The Independence Journal
No Exit for Retirees
Retirement Overseas?
Faced with crowded cities, increasing air pollution, and ever more clogged freeways, an increasing number of Americans are considering the possibility of moving overseas to spend their retirement years in relative comfort in a less pressurized lifestyle. Unfortunately, the dream of overseas retirement may be slowly fading from view.
Not that it would be the first time. In the 1930’s, American expatriots were all over Europe, and the streets of Paris were particularly filled with Western imperial culture. In a region where Modernism, Dadaism, and Surrealism were being born, thousands of Americans showed up to become part of the new “scene.” While the Yanks were showing up, lots of the artists left for stateside, leading to a cultural explosion in immigrant cities like New York, and to a lesser extent, Los Angeles.
The urge to head to Europe upon retirement is less attractive today than it was 70 years ago. The Euro is continuing to advance, and this means people who retire on a U.S. dollar denominated basis will suffer declining real income as the dollar drifts down relative to the Euro. On the other hand, there are many countries, especially in South and Central America where the dollar still rules supreme.
One example is Costa Rica, which has more Americans living in country than anywhere else in the region. About 30,000 Americans by some counts, and of these, about a third are retirees. When you look at the conditions of the country, it’s easy to see the attraction. About a quarter of Costa Rica is national parks and protected environments. The literacy rate is 93 percent, and foreign residents are allowed to make up to $70,000 US without paying an local taxes. If you stay outside the US for two years, your tax bill goes to zero.
Sounds ideal, doesn’t it?
Unfortunately, governments around the world are slowly circling in on retirees who have the sense to vote with their feet and find a nice place to live inexpensively. In some cases, countries are already screwing the retirees out of benefits because of where they live.
According to the BBC recently, the UK Court of Appeals ruled that the British government was within its rights when it “froze” the pension amount being paid to retiree Annette Carson who presently lives in South Africa. She and about 490,000 countrymen have had their pensions frozen at the rate first paid abroad. Not all countries are treated as poorly by the British rules, and about 410,000 British expats live in countries where their benefits are being adjusted. The British had drawn up retiree agreements with Canada, South Africa, and Australia before inflation was such an important part of retirement planning.
If you’re thinking about retiring overseas, you might want to be aware of some limits that are placed on your independence by the U.S. government. For example, there are several countries you can’t retire to because the U.S. is simply not on friendly terms with the countries. The list includes:
Cambodia
Cuba
And North Korea
Not that you’d want to live in these countries, but the choices are off the table. There are also restrictions on receiving Social Security payments if you live in Vietnam or some parts of the former Soviet Union, such as the Ukraine.
If you live in one of these places, you won’t necessarily lose your payments for all time – they can be restored once you return to a non-restricted area. Of course, it goes without saying that there’s plenty of red tape involved.
On the other hand, restrictions have been lifted, so if you’d like to live in Russia, Estonia, Latvia, Lithuania or Armenia, go ahead and buy that villa while their cheap or while the dollar still buys some values overseas.
In some ways, there are some incentives to move out of the U.S. upon retirement. For one thing, the Social Security Administration is involved in an international direct deposit system that provides for the transfer and conversion of your Social Security benefits right into the participating foreign bank. Called electronic benefit transfers, these are now available to U.S. retirees moving to Argentina, Australia, Canada, France, German, Ireland, Italy, Norway, Portugal, Spain, Sweden, and the United Kingdom.
If you’d like to tinker around with the “bug out” option upon retirement, you can order a brochure from Social Security called Publication No. 05-10137.
Considering the natural attractions of places like Costa Rica, overseas retirement sounds like it could be just the ticket – a chance to maintain your pre-retirement standard of living while no longer having to work.
There are just two important things to keep in mind. First is you’ll need to look at the U.S. budget deficits, which with the latest tax reduction leaves an unfunded deficit of 44-trillion dollars to fund in the next 10-year.s The other thing you’ll need to consider is what Brit Annette Carson discovered. The home government doesn’t feel fully obligated to people who are living outside the homeland.
Out of sight, out of mind.
Contact Information:
Publisher: george@ure.net
Editor: elaine@ure.net
All contents © 2004 George A. Ure