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Retirement as an Expat: A Money-Saving Idea?
Linda Goin

A recent study published by AARP set my head reeling. This study, conducted by International Living, showed that Americans could retire 10 years earlier and enjoy a higher standard of living by moving to other countries. According to this article, Ecuador is the place to retire, as it has the lowest cost of living and real estate. I’m divided on this issue – I don’t have to wonder why this study was conducted, but I do wonder who might retire in a foreign country, especially anyone from the U.S. – but I did learn some reasons, and those insights were enlightening.

During my lifetime, which I consider a low- to average-income life for the most part (and, the IRS agrees), I knew very few people who traveled abroad. Those individuals I’ve known who have gone beyond this country’s borders usually went one of three ways:

  1. On a cruise
  2. In the military
  3. As a student (group trips or scholarship studies)

Granted, I knew couples who took vacation and retirement trips overseas, but they would never think to leave their children or grandchildren behind for extended periods of time. Although I spent a year in Melbourne, Australia, I sold everything I owned for a plane ticket. Selling everything for a plane ticket might be considered insanity, no matter one’s age.

On the other hand, as an historian, I also thought about Ireland’s potato famine. In 1845, approximately one million people died and a million more emigrated from Ireland, as a potato blight and other issues decimated that country’s population by 20-25%. Hold on to that thought for a moment, as I’m going to add more meat to these potatoes before I steer you toward a conclusion.

A Few Facts about Expats

First, expatriates are not traitors. “Expats” are people who live in different countries temporarily or permanently, but who still are U.S. citizens. These folks may be working for companies located overseas, or they may be living with family who relocated to overseas locations, or they may be retired. Other reasons to go abroad include wanderlust, exile, economic migration, forced migration, and existential migration (I’ll let you learn about that latter option on your own time).

Many countries do keep track of citizens who reside abroad, and – outside the U.S. – the U.K. leads the pack with more than three million British living abroad, followed by Germany and Italy, with destinations such as Spain, Germany, the U.K., and Italy. Currently, an estimated 5.2 million Americans reside outside the United States. But, the U.S. is the only industrialized country to tax citizens on income earned abroad, even when taxed by their countries of residence, though they are allowed to exclude their first $91,400.

Additionally, U.S. law requires expatriates to report any foreign bank accounts exceeding $10,000, with heavy fines for noncompliance. American expatriates have been denied service at banks and other institutions in other countries, as the U.S. government requires other nations to abide by its banking and financial laws when dealing with U.S. citizens. As a result of burdensome taxes and banking problems, hundreds of U.S. expatriates renounce their U.S. citizenship every year, and that number is growing rapidly.

The Numbers

Going back to the numbers presented previously, look at the $91,400 income status. First, few people make that kind of money legally unless they are successful business owners, CEOs, PhD researchers, attorneys, celebrities, etc. Retirees don’t make this kind of income, unless they have huge sums saved, or hold large amounts of stock with huge dividends, or hold inherited trust funds that survive into their retirements.

The disturbing number is the $10,000 bank account figure. Although I’ve never been rich, holding over $10,000 for retirement is reasonable, especially if it represents liquid funds for emergencies. While expats may save money overseas on medical and living expenses, I don’t know if those savings will amount to beans (or potatoes) if they are fined for holding more than what may be necessary for a feasible retirement.

Those two numbers don’t touch Social Security, Medicare, stock holdings, or other retirement plans and investments. What happens to those securities if you decide to give up citizenship because of taxes and bank issues? That question leads to a look at income disparity and possible solutions…

You Can Do It…

This link for International Living provides information on how to retire on pennies. The possibilities are endless. You can decide later to give up your citizenship or not, depending upon your individual situation. You might notice that this article focuses on people who have lost jobs or home values, or who have lost value in the stock market or in retirement funds. They also feature people who bring children along, who can now afford insurance in foreign countries, and who submit their bodies to hour-long $25 massages, compared to $60+ in the states.

Back to that potato famine…that migration was a complicated and hurtful disaster that tore families apart and permanently changed the island's demographic, political, and cultural landscape. Considering the U.S. population currently stands close to 312,000,000, the fact that a little over 500 people have given up their citizenships accounts for little over 1% of the population, compared to the 20-25% loss that Ireland experienced over 150 years ago. But, if that number grows, especially encouraged by “retirement in foreign countries” articles, long-term global employment, taxes, and bank policies, what might happen to this country?

Considering the numbers, we may lose many people who have lost their investments and retirements. Or, we’ll have a “brain drain” of people who can afford to move overseas at a younger age. Interestingly, brain drains usually affect poor countries who find richer lives abroad. Either loss can be either beneficial or detrimental to this country, depending upon perspectives. But, either way, the U.S. will lose a lot of tax funds if those same people give up their citizenships.

In conclusion, you, too, can live abroad, especially if you’re rich or if you’ve lost everything. The dwindling middle class in this country may have a harder time letting things go to pursue happiness on other shores. After my year in Melbourne, I can tell you that it might be wise to do plenty of research, take a trip or two to your country of choice, or develop friendships in that country before you make a permanent move (which can happen easily now, thanks to the Internet). But, even limited monarchies (as opposed to presidential governments) in English-speaking countries can jolt cultural sensibilities. And, being so far away from loved family members for any length of time can be emotionally taxing.

You only live once, though – at least, one life that can be remembered. The point of investing is to have funds to meet goals and dreams. If your goal for retirement is happiness and your dream is about lack of money worries, think about what you have here, what you might have elsewhere, and your options. Who knows? Perhaps Baby Boomer emigration might become the hottest migration story in history.

Until Later,
Linda Goin

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