). But now I can use my Philippines driver's license in the USA for visits.

I buy temporary health insurance for my USA visits. I would never step into the USA without health insurance there.

Alan 01-25-2013 09:57 PM

Excellent info Kramer. Having a Texas driving license, have you ever been called for jury duty (in the 9 years I have lived here I have been called 3 times, and served on a jury last year).

nun 01-25-2013 10:06 PM

Quote:

Originally Posted by kramer

I, like all American expats that I know or have met, pay USA income taxes on all my passive income. I have never heard of anyone paying local income taxes on passive income earned abroad (in practice). But there are a few countries that require this of permanent residents, usually after 5 years of permanent residency (France and Colombia are two examples that I know of). So you should research this for any country you are interested in. I am in the Philippines and there is no requirement to pay income taxes on money earned outside of the Philippines.

If you are resident and ordinarily resident in the UK you are taxed on your worldwide income. If you are only resident you can choose to pay 30k GBP to avoid UK tax on foreign income and gains you don't bring into the UK.

For me that will be moot as I'm a US/UK citizen and When I return to the UK I will be resident, ordinarily resident and domiciled there and my worldwide income will be taxable by both the UK and the US. But the tax treaty avoids double taxation. In practice low local tax rates are meaningless for US expats because the US taxes on citizenship as well as residency.

kramer 01-25-2013 10:30 PM

Quote:

Originally Posted by Alan (Post 1275977)
Excellent info Kramer. Having a Texas driving license, have you ever been called for jury duty (in the 9 years I have lived here I have been called 3 times, and served on a jury last year).

No jury duty calls in 5 years. In Texas you are allowed to have a non-residence (e.g., a mail box) as your driver's license address, although you are supposed to have a residence address before that and then you can change to the mailbox address after you leave.

To register to vote, you initially need a physical address, not just a mailbox.

kramer 01-25-2013 10:31 PM

nun, ouch on the UK tax requirement!

nun 01-25-2013 10:58 PM

Quote:

Originally Posted by kramer (Post 1275986)
nun, ouch on the UK tax requirement!

It's not an issue as the treaty avoids double taxation and the UK has higher tax free income and capital gains allowances than the US so the difference in the tax bills isn't enormous. As I said being a US citizen you always have to pay US tax wherever you live and if there is a treaty in place you avoid double taxation.

theOAP 01-26-2013 05:10 AM

Quote:

Originally Posted by kramer (Post 1275975)
Because I have no earned income, the only reason I care about the residency tests is to avoid the ObamaCare penalty. This is a new complication for expats.

An excellent point, and one that may need further explanation. As originally drafted, the PPACA (Affordable Care Act) ignored the situation of US retirees living abroad. Since they cannot 'buy' insurance in the US, they would have been subject to the tax/penalty. Another ACA (American Citizens Abroad) raised the issue, and at the last moment the clause relating to Code Section 911 (FEIE) was introduced into the final regulations.

To avoid the tax/penalty, the retired US expat does not have to file a Form 2555 FEIE (with no earned income, you can't!); they only have to meet the same requirements applicable to those who do. In most cases, after the first full calendar year, they would be covered by the Bona Fide residence test. The physical Presence test requirements no longer apply, and the expat could spend more than the limited number of days in the US found in the Physical Presence test. This is my opinion only, and I am not a tax expert. It will only become evident after the first year of enforcement, and any resulting actions which may be taken by the IRS.

There are other complications arising from PPACA for the retired US expat in the area of capital gains, but I won't go into those on this thread.

This thread has, as has many others relating to living abroad, veered into taxation. It should be abundantly clear to the OP (and anyone else considering retirement abroad) to do adequate research into the tax implications of both the US and the new 'local' country of residence. Failure to understand all the implications could result in a 'horror story'.

SecretlyFI 01-26-2013 07:15 PM

DH and I are considering permanently relocating to New Zealand. I've done alot of reading on it and it's a country that you can't just retire to, you need to get a job there to qualify for residency (you gotta respect that). I've done some reading on the tax treaties to avoid double taxation, but I was wondering how Roth's would be treated. They're exempt here, but I'm guess that exemption wouldn't be recognized in the expat country and you'd be taxed there. This would actually create double taxation, since the contributions were after tax to begin with. Does anyone know if that's the case? I stopped doing Roth's recently until I have this figured out. Also anyone have an opinion on good sources of tax knowledge/strageies for expats and what type of professional to consult where needed? I'm assuming most tax professionals might not be experts.

Rob 01-26-2013 07:53 PM

Hi all-
I've been an expat for most of my life, since I have been teaching in international schools, with most of the years spent in Singapore (25 years). I recently retired at the age of 65, but immediately got a job teaching at another school in Singapore. I'm bound and determined to retire again at the age of 66.

I am a Permanent Resident in Singapore, but as nice as Singapore is, it really is not the place you should retire. The cost of living is rather high, and unless you are very wealthy, retirement here is not recommended. As a result, I applied for and received a 10 year retirement visa for Malaysia. It's called Malaysia My 2nd Home visa, and it is easily renewable. The nice thing about it is you're not required to remain in Malaysia any number of days a year, and you can come and go as you want. The cost of living is very very low. Eventually, I will completely relocate across the border from Singapore to Johor, the nearest Malaysian state to Singapore.

The only frustration I have is the requirement to be on US Medicare or risk losing it. I'm required at the age of 65, as you know, to get into Medicare or risk a penalty. As one who has pre-existing conditions, I'd be a fool not to get into it at the required date. However, I also am required to get into the "Part B", the Supplementary", and the "Part D Prescription Drug". If I didn't, I'd pay a hefty and possibly heavy penalty and risk not even getting it. As a result, it's very nice to be under Medicare, but it only covers me in the States. So when you do retire overseas, you will have that problem, also. My attitude is that if something ever serious comes up medically, I will need to return to the States where everything is paid for regardless. At any rate I do have an international health insurance with BUPA, but that is pretty expensive.

I have passive income from TIAA-CREF, and of course I need to pay taxes on that regardless of where I am in the world. I recently went on Turbo-tax to run through the program, and although I have not e-filed yet, I was pleasantly surprised to find out that this is the first year that you can e-file from a foreign address. In the past I have always had to e-file using a friend's address in my state of residency.

Rob

bondi688 01-26-2013 08:35 PM

If all you are getting are distributions from IRA and Social Security benefits, i.e. not earned income, are you still subjected to the tax penalty generated by PPACA while you are living abroad, not working, and do not benefit from MediCare?

nun 01-26-2013 08:47 PM

Quote:

Originally Posted by SecretlyFI
I've done some reading on the tax treaties to avoid double taxation, but I was wondering how Roth's would be treated. They're exempt here, but I'm guess that exemption wouldn't be recognized in the expat country and you'd be taxed there. This would actually create double taxation, since the contributions were after tax to begin with. Does anyone know if that's the case? I stopped doing Roth's recently until I have this figured out. Also anyone have an opinion on good sources of tax knowledge/strageies for expats and what type of professional to consult where needed? I'm assuming most tax professionals might not be experts.

You need to look at the US NZ tax treaty. ROTHs are tax free in the UK under the US/UK treaty so you need to read the pensions Article closely to see if the same applies for NZ.

Khufu 01-26-2013 10:01 PM

Steps I took before retiring abroad (to Thailand):

1. severed all connections to my home state (NY) to avoid any tax domicile issue later: surrendered NYS driver's license, sold off all property, etc. according to the specific tax domicile rules of NYS. God help you if you are leaving Virginia.

2. Opened an account with a mail forwarding service, Mail Forwarding Services at St Brendan's Isle (highly recommended). Service must be located in a no-income-tax state, eg. Florida, and should provide a street address, not a PO box. Updated address information with all banks, brokers, etc. while still in the US. I have never notified any institution of my current physical address, only the mailing address in Florida.

3. Opened several bank accounts since after having moved abroad it may be difficult or impossible to open a new account and the relative merits of each bank's services are likely to change over time. Bill pay features are relevant because I will always have some bills, e.g. credit cards, to pay in the US. The best banks are those that cater to a military clientele since they are not alarmed if they find out that you live abroad. Recommend USAA Federal Savings and Pentagon Federal Credit Union.

4. Bought an Ooma voip phone device and ported my home phone number to it. Not the cheapest solution, but high-quality product and service. After arriving in Thailand, plugged the Ooma device into my router and now have free incoming and outgoing US service with the same phone number I had for 30 years in New York City. I probably have the only 212 number in Bangkok. If you go the Ooma route don't buy their current Telo product which has monthly charges. Get the original hub on ebay or somewhere. That product has no monthly charges at all.

5. Selected a bank in Thailand that can accept low-cost ACH transfers from US banks. There is only one such bank in Thailand. Bangkok Bank can do this because it has a branch in NYC and therefore, an ABA number. Other countries may or may not have such a bank, but some banks will have lower charges than others for transfers.

6. Opened a variety of US credit card accounts, since I cannot be sure of being able to open one in the future. However, I subsequently did open one with Capital One without any difficulty. The key for the credit card is that it reimburses all ATM charges and does not charge a foreign exchange transaction fee. Penfed and CapOne cards meet the requirement. There are others that do as well. I make sure to have at least some charges on each credit card every month so that they are never closed for inactivity.

7. Switched reporting on all financial accounts to email only. However, there will still be snail mail occasionally, such as tax statements at this time of year. The mail forwarding service scans them for me to read the next day.

As an expat with US investments your big financial problem long-term is currency risk, which dwarfes inflation in importance. This is assuming that you keep your assets in the US, which is what most of us expats would recommend unless you were to move to Canada, for instance. Start reading books by economist Barry Eichengreen.

You need to make sure that you have a health care solution in your new country. I plan to sign up for Medicare at age 65 even though I can't use the services while outside the country for two reasons: I can never be sure that I will stay forever in Thailand and, even if I were sure of that, I will always need US insurance during annual trips to see the family.

As for destination countries, I wouldn't consider Ireland myself because the cost of living is high. However, I can see the attraction since Ireland was recently rated by somebody as having the best quality of life in the world. Asia has the advantage of lower cost of living, at least in most locations, and relatively lower levels of crime. Latin America would be attractive to me, but for the crime problem, although I am sure there are effective ways of coping in many areas. I have friends who love retired life in Mexico, but the potential for crime there to expand into currently safe areas would certainly give me pause.

I never plan to own anything in Thailand. Renting an apartment is the overwhelmingly best choice here for many reasons. I hire a car and driver when I need to get out of Bangkok.

My other advice is to study the local language full-time until you are fluent. As an older person the mental benefit of language study in itself is substantial. And then, in terms of the new culture you can be a competent person.

nun 01-26-2013 10:30 PM

Quote:

Originally Posted by Khufu (Post 1276386)

As an expat with US investments your big financial problem long-term is currency risk, which dwarfes inflation in importance. This is assuming that you keep your assets in the US, which is what most of us expats would recommend unless you were to move to Canada, for instance. Start reading books by economist Barry Eichengreen.

Canada is as foreign as anywhere. Be careful to avoid PFIC issues with any foreign investments and of course file FBAR and 8938 form if necessary. Also, depending on the country where you retire, there might be local tax laws similar to PFIC that limit your investment choices in the US.

meierlde 01-26-2013 10:39 PM

Quote:

Originally Posted by Alan (Post 1275977)
Excellent info Kramer. Having a Texas driving license, have you ever been called for jury duty (in the 9 years I have lived here I have been called 3 times, and served on a jury last year).

Given that they use driver licensees in Tx you find that less than 50% of those called show up (particularly in the large counties). So they don't have time to pursue those who don't show up, and in any case you would be out of the country or at least likely out of town anyway. Harris County I recall the several times I was called seemed to have a 30 to 40% turnout rate, as a result they were calling 5000 folks twice a day to get about 2000 a day. They do not have time to pursue those who do not show. Now even in the hill country the turn out rate is 50-60% and once they did have a retired judge who called those who did not show, but gave up on it since so many aliens have driver licenses and get called but don't show because they have an automatic excuse.
So if you can get your physical address in a large county there will likely be no problem but a county of 10k or less may care.

Alan 01-26-2013 10:49 PM

Quote:

Originally Posted by meierlde (Post 1276390)
Given that they use driver licensees in Tx you find that less than 50% of those called show up (particularly in the large counties). So they don't have time to pursue those who don't show up, and in any case you would be out of the country or at least likely out of town anyway. Harris County I recall the several times I was called seemed to have a 30 to 40% turnout rate, as a result they were calling 5000 folks twice a day to get about 2000 a day. They do not have time to pursue those who do not show. Now even in the hill country the turn out rate is 50-60% and once they did have a retired judge who called those who did not show, but gave up on it since so many aliens have driver licenses and get called but don't show because they have an automatic excuse.
So if you can get your physical address in a large county there will likely be no problem but a county of 10k or less may care.

That's good to know, but I guess that I'm just averse to wasting people's time and was hoping that there was a more effective way of opting out. I guess it will only be a problem up to age 70, after which you may be called but are not required to serve.

meierlde 01-26-2013 11:32 PM

Quote:

Originally Posted by Alan (Post 1276394)
That's good to know, but I guess that I'm just averse to wasting people's time and was hoping that there was a more effective way of opting out. I guess it will only be a problem up to age 70, after which you may be called but are not required to serve.

Just a story to tell how the system works. My father died in 2002 and received a jury summons in 2009, since it appears that one branch of the state never tells another about deaths (the county issued the death certificate, but the drivers license folks don't check that or the social security death index). I called the clerk and said we could try a seance if need be but I thought the judge might object. They said they were sorry and removed the names. BTW he also got an invitation to renew his drivers license in 2008 as well.

Rich 01-27-2013 10:01 AM

Although I have no intention of becoming an expat I've found this thread to be incredibly informative and interesting. I respectfully suggest it should be made a "sticky" somewhere for folks who really need the practical information it contains.

Rich

:greetings10:

FreqFlyer 01-27-2013 11:01 AM

I had a good laugh at myself. In planning a post in defense of the rule "RENT DO NOT BUY" I thought about my FIRE plan to open or purchase a business in Latin America.

Do as I say not as I do is all I can say. Whether I actually end up starting a coffee plantation (one idea) remains in doubt. :angel:

Seriously. Until one is experienced enough to break the expat golden rule do not buy.

1) speak the local language
2) live for a considerable amount of time in your chosen location
3) develop relationships with both expats and local residents
4) understand local laws and ways of doing business

george76 01-27-2013 11:19 AM

Quote:

Originally Posted by Rob (Post 1276304)

The only frustration I have is the requirement to be on US Medicare or risk losing it. I'm required at the age of 65, as you know, to get into Medicare or risk a penalty. As one who has pre-existing conditions, I'd be a fool not to get into it at the required date. However, I also am required to get into the "Part B", the Supplementary", and the "Part D Prescription Drug". If I didn't, I'd pay a hefty and possibly heavy penalty and risk not even getting it.

Rob

I thought if you lived abroad and wanted to make sure to be a part of Medicare one only had to sign up for Medicare B at age 65, which is currently around $1200 per year.` And the reason was to do it then, otherwise rates would be much higher for each subsequent year. But, as Rob points out, if this doesn't cover drugs, then the cost would actually be much higher.

So, could someone confirm what Rob stated, ie that one would be wise to sign up for part D as well or that that cost would also go up each year? And if so, what would be cost when including Drug coverage? I have years to go before 65, but I am assuming that I would need prescription drugs of some kind at that age.

Thanks in advance!

george76 01-27-2013 11:30 AM

Khufu,

First of all, great list with lots of great information! Several items I hadn't seen before. I have a couple of questions:

Quote:

Originally Posted by Khufu (Post 1276386)
Steps I took before retiring abroad (to Thailand):
2. Opened an account with a mail forwarding service, Mail Forwarding Services at St Brendan's Isle (highly recommended). Service must be located in a no-income-tax state, eg. Florida, and should provide a street address, not a PO box. Updated address information with all banks, brokers, etc. while still in the US. I have never notified any institution of my current physical address, only the mailing address in Florida.

Just to confirm, the mail forwarding service is able to provide you with a street address. And this street address is acceptable to the bank? I had previously checked with my bank and they had said that they would need to close my account if I had a foreign address. Perhaps a mail forwarding service address would suffice?

Quote:

Originally Posted by Khufu (Post 1276386)
7. Switched reporting on all financial accounts to email only. However, there will still be snail mail occasionally, such as tax statements at this time of year. The mail forwarding service scans them for me to read the next day.

I assume you get an e-mail with the scanned documents? Is there reason at all to be concerned about security/privacy since it is sent via e-mail?

haha 01-27-2013 11:56 AM

Quote:

Originally Posted by george76 (Post 1276531)
I thought if you lived abroad and wanted to make sure to be a part of Medicare one only had to sign up for Medicare B at age 65, which is currently around $1200 per year.` And the reason was to do it then, otherwise rates would be much higher for each subsequent year. But, as Rob points out, if this doesn't cover drugs, then the cost would actually be much higher.

So, could someone confirm what Rob stated, ie that one would be wise to sign up for part D as well or that that cost would also go up each year? And if so, what would be cost when including Drug coverage? I have years to go before 65, but I am assuming that I would need prescription drugs of some kind at that age.

Thanks in advance!

The availability and costs of these plans varies with state.

In my state, the currently cheapest plan is $15/mo. Prices do go up yearly, and I doubt this $15 plan would buy you much. I use it like you plan to use your plan- to keep the door open. I have had to change plans not quite annually, to stay with the cheapest available to me.

To actually compare plans in detail is more than I have been wiling to do so far. They are very complex.

Ha

george76 01-27-2013 12:10 PM

Quote:

Originally Posted by haha (Post 1276553)
The availability and costs of these plans varies with state.

In my state, the currently cheapest plan is $15/mo. Prices do go up yearly, and I doubt this $15 plan would buy you much. I use it like you plan to use your plan- to keep the door open. I have had to change plans not quite annually, to stay with the cheapest available to me.

Ha

Thanks ha!

So, it is about $1,200 a year to Medicare B open and another $200 to keep Medicare D open. So a conservative $1,500 a year to keep the critical parts of Medicare open should you happen to need it.

NYEXPAT 01-27-2013 01:06 PM

Quote:

Originally Posted by Khufu (Post 1276386)
Steps I took before retiring abroad (to Thailand):

1. severed all connections to my home state (NY) to avoid any tax domicile issue later: surrendered NYS driver's license, sold off all property, etc. according to the specific tax domicile rules of NYS. God help you if you are leaving Virginia.

2. Opened an account with a mail forwarding service, Mail Forwarding Services at St Brendan's Isle (highly recommended). Service must be located in a no-income-tax state, eg. Florida, and should provide a street address, not a PO box. Updated address information with all banks, brokers, etc. while still in the US. I have never notified any institution of my current physical address, only the mailing address in Florida.

3. Opened several bank accounts since after having moved abroad it may be difficult or impossible to open a new account and the relative merits of each bank's services are likely to change over time. Bill pay features are relevant because I will always have some bills, e.g. credit cards, to pay in the US. The best banks are those that cater to a military clientele since they are not alarmed if they find out that you live abroad. Recommend USAA Federal Savings and Pentagon Federal Credit Union.

4. Bought an Ooma voip phone device and ported my home phone number to it. Not the cheapest solution, but high-quality product and service. After arriving in Thailand, plugged the Ooma device into my router and now have free incoming and outgoing US service with the same phone number I had for 30 years in New York City. I probably have the only 212 number in Bangkok. If you go the Ooma route don't buy their current Telo product which has monthly charges. Get the original hub on ebay or somewhere. That product has no monthly charges at all.

5. Selected a bank in Thailand that can accept low-cost ACH transfers from US banks. There is only one such bank in Thailand. Bangkok Bank can do this because it has a branch in NYC and therefore, an ABA number. Other countries may or may not have such a bank, but some banks will have lower charges than others for transfers.

6. Opened a variety of US credit card accounts, since I cannot be sure of being able to open one in the future. However, I subsequently did open one with Capital One without any difficulty. The key for the credit card is that it reimburses all ATM charges and does not charge a foreign exchange transaction fee. Penfed and CapOne cards meet the requirement. There are others that do as well. I make sure to have at least some charges on each credit card every month so that they are never closed for inactivity.

7. Switched reporting on all financial accounts to email only. However, there will still be snail mail occasionally, such as tax statements at this time of year. The mail forwarding service scans them for me to read the next day.

As an expat with US investments your big financial problem long-term is currency risk, which dwarfes inflation in importance. This is assuming that you keep your assets in the US, which is what most of us expats would recommend unless you were to move to Canada, for instance. Start reading books by economist Barry Eichengreen.

You need to make sure that you have a health care solution in your new country. I plan to sign up for Medicare at age 65 even though I can't use the services while outside the country for two reasons: I can never be sure that I will stay forever in Thailand and, even if I were sure of that, I will always need US insurance during annual trips to see the family.

As for destination countries, I wouldn't consider Ireland myself because the cost of living is high. However, I can see the attraction since Ireland was recently rated by somebody as having the best quality of life in the world. Asia has the advantage of lower cost of living, at least in most locations, and relatively lower levels of crime. Latin America would be attractive to me, but for the crime problem, although I am sure there are effective ways of coping in many areas. I have friends who love retired life in Mexico, but the potential for crime there to expand into currently safe areas would certainly give me pause.

I never plan to own anything in Thailand. Renting an apartment is the overwhelmingly best choice here for many reasons. I hire a car and driver when I need to get out of Bangkok.

My other advice is to study the local language full-time until you are fluent. As an older person the mental benefit of language study in itself is substantial. And then, in terms of the new culture you can be a competent person.

Khufu,
Great list and thank you for taking the time to compile it. I plan to keep it in a file as I get asked these questions frequently.

For myself, I have found it to be much simpler just to cut all ties (except passport).

With Medicare (six years out) most people I talk to only have Part A and buy any needed medications, procedures overseas which is far cheaper. I imagine I would have to look into this as I get closer in age.

I was talking to a Canadian (on the street) yesterday about HC and he told me he had to wait several months to get a MRI. So he came to Peru and got one for S./650 ($250) in one day. He forwarded the results and had surgery scheduled and the Canadian system reimbursed him $650.00 or almost three times the cost.

Alan 01-27-2013 03:12 PM

Quote:

Originally Posted by Rich (Post 1276506)
Although I have no intention of becoming an expat I've found this thread to be incredibly informative and interesting. I respectfully suggest it should be made a "sticky" somewhere for folks who really need the practical information it contains.

Rich

:greetings10:

Good idea Rich.

We discussed this and decided to move the thread to the FAQ's forum.
Early Retirement FAQs - Early Retirement & Financial Independence Community

I have left a permanent re-direct in the original forum.


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