These Tropical Countries Reward You to Retire There

The "pensionado'' programs in some Central and South American countries offer huge tax breaks to foreigners who choose to retire there.

Jul 6, 2014 at 12:05PM


Because Europe can be an expensive place for Americans to visit, South and Central American countries have become vacation destinations for adventurous Americans looking for something different.

Countries such as Costa Rica, Belize, and Ecuador now want to be considered someplace to live permanently.

Kathleen Peddicord, founder of the Live and Invest Overseas publishing group, compiled for a list of four Central American countries that have laws designed to attract Americans to settle down there upon retirement.

These laws play into the preferred retirement specifications of most wealthy Americans.

Spectrem's Millionaire Corner did a study of retirement interests of affluent investors and found that 41% planned to retire somewhere other than where they lived while working. They also listed the three most important factors in selecting a place to retire as cost of living (61%), proximity to family and friends (58%), and weather (57%). In an examination of conditions for retirees in the Central American countries, cost of living and weather score very highly.

The first country to make a concerted effort to attract foreign retirees was Costa Rica, which created the "pensionado'' program with significant tax breaks and other perks. After tens of thousands of foreigners moved in, the country discontinued most of the breaks, and it has now become a more expensive place to live than most other Central American countries.

Here are some of the specific conditions in the countries selected by Peddicord that make the decision to retire outside the United States attractive.

On the northeastern corner of Central America, Belize is the only CA country in which English is the predominant language. With a population of less than 350,000, Belize is an independent state that for a long time was the property of the British Empire.

Around the turn of the 21st century, Belize enacted legislation creating a QRP program, in which people could obtain permanent residency in their country by spending as little as one moth a year in Belize. For that little bit of time, new Belizeans ages 45 and older get a permanent exemption from all Belizean taxes (including income tax, import tax, and capital gains tax).

To qualify for QRP, you must consider yourself retired (you cannot apply for a work visa) and have at least $2,000 a month in guaranteed income to support yourself. All they require to prove your income is a bank account with $24,000 in it at all times.

While one cannot get a work visa to qualify for QPR, it is still possible to have an income from international or Internet businesses, and you can also work for yourself. You just can't be an employee of someone else, because you would then be taking a job from someone else who is not "retired."

The northwestern South American country of Ecuador is a desirous location because it has both beach property to the west and mountainous regions to the north. The Amazon also spills into the country on the east.

Ecuador's retiree residency program offers a massive variety of benefits to foreign retirees, including 50% off all national and international airfare, 50% off all cultural and recreational events, and 50% off electricity, water, and telephone service. There is reduced income tax and property tax for foreign retirees, and a refund on sales tax.

There are restrictions, however. As a retiree resident of Ecuador, you cannot leave the country for more than 90 days per year for each of your first two years, or you lose your retiree status. After the first two years, you cannot be out of the country for more than 18 consecutive months. You must be able to show $800 in guaranteed income per month, an amount that goes up $100 per month for each dependent relocating with you.

Yes, Nicaragua.

The once war-torn Central American country lying entirely within the tropics is now at relative peace and has an interest in inviting guests for permanent status. Geographically, the country has two long coastlines, volcanoes, highlands, and rain forest. From a cost standpoint, it is the most inexpensive country that one can relocate to and hope to have a settled lifestyle.

Its pensionado program allows foreign retirees to be as young as 45, and the minimum monthly income requirement is $600 a month. Your reward for moving to Nicaragua is no tax on out-of-country earnings, and you can bring up to $20,000 worth of household goods into the country duty-free. You can even bring your car for personal use free of charge and, if you sell it after five years, there is no sales tax attached to the sale.

Really, who hasn't thought of retiring to Panama?

The Central American country with a booming resort business has the best-known pensionado program that includes 50% off entertainment anywhere in the country, 25% off airline tickets, and 50% off hotel stays Monday through Thursday. Almost every service you can think of (hospital, medicine, dental, technical) comes at a reduced rate, and there is a 25% discount at all sit-down restaurants.

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