Your retirement plans may benefit from a significant change if you move abroad in search of a more active, healthy, and fulfilling way to spend your golden years.
It’s not a good idea for everyone to retire in a foreign nation, especially if they have mobility limitations, trouble adjusting to a new environment, or chronic health problems. The present Covid-19 outbreak also poses a significant barrier to free travel between nations.
Because of the abundance of retirement communities, states like Florida and others in the United States may also be desirable. The unpredictable aspect of life abroad may positively affect one’s mental and physical health.
Research has demonstrated that retiring adults who engage in activities similar to those they engaged in while working can delay the onset of cognitive deterioration. As a retiree living abroad, you won’t have to look far to find that intellectual challenge.
Several Americans are considering moving their retirement to Cape Town, South Africa, because of the potential advantages of doing so.
- Cape Town’s cost of living is cheaper than many other popular retirement destinations worldwide, which paves the way for retirees to live well on less money.
- Beautiful Weather: Retirees whose health is negatively impacted by colder climes may find Cape Town a perfect place to spend their golden years.
- The quality of medical care in South Africa is excellent, and Cape Town is home to some of the country’s finest hospitals. Treatments in hospitals and clinics are also reasonably priced in Cape Town.
- Cape Town is surrounded by breathtaking beaches, mountains, and wineries and sits at the base of Table Mountain. Retirees can access beautiful natural areas and various outdoor pursuits, such as hiking, golfing, and water sports.
- Cape Town, a city with a rich history and a wide range of cultural traditions, is a prime example of cosmopolitan diversity. There is a wealth of cultural opportunities for retirees, such as museums, art galleries, restaurants, and events.
But, retirees should be aware of the potential drawbacks of relocating to Cape Town, such as language and cultural hurdles, fear of crime, and separation from loved ones back in the United States. Before deciding to retire in Cape Town or anywhere else abroad, it is wise to do some serious research and consult with experts.
If you go this way, you might need some assistance locating information for queries you didn’t even know you had.
Which visa do I need? How can I enroll in a medical plan? Where do I send my tax money?
Before you pack up and move to a foreign country to spend your golden years, consider the information below.
Don’t Forget About the Price of Medical Care
Healthcare costs are crucial for everyone, but they become especially critical for retirees.
If you haven’t already done so, enroll in Medicare and any Medicare supplements as soon as you become eligible. Annual enrollment is only required if you plan to leave the United States for more than a year.
That’s because you might want to come back to the States someday, and missing out on signing up early could cost you.
In the case of Medicare Part B, your rates will increase by 10% every 12 months because you were eligible but not enrolled.
For your peace of mind, it’s worth it to keep paying the premiums even when you’re abroad. Nevertheless, Medicare coverage cannot be used while traveling outside the country.
In the case of Medicare Part B, your rates will increase by 10% every 12 months because you were eligible but not enrolled. For your peace of mind, it’s probably worth it to keep paying the premiums even when you’re abroad. Nevertheless, Medicare coverage cannot be used while traveling outside the country.
As a U.S. citizen, you are still subject to U.S. tax laws even if you are physically located in another nation.
According to the Internal Revenue Service, income earned anywhere in the globe is taxable in the United States. The U.S. is part of a select group of countries that assesses taxes based on citizenship rather than residency.
However, you won’t have to hand up 100% of your foreign earnings to the IRS. You can reduce or avoid paying any U.S. income tax on sure of your foreign-earned income thanks to the United States tax treaties with several nations. U.S. citizens who spend the whole tax year, or more than 330 days in 12 months, outside the country may be exempt up to $107,600 in overseas earnings from U.S. income tax in 2020 under the Foreign Earned Income Exception.
Whatever you make over that point, however, may be subject to taxation in both your place of residency and the United States.
There is no need to worry about income tax on employment earnings if you do not intend to work while overseas.
Withdrawals from traditional IRAs, 401(k)s, taxable pensions, and taxable Social Security income in excess of thresholds are all subject to taxation. Due to tax treaties with a select number of nations, U.S. citizens living in such countries are exempt from paying U.S. income tax on their Social Security benefits.
Your U.S. taxable income can be decreased by the Overseas Tax Credit as well. To avoid double taxation by the U.S. and your new country of residence, you can often claim the Foreign Tax Credit to reduce the tax you owe to the foreign entity from income you make overseas.
You must file a U.S. tax return each year, even if you have no taxable income. Any time for even one day during the year that your overseas bank account balance is over $10,000, you must declare it.
Failing to understand your payment or reporting obligations under U.S. tax law is not an excuse. Choose an accountant well-versed in foreign tax legislation to ensure you don’t end up paying unnecessary fines.
Do not let the possibility of difficulties dissuade you from making a change that could offer you much happiness.