Can I still work if I retire overseas?
If you’re thinking of getting a part-time job during retirement abroad or starting a second career, you’ll need to look into the legal regulations of the country in question. In most cases, you will need to have a business visa to legally work in another country. Some countries (Thailand, for example) will give you residency for retirement purposes, but you’re not allowed to start up a business once you move there. We’ve compiled a list of the most frequently asked questions about retiring overseas on a budget.
If you want to freelance online or run your own internet business, there’s a lot more flexibility. You can work wherever you have your computer, since you’re not technically employed in the country.
How do I make extra income if I retire overseas?
There are a lot of ways you can make extra money to fuel your retirement, even if you live overseas. If your visa or residency status allows it, you can always get a part-time job in your new hometown.
If you’re savvy with real estate, your new home country might be a good opportunity for investment. Countries like Portugal, Colombia, Mexico, Panama and the Dominican Republic have real estate advantage and appeal for foreign buyers.
Lastly there’s starting your own business. If you want to start a brick-and-mortar business, you’ll need to navigate the regulations of the country you move to. Your visa might not be valid for business purposes, so look into that as well.
If you choose to work online, you can circumvent all that. Believe it or not, retirees are starting online businesses all the time, offering freelance services, consulting, working in e-commerce, etc. That’s one of the main topics we discuss on My Retirement Rehab Blog.
If you’re just looking to earn a little extra spending money, you can probably find a local gig as an English tutor. Especially in developing countries, wealthy families will pay good money for you to just spend time taking with them or their children so they can learn the American English accent.
How does banking work if I retire overseas?
When you move abroad, there’s no reason to shut down your US bank accounts and credit lines. You’ll need these to take care of some business back in the US, such as collecting Social Security. Keeping your credit cards active also keeps your US credit history alive. You can use these to make online purchases (such as plane tickets) as well.
You’ll also want to open up a bank account in your resident country. Don’t be surprised if some banks refuse you. The US enacted a law, the Foreign Account Tax Compliance Act, which requires foreign banks to report on the accounts of US citizens. Some banks won’t want to do this, or they’ll charge an extra fee.
If the cumulative balance of your foreign accounts ever exceeds $10,000, you’ll also need to file a Report of Foreign Bank and Financial Accounts to the US.
You could theoretically just get by with using your US ATM cards overseas to get money, but you won’t get a good deal on the exchange rate and will likely incur a lot of ATM fees in the process.
Do I need to file taxes if I retire overseas?
The United States is a pretty unique country. It’s one of two in the whole world where you will always need to file taxes on income, no matter where you live in the world and where the earnings come from. If your only source of income is Social Security or your pension or annuity, you won’t need to file.
If you have other income, you’ll still need to file every year, but you can do it online with a tax service.
There are a few instances where you might not have to pay, such as residing outside the US for more than 330 days of the year, or when your income is subject to double taxation using the Foreign Earned Income Exclusion. These rules change frequently, so it’s best to do your research and talk to a tax professional when the time comes. But the short answer is yes, you will need to file if you retire overseas.
Will I need to get a new driver’s license if I retire overseas?
You might, depending on the country you move to. A US driver’s license is all you need to drive in a lot of countries, especially in the developing world. After you move overseas, you can renew it online and have it sent to a local address in the US. Then have a friend or family member ship it to you.
Some countries may require you to have an International Driving Permit. This is something you can apply for from the DMV before you move abroad.
In still other countries you’ll need to eventually get a local driver’s license if you plan to drive there long-term. In Spain, for example, you’re allowed to drive for up to 6 months before obtaining a local license. You’ll have to take the Spanish driving test to get it.
It’s best to look into the local regulations for the country in question before you move. Want to ride motorcycles as a hobby while retired in Ireland? Not so fast. The country requires you to go to motorcycle driver’s education, even if you have an equivalent license from the US.
Can I (should I) buy a house if I retire overseas?
You should be able to buy a home overseas as long at the country’s foreign ownership laws allow it. You may be required to obtain a special permit or register with a government agency to make it happen.
The real question is, should you buy a house? That’s going to depend on:
• Your long-term plans
When relocating abroad, you might feel compelled to invest in a home immediately to help you make the plunge. But I don’t recommend that strategy. Part of the point of retiring overseas is diversifying your environment. Make a decision to rent for a while first, and you might later find another city or another country is where you really want to spend your retirement.
• The cost of living
In some countries around the world, you can easily rent an apartment or condo for as low as $300/month. Purchasing your own home comes with a lot of extra expenses in and of itself: Property taxes, home repairs, etc. If renting is affordable, you might opt to continue with that option instead of purchasing a home.
• The local economy
Buying a home abroad involves taking a lot of money and transferring it to a foreign currency. The Dollar is powerful, so you should think twice before doing this. If the country’s local real estate market isn’t good, and you end up having to sell your home later, you could be out a lot of money.
• Your tax liability
Look into the local tax liabilities, similar to US property taxes. It’s possible that foreign buyers are taxed in another, more expensive bracket when they purchase a home.
If I’m retiring overseas on a budget are there tax benefits?
If you’re truly retired when you move overseas (you don’t have any earned or invested income), then there are no real federal tax benefits to it. You’ll pay no more and no less than before. However you would be able to avoid state taxes.
If you’re continuing to earn income during retirement, you can avoid some taxes under the Foreign Earned Income Exclusion. Otherwise, unless you renounce your citizenship, your US tax responsibilities follow you wherever you go.
How much will I owe in taxes if I retire overseas?
If Social Security is your only source of income, you should receive a Form SSA-1099 from the US government, and won’t need to file a US tax return. Most countries around the world won’t tax you for this retirement income either.
If you have other forms of retirement income, such as a part time job, you may have tax obligations to both the US and your country of residence. If you qualify, you can exclude some of your foreign earned income from US taxes using the Foreign Earned Income Exclusion (FEIE). For 2015, this applied up to $100,800 of income. If the US has a tax treaty with your country of residence, you may also be able to pay taxes at a reduced rate.
Many US states tax income as well. If you establish residency in a no-tax state before moving overseas, you can avoid this obligation.
As you can imagine, retiring overseas on a budget and tax filing while living abroad is complicated. How much you owe depends on your income sources, how much you earn, your status in your host country, where you claim residency in the US, and more. It’s best to talk to a tax professional to learn your full obligations.
Can I still receive my US Social Security if I retire overseas?
If you’re eligible for Social Security, you can receive it while living abroad. There are a few countries where it’s illegal to send SS checks (Cuba, North Korea) and other restrictions apply around the world. The easiest way to manage this is by maintaining a US bank account and receiving SS direct deposits there.
If you gain employment abroad and pay into their social security system, your US Social Security may be reduced based on Bilateral Social Security Agreements.
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Ian Bond is a private banking senior executive with over three decades of experience in wealth and asset management with Goldman Sachs, Credit Suisse, and Citigroup. He has built major businesses on four continents.
Despite his professional responsibility for assets over $100B and revenues over $1B, after the 2008 crash Ian was personally going broke. Within five years he destroyed his debt, became an expat in 2014, and built multiple streams of income to fund his imminent retirement. Ian is also the founder of MyRetirementRehab.me created to help other executives and professionals rehabilitate their finances and make a prosperous, enduring retirement a reality.