If you (and your spouse, if you're married) are adventurous and are thinking of retiring abroad, that's a perfectly reasonable thing to do. After all, plenty of places outside the U.S. can cost you a lot less, helping you stretch your retirement nest egg further. Women, who often have smaller nest eggs, might particularly want to consider this strategy.
As you think about various countries, you'll likely consider factors such as climate, cost of living, and the availability of recreational activities that you enjoy. Be sure to consider the quality and availability of healthcare, too -- and the tax treatment that relocating retirees can expect. Many countries want foreign retirees to move there, and thus offer special programs, visas, and tax treatments.
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Here's a look at three countries with attractive tax considerations, as well as other appealing characteristics.
1. Panama
Panama might draw your interest tax-wise because it doesn't tax foreign retirees' incomes. It also levies no capital gains tax. You can qualify for a retirement visa there if, among other things, you have guaranteed income of at least $1,000 per month. (You may qualify with lower income if you buy real estate there.) That's not the tallest hurdle, considering that the average monthly Social Security retirement benefit was recently $1,836, as of May 2023.
Other tax perks include a one-time exemption to import household goods up to a value of $10,000 duty-free, and a duty exemption for the importation of a new car every two years. The Panama retirement visa also offers significant discounts for transportation, restaurants, entertainment venues, airline tickets, hotels, utility bills, and healthcare, among other things.
Beyond taxes, the country offers a fairly low cost of living, solid healthcare, warm weather, and beaches. Per Numbeo.com, consumer prices and rent prices are, respectively, 35% and 56% lower than in the U.S.
2. Portugal
Portugal is another retirement destination worth considering, because the country offers tax breaks to those who invest in real estate there. Its Golden Visa program offers a residency permit for two years (which can be renewed) and exemption from taxation for most foreign income. Those who want to work during their retirement might look into Portugal's D7 Passive Income Visa, which can lead to citizenship, if desired. It also gives visa-holders access to Portugal's healthcare system.
Living in Portugal means you'll have fairly easy access to the rest of Europe, and the country offers many beaches as well as city life in Lisbon. Its cost of living is substantially lower than in the United States, too. Per Numbeo.com, consumer prices and rent prices are, respectively, 38% and 52% lower than in the U.S.
3. Malaysia
If you'd prefer Asia over Europe or Central America, consider Malaysia, which sports a low cost of living and an excellent and affordable healthcare system. (Per Numbeo.com, consumer prices and rent prices in Malaysia are, respectively, 57% and 80% lower than in the U.S.)
It offers tax breaks, too, via its "Malaysia My Second Home" visa. The visa offers 10 years of multiple entries and is renewable. It does require you to deposit a certain sum (recently around $36,000) into a bank in Malaysia or prove you have a certain minimum monthly income (recently around $2,500) from a government pension such as Social Security.
You can also have all the money you bring with you into the country exempted from taxation, and any income you receive that's not earned in Malaysia will be tax-exempt from Malaysian taxes, too.
These are just a few of the many potential retirement locations you might consider that offer various attractions. A little digging online will turn up many more, such as Australia, New Zealand, Switzerland, Greece, Nicaragua, the Philippines, Ireland, Ecuador, and Malta.
Before you retire abroad
Think twice -- or even thrice -- before you pack up and move abroad for your retirement, because your new life may not be as idyllic as expected. For one thing, there may be a language barrier, and you'll need to navigate an entirely new system of government, taxes, and more. Some countries may be vulnerable to political, social, or economic unrest, as well.
You may also find yourself feeling isolated, missing your old life, your family, and your friends. Loved ones may not visit as much as you (or they) thought they would. And even though many countries offer tax breaks, you may still have to pay taxes to Uncle Sam, depending on where you've moved and what if any tax treaties a country has in place with the U.S. government.
Before you make a big move, consider just living in your target country for a few months, if you can, to make sure it seems like a good fit for you.
Consider the alternative -- staying in the U.S.
You might strike a nice balance between the pros and cons of retiring abroad by moving to a new location with a lower cost of living -- in the U.S. Many cities and states will likely offer a lower cost of living than your current one, and many offer solid healthcare systems, temperate climates, and a pleasant quality of life.
As you plan for your retirement, consider as many possibilities as you can, to see what plan will serve you best.
