How To Retire Overseas In 2011

How To Retire Overseas In 2011

Dec. 26, 2010, Baltimore, Maryland: In 2011, the Live and Invest Overseas agenda will feature more expanded coverage, more hand-holding, and more comparative analysis to help you launch your new life overseas.

Also This Week: The Passage Of The Child In Cuenca...Caribbean Christmas...Christmastime In London...Big-Hearted Basque--The France You Never Hear About...

And Lief Simon On: 2011 Tax Tips For Global Property Investors...

Dear Overseas Opportunity Letter Reader,

We awake this day-after-Christmas morning in Baltimore to news of what forecasters here are calling the "Snow Miser Surpriser." Young Jackson is delighted. Back in Panama, he wished for a white Christmas, and it looks like he might just get it one day late. We're told a big snowstorm is on its way.

Meantime, Lief and I, cozy and warm inside my mom's house, with a fire burning in the living room and the Christmas tree twinkling in the corner, are using this opportunity to finalize our Live and Invest Overseas plan for 2011. What can you look forward to in the New Year?

Here's a preview...

First: More expanded coverage. Our 2011 editorial agenda will take you farther and wider than ever before, with more regular coverage from Asia (the world's biggest retirement bargain right now), especially Malaysia, Vietnam, and the Philippines (three places Lief and I will be visiting on an extended Asia tour over summer 2011) and Europe, too (starting with the January 2011 issue of Overseas Retirement Letter, which features a complete guide to retirement in France's undiscovered Basque region...see below)...

Second: More hand-holding. We want to do everything we can to help you make 2011 the year you make your move. Last month, we launched our new Overseas Retirement Circle. Already, hundreds of your fellow readers already have taken advantage of this invitation to position themselves on the retire-overseas fast track.

In addition, our 2011 events calendar includes our first-ever Retire Overseas Conference Stateside. This is your chance to take a comfortable first step toward launching the new life of your dreams overseas. You don't even need a passport.

San Antonio, Texas, October 2011. Be there! More details to follow early in the New Year.

Meantime, in June 2011, we're planning another first: A retire-to-Latin America event. Our Retire Overseas event in the States will introduce you to the top 2011 retire-overseas options worldwide. This Live and Invest in Latin America Conference will showcase the top options in these Americas, from end to end and coast to coast. This first-time event will take place in the region's most accessible travel hub, Panama City. Again, details very soon.

These two new conference events bring me to the third part of our Live and Invest Overseas program for 2011...

Third: More comparative analysis. "I'm drawn to both Panama and Belize but can't decide"..."I can't choose between Buenos Aires or Montevideo"..."I'm back and forth between France and Argentina"...

We get hundreds of e-mails like these every week. And we want to help.

How can you identify the retirement haven with your name on it?

You've got to compare and contrast. List out the pluses and the minuses. Understand the advantages and the downsides. You've got to delve beneath the rosy first impression of any would-be overseas retirement haven that catches your fancy and take a sober morning-after look.

What would your life in Retirement Haven ABC be like...compared with your life in Retirement Haven XYZ?

We're going to help you find out. Our editorial mandate for the New Year is more depth, more substance, more real-life, real-world analysis from real experts and expats, reporting not as editors from behind a desk but as people just like you who've already taken the leap.

Now it's your turn.

Here's to 2011. The year your new life begins.

Kathleen Peddicord

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P.S. What else this week?

• "Every morning in Cuenca," writes Latin America Correspondent Christian MacDonald, "the sun begins to backlight the jagged Andean peaks and church steeples, casting its glow over the sea of clay-tile roofs.

"But on the morning of Christmas Eve in Cuenca, it also lights up an impressive scene that comes but once a year.
"On this day, thousands of Ecuadorians come to Cuenca from all over the country to celebrate a procession known as El Pase del Niño Viajero, loosely, 'the passage of the child.'

"It's a custom that started in the 1960s, when a statue of the Christ Child, called El Niño Viajero, was blessed by the Pope and then brought to Cuenca from Rome. The event is a core tradition in Cuenca today.

"The extravagant, ad-hoc parade extends for miles and can include more than 35,000 people, local residents and visitors, who walk along with the participants.

"The Pase del Niño is not centrally organized but consists of hundreds of small family delegations who come from cities, towns, and villages across the country..."

• "For those of us who grew up in snow country, it seems odd to be walking around in T-shirts and flip flops on Christmas Day," writes Belize Correspondent Ann Kuffner.

"But, having lived here on Ambergris Caye for five years now, I've come to appreciate that Belize offers a unique collection of blended Christmas traditions. Home to more than 10 different ethnic groups, this country boasts the most multicultural holiday celebrations I can imagine.

"First and foremost, Christmas in Belize is about spending quality time with family and friends. Government offices, banks, and most non-tourism-oriented businesses shut down for the week surrounding Christmas Day. Festivities and family time continue through Boxing Day (Dec. 26) at least, a throwback to Belize's days as a British colony.

"One important Christmas tradition, remembered throughout Belize, is to spiff up the interior of your home. This is a Belizean's way of inviting the Christmas spirit. One Belizean friend told me not to judge a local's home by the exterior this time of year. It's what's inside that counts come holiday time. She explained that everyone brings out their gold, red, and green curtains, tablecloths, etc.

"And, in preparation for all the holiday visiting, Belizeans don't just decorate the insides of their homes this time of year; they give them a facelift, too. They repaint the walls, hang new drapes, even replace the linoleum! This is the Belizean version of spring cleaning, and the entire family pitches in..."

• "'Just go through the archway on the left of the Cathedral Square, walk past the Christmas tree, cross the street, and you will be there,' said Diane.

"It worked," reports friend and Roving Correspondent Vivian Lewis.

"I hit the City of London yesterday to check out shopping beyond Westfield malls, including the outpost of Mammon by St. Paul's Cathedral. Under the official name of One New Change, and the unofficial one of 'Cheapside Mall,' this is a cross-shaped set of passages between four glitzy glass towers connected only above the street level just past the Cathedral Christmas Tree across a street.

"Howling winds and snow flurries harried the few pre-Christmas shoppers in the mall's wide corridors, which lack any cozy amenities like seats or a cafe where you can place your sugar daddy until his checkbook is required. But the passages do give you occasional startling juxtapositions of full views of Sir Christopher Wren's cathedral masterpiece alongside yet another overpriced jewelry shop.

"Luckily there are some more down-market women's clothing chains in the mix. While City men are rich and powerful, their female support staff are not overpaid and shop at The Gap, Monsoon, and Mango.

"On the other side of St. Paul's you can glimpse another local house of worship, St. Vedast Alias Porter, an odd name for a saint. Why did Vedast require a pseudonym?

"Two comments. First, remember that the Brits pronounce 'Mall' to rhyme with 'Hell.' Second, if there was any doubt in your mind, Cheapside ain't cheap. I await the opening next year of the Stratford Westfield East near my base at Mudchute Manor for serious shopping therapy..."

• "Though there's no border marking the entry to the Basque region of France," writes Euro Editor Lucy Culpepper, "but there's no doubting when you've crossed it.

"The most obvious change is the architecture. Every house, and I do not exaggerate, is painted white with lots of Basque red paintwork. You can buy the paint at any Home Depot-type store. The paint pot will be labeled 'Basque Red.' And that is likely the only red paint in the store. In Basque country, there's just one red.

"There is also Basque Green, but nearly everyone here sticks with the red.

"This collective paintwork has the effect of making everything appear pristine and cared for. Even the neighboring people of the Béarn marvel at the incredible upkeep of Basque homes. This slightly heavy-handed painting decree is imposed by the local government sometimes, half-jokingly, referred to as the Communist State of Pays Basque!

"The Basque people also have their own language, music, dance, sport, cuisine--reputed to be one of the best in France--myths, flag, and even alphabet typeface.

"The Basque Region (Pays Basque in French and Euskal Herri, meaning 'Land of the Basque language,' in the Basque language of Euskara) is made up of seven provinces that sit astride the French-Spanish Atlantic border.

"Four of the provinces are in Spain (Alava, Viscaya, Guipuzcoa, and Navarra), and three are in France (Labourd, Bas Navarre, and Soule). This geographic arrangement gave rise to an old form of Basque nationalist graffiti ('4 + 3 = 1') and the motto for Pays Basque ('Zazpiak Bat'), meaning 'The seven make one'..."

Also This Week...from resident global real estate investing expert Lief Simon:

As we near the end of the year, many investors are looking ahead to the coming tax season and considering tax-saving strategies. One that is often misunderstood is the 1031 like-kind exchange that an American can use to defer capital gains taxes on investment real estate profits.

Many real estate and tax experts still think that you can't do a like-kind exchange with foreign real estate. You can. The question is whether or not you should.

First, some background. A 1031 like-kind exchange is a section of the U.S. tax code that allows for investment property, real estate or otherwise, to be exchanged for similar investment property. You can exchange a piece of factory equipment for another piece of factory equipment...or you can exchange a commercial building for a residential apartment building (that is, investment real estate for investment real estate).

Of course, generally speaking, things like factory equipment don't appreciate over time, whereas real estate can. Therefore, the ability to exchange an appreciated property for another property and thereby defer the capital gains taxes (both on the absolute appreciation and any recaptured depreciation that would have occurred with a sale) can be an excellent tax-planning tool.

U.S. real estate investors are generally well aware of the benefits of 1031 like-kind exchanges. A whole real estate industry has evolved around the concept. However, many don't realize they can do an exchange with foreign property.

The catch is that you can't exchange a U.S. property for a foreign one under the 1031 rules. It has to be U.S. for U.S. or foreign for foreign. In other words, you must make your first foreign real estate investment...and then think about like-kind exchanging it for another when you're ready to execute your exit strategy.

You could exchange a rental apartment in Buenos Aires for a farm in New Zealand...or a ranch in Uruguay for a beach house in Puerto Vallarta.

Of course, it isn't a literal exchange. You don't have to find a farmer in New Zealand who wants an apartment in Buenos Aires. However, you do have to follow the 1031 rules carefully. These include certain timelines for identifying properties you want to buy as part of the exchange and for closing on the selected new property.

In addition, it's very important to understand that you can't actually touch (that is, take possession of) any proceeds from the sale of the original property. You have to use a qualified intermediary to hold the proceeds from the sale of the first property for you and then pass them along to the seller of the property for which you are exchanging.

You can find the specifics for the rules online at any number of sites specializing in 1031 exchanges.

Many investors get excited when they learn they can do an exchange with a foreign investment property. However, as I mentioned, it's a great opportunity in theory, but not always in practice.

While deferring your U.S. capital gains taxes is obviously beneficial, you don't want to end up deferring U.S. taxes (meaning you have to pay them later) when you could get a credit against them today and avoid them altogether.

For example...

If you sell an investment property in Spain for a profit, you'll owe capital gains taxes to the Spanish government (the rate is 18%).

The U.S. capital gains tax is currently 15%.

Therefore, because you must pay the Spanish government 18%, you can be better off in the long run taking that as a credit against the 15% tax due to Uncle Sam, rather than doing a 1031 like-kind exchange and deferring the U.S. capital gains tax.

Obviously, if you're selling a property in a country that doesn't charge capital gains taxes (New Zealand, for example), then doing the exchange makes sense for your U.S. tax purposes.

You also have to weigh the expense of doing the exchange against the potential U.S. capital gains tax. The cost of exchanging a U.S. property for a U.S. property exchange can be minimal...as little as US$495 through do-it-yourself websites.

However, a foreign-for-foreign exchange will likely cost you more, maybe as much as US$1,500, meaning that, at the current capital gains tax rate of 15%, you break even only if your gain is US$10,000 or more.

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