Today more than ever before, American seniors are choosing to retire abroad. In 2004, an estimated 255,000 Social Security checks were mailed to countries outside of the United States.
In the past twenty years, the advent of new technology, namely the Internet, has spawned the global community. No matter where you call home, accessing bank accounts, filing taxes, and communicating with friends and family, is just a mouse click away. This in itself has made retiring overseas more feasible and attractive to many seniors who previously may not have ever considered an exotic, foreign location to live out their golden years.
Some places are better to retire in than others, based on key factors such as tax liability, real estate costs, ease of obtaining residency, health care, climate and culture. Many a retiree has had to abandon their dream of living abroad, having grossly underestimated the cultural and financial burdens related to their region of choice. Selecting a retirement location abroad should involve careful research and planning. According to an article featured in the UK's The Times Newspaper on January 20, 2008, comprehensive research on the subject conducted by the Homebuyer and Property Investor Show, provides a list of the 10 most popular retirement countries, based on the above key factors. The following are the top five countries on this list, along with a brief overview of the report's findings:
Currently, overseas retirees who have lived in Cyprus for at least 183 days, are taxed on their retirement income at the rate of 5% per year. Otherwise, the normal rate is no tax on the first $28,516.46 USD, then rising to 30% on $53,085.05 USD.
Assets maintained in the United States, such as bank accounts and stock portfolios, will be taxed by the IRS. This situation can be avoided by moving assets to an offshore account, then subsequently bringing those assets into Cyprus. Cyprus has no inheritance tax; however, expats need to provide documentation that all ties have been severed with their previous country to enjoy that benefit.
A starting price for Cyprus property is about $150,846.69 USD, but this will likely continue to rise as the area gains in popularity. Stamp duty (a percentage paid on certain documents such as loan contracts) is 0.15% for properties up to about $254,626.68 USD and 0.2% on more expensive residences. There may also be transfer fees of 3% of the first $127,297.51
USD, 5% on homes valued from $127,297.51 USD - $254,626.68 USD, and 8% on homes valued higher than $254,626.68 USD.
Retirees do not require a visa to move to southern Cyprus, but a temporary residence employment permit is needed and should be applied for upon arrival into the country. To buy property, you must prove you have adequate resources to live in Cyprus without working - currently the minimum is about $15,672.63 USD annually.
Medical care is provided by the government and through private medical establishments. Government Medical Services can be used by anyone; however, U. S. retirees will need to pay the nominal fees as dictated by the system as they are not likely eligible for free treatment.
U. S. retirees will feel right at home in Panama, as English is commonly spoken and the main currency is the US dollar.
All income from assets outside Panama are TAX FREE. However, there is a 5% transfer tax on goods and services. There is no inheritance tax, but gifts of property may be subject to 4% - 33% levy, depending on the beneficiary relationship. Again, U. S retirees will still need to pay income tax to Uncle Sam as long as they remain U. S. citizens.
Buying a home is Panama is surprisingly expensive and you can expect to pay around $215,000 USD for a median property. Anyone buying property can apply to become a permanent resident one year after having applied for a residence visa. The total value of your property and local bank accounts must equal at least $200,000 USD to be eligible.
Under Panama's “pensionado" system, pensioners are eligible for 15% discount on hospital services in private clinics, 10% discount for medicine, 20% discount on medical consultations and surgical procedures and 15% off of dental and optical services.
Retirees certainly can appreciate France's lower tax rate for “pensioners" - a retired couple can have a joint income of up to approximately $102,000 USD and pay about 14% in taxes. That may be better than what could be expected in the U. S.
Housing is rather expensive in France, with the average property going for around $275,000 USD - one of the highest areas to purchase property in the study and prices are only going up. Buying costs are 7% for existing homes, 3% for newly built properties and real estate fees are approximately 6%.
If you spend longer in France than in any other tax jurisdiction during one year's time, you are automatically
considered a resident for tax purposes.
France has a public health system and while retirees are not required to join, they will need a specific plan that covers all of their medical expenses. Typically, the public health system pays 70% - you will want to look into a supplement that will provide benefits for the other 30% not covered.
Belize's official language is English, has a tropical climate with a definite rainy season, and enjoys a low cost of living.
Income tax is 1.75%, but some income such as pensions, is tax free. There is also no capital gains tax or inheritance tax for people retiring to Belize. Personal belongings such as cars and boats can be imported, duty-free. The maximum tax on any one item is $15,000.
If you dream of living on the beach, a three-bedroom property will set you back around $375,000. Associated stamp duties are 5%, legal fees are around 2% and there is a 1.5% transfer tax when you sell a property.
If you are age 45 or over, you can apply for permanent residency through Belize's government retirement program. As a “qualified retired person, " you are eligible for tax exemptions and incentives, as well as other benefits.
Belize has a national, tax-funded healthcare service, but you may find its medical services lacking. Private healthcare is available and inexpensive, however.
Spain is a very popular retirement destination, but because of their high tax requirements, it may not the best choice overall. Spanish residents (spending more than 183 days annually), can expect to pay up to 40% on total income, regardless of origin. Capital gains tax is currently 18% and inheritance taxes for expats run anywhere from 7.65% - 34% depending on the amount inherited and the relationship of the person you inherit from.
Spanish residents also are liable for paying a wealth tax of 0.2% to 0.5% of their assets worldwide.
An average retirement property will cost around $268,000 USD, and property fees can add on an additional 10%.
There is free universal health care in Spain. To become insured, you have to have a Spanish-issued social security number. To get one, you will have to either work or become self employed to pay into the system. Otherwise you will need to look into private health insurance.
Even though you may initially consider climate, breathtaking vistas and scrumptious cuisine when deciding where to retire abroad, the choice should rest at the bottom line - your finances. Crunching the all-important numbers will ultimately dictate if you can actually afford to live out your retirement fantasy.
1. “Revealed: the best places in the world for retirement;" Jessica Bown; The Sunday Times, January 20, 2008.
(http://business. timesonline.co.uk/tol/business/mo ney/consumer_affairs/article3215247. ece)
2. Ministry of Health of the Republic of Cyprus (http://www.moh. gov. cy/moh/moh. nsf)