Cut Your Expenses By 57% in This Retirement Paradise
If you think you need to be a millionaire to live well in a foreign country – or to make the move abroad at all – it’s time to reconsider.
Nick made the move to Medellín, Colombia, with his wife and daughter two years ago. He admires the city’s vibrant culture and affordable lifestyle.
“I love that I can go to my favorite bar on Friday evening and have a beer for 2,000 pesos (roughly $0.66),” Nick said. He also mentioned that a gourmet meal in a Medellín restaurant might cost as little as $3 or $4.
The United States ranks among the world’s most expensive countries. Meanwhile, places like Italy, the U.K., the Netherlands, Germany, Colombia, Argentina, Hungary, Costa Rica and Canada all boast a lower cost of living.
“People start to realize they can’t afford a great lifestyle in their home countries if they’re living on a [crappy] pension,” Nick told me.
Now in his early 50s, Nick has been living abroad on and off for the past 30 years.
He has spent his professional career in advertising and education consulting. Today, he actively manages his investments back in his native Australia, the 12th most expensive country in the world.
Colombia is among the world’s 10 least expensive countries. In fact, the cost of living is 57% less than in the United States. Remarkably, places like Medellín offer a lifestyle that’s better than what money can buy in a typical American city.
That kind of value alone makes a compelling case for moving abroad to make the most of your pension or retirement income.
Managing Finances at Home
Jeff Winn of International Assets Advisory LLC, an Oxford Club Pillar One Advisor, says that maintaining your accounts abroad is as simple as going online or making a periodic phone call.
He says that his clients often make investments to hedge against currency movements in their new countries by longing or shorting the corresponding ETFs or futures markets.
Regardless of where you physically live, most brokerages will require you to have a (non-P.O. box) U.S. address to keep your account open.
Nick is able to follow a similar rule in Australia since he still owns his former home in Sydney. He said there’s only one real challenge.
“Getting mail directed to Colombia from Australia is nearly impossible.”
His solution? A friend picks up all of his mail and keeps it, unopened, in a large bin. Nick goes through his mail whenever he comes back.
Uncle Sam: Your Global Companion Forever
For those trying to avoid taxes, I’ve got some bad news for you: Unless you’re ready to renounce your U.S. citizenship, Uncle Sam gets his share no matter where you go.
“Tough news for the guy who wants to go dark,” Jeff said.
With that said, many countries around the world have tax treaties with the United States. These treaties allow residents of foreign countries to pay taxes at a reduced rate. Some even offer exemptions from taxes on certain types of income made in the United States.
You can find a list of all countries that have tax treaties with the U.S. here on the IRS website.
Cash Transactions and Purchases
If you’re thinking of becoming an expat, just know that you may have to jump over some occasional hurdles. For example, the Foreign Account Tax Compliance Act has made it more difficult for Americans to open a bank account in a foreign country.
Though not impossible, foreign banks now have more compliance requirements with the U.S. government. Some banks prefer to just avoid the hassle and simply won’t let an American open an account.
But there are simple alternatives. For example, you can open a checking account with an American bank that will waive or reimburse foreign ATM fees. Many brokerages, in fact, offer this to clients with checking accounts.
Even if you ultimately decide to open a local bank account, a checking account with a U.S. bank that doesn’t penalize you for international withdrawals is a no-brainer. My account with Charles Schwab, for example, works great when I’m traveling abroad.
Many credit card companies encourage foreign transactions and travel expenses. Travel reimbursement points and double rewards on foreign purchases go a long way. It would be wise to sign up for a credit card that offers benefits like these.
For some, the decision to move abroad is about exploring a new place with a lower cost of living… where the same pension checks or investment income you get by on in the States would allow you to live like a king…
For others, it’s the appeal of foreign real estate, an investment the U.S. government can’t tax. Not to mention access to an exciting new lifestyle and experiences that no other asset can afford you.
If you’re intrigued by the idea of a foreign retirement, now you know the first steps are a breeze…
That is, of course, if you can figure out where in the world you want to go.