FAQs About Retiring or Moving Overseas

It’s Not Only About The Money

Attendees at the “Retiring Abroad…A New Place To Call Home” session at the AARP Life@50+ event in D.C. yesterday had questions:

“When buying real estate in another country, how do you know that you’re getting the correct title? I mean, what title do you want? Is it the same as in the States?”

Ideally, you want freehold title. And, no, not all property in all parts of the world is sold freehold. Sometimes it’s sold leasehold. Sometimes it’s sold as rights of possession.

Sometimes it’s sold by someone who doesn’t own it.

In some parts of the world, the history of ownership of a piece of real estate (that is, the title) can be complicated.

Don’t try to sort it out on your own. Engage the services of a local attorney with experience helping foreigners buy property in that country. And make sure he’s your attorney (not the developer’s attorney, not the seller’s attorney, not your agent’s attorney…you want to hire your own, independent guy).

And invest in title insurance. It’s available now in most markets where you’d want to buy (including Panama, Nicaragua, Costa Rica, Belize, Uruguay, Argentina, etc.). It costs less than 2% of the purchase price. And it buys you peace of mind. I recommend First American.

“How do I know these places you’re recommending are safe? I mean, look at what’s going on right now in Thailand. How do we know a place is stable…and will remain stable?”

There are no guarantees, of course, and none of us can see the future. You do your research, you visit and scout in person, and you make a determination. Is the place “stable” enough for you?

Paul Terhorst reported the other day that Thailand, for example, “unlike in Europe and the Western democracies, enjoys a small, ineffective government. No checks in the mail, no welfare state, no half-trillion-dollar deficits. The government can self-destruct—and does so with some regularity—without anyone really noticing…”

Administrations come and go regularly and sometimes dramatically in Ecuador, as well, for example. For Ecuadorians, this isn’t instability…it’s the way of government.

Know yourself. What are you comfortable with? If you want absolute stability and peace of mind, consider peaceful, orderly Uruguay, say, or Belize.

On the other hand, if you’ve the stomach for it, remember that local political troubles can translate into opportunity.

As Lief wrote this morning to remind me (after reading discussion in our Mailbag this week about the current troubles in Thailand):

“People thought I was crazy for going to Argentina 10 months after their financial crisis back in 2001. There were still riots (organized protests, really) in the streets of Buenos Aires. Wasn’t I worried for my safety, people asked?

“I used common sense, and, no, I wasn’t concerned about my safety. I was a little concerned, though, that if I didn’t act quickly I’d miss my chance. Real estate prices had already begun going back up by the time I hit BA. I arrived maybe 10 weeks after the absolute bottom…”

“As an American abroad, do I still have to pay U.S. taxes?”

You still have to file U.S. taxes. Every year. No matter your country of residence and no matter how long you’ve been living outside the States.

However, you may not have to pay U.S. taxes. That is, you may not owe anything to Uncle Sam. Depending on how much money you’re earning each year and where you’re earning it, once you take into account the earned-income exemption for Americans abroad and other deductions and exemptions you may be eligible for, you may well find yourself living U.S. tax-free.

But that is not to say…it is never to say…that you’re free of your U.S. tax filing obligation. The key is to understand the distinction between having a tax filing obligation…and actually paying tax.

“Will I owe taxes in the country where I’m living?”

This depends largely on your residency status. If you’re a full-time legal resident of a country, then, yes, you’ll acquire a local tax obligation…in addition to your U.S. tax obligation if you’re an American. Again, though, that is not to say you’ll owe tax. You’ll be required to file a local return, but, depending on your level of income and where and how it’s sourced, you may not actually be liable for any tax.

“What would my life be like, living overseas?”

I have no idea…and the only way to find out is to get up now and make the move.

I can tell you this, though: Every day abroad will bring new experiences, discovery, and adventure. A fellow reader explains it well in today’s Mailbag. See below.

Kathleen Peddicord

P.S. From D.C. late yesterday afternoon, I took a taxi north to Annapolis, Maryland, to spend the weekend with my daughter, who this week commenced her second year at St. John’s College.

When I was last here, two months ago, the streets of Annapolis were awash with tourists. But that was summer, and summer officially ended in this part of the world last weekend. Now, the Middies are in residence at the Naval Academy, and the Johnnies, as they’re called (including my daughter), are installed at St. Johns. And, I’m pleased to report, they must all be chained to their study desks, for I saw nary a soul as I meandered the brick-paved lanes of old town last night…

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