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If you might have dreamed of working or retiring abroad, chances are you’ll be tempted by the potential for cheaper housing or healthcare. But there are just a few things to think about before taking the leap.
Jude Boudreaux, a partner and senior financial planner at The Planning Center in New Orleans, works with several overseas clients and said the “modern economy” has made living abroad more feasible for some Americans because the pandemic.
“There are various individuals who can work remotely and permanently,” which has opened the door to living abroad, said Boudreaux, who’s an authorized financial planner and a member of CNBC’s Council of Financial Advisers.
While an area work permit might be difficult in parts of Europe, moving abroad could also be easier for Americans who’re “self-reliant” because of the pliability of working remotely, Boudreaux explained.
As for retirees, he worked with clients “on either side of the political register”, looking for more alternative and adaptability in his golden years because the political environment of the United States shifted.
According to the information, about 9 million US residents lived abroad in 2020 estimates from the US State Department.
For clients considering moving, he often suggests spending a month in a location of his alternative.
“It’s one thing to navigate the food market and healthcare procedures in a foreign language should you’re not super fluent,” he said.
Here are another key things to think about.
Income reporting requirements increase complexity
Boudreaux said one among the important thing things prospective American expats need to think about is annual tax filing requirements.
While living abroad, you could pay annual U.S. income tax in your worldwide earnings, including wages, business profits, investment income, and more.
By means similar to exclusion of foreign income AND tax reliefyou’ll avoid double taxation. But there remains to be time beyond regulation and value involved in filing income tax in two countries.
Many times we’ll find individuals or banks that simply won’t cope with US residents because they don’t desire to cope with reporting requirements.
Some financial institutions ‘won’t cope with US residents’
Some expats must also report foreign accounts annually to the U.S. Department of Treasury through the Report on Foreign Bank and Financial Accounts, or FBAR. The rule applies to expats with offshore accounts totaling greater than $10,000 at any time through the yr.
“Plenty of times we’ll find individuals or banks that simply won’t cope with U.S. residents because they don’t desire to cope with reporting requirements,” Boudreaux said.
According to a 2022 study by Greenback Expat Tax Services, annual tax reporting requirements have even led some expats to think about relinquishing their US citizenship.
Exchange rate ‘all the time an issue’
Another issue is the possible change in purchasing power when converting money between countries. “The exchange rate is definitely all the time a problem,” Boudreaux said.
While there are some investment options to assist manage this exposure, “more often than not it’s just the form of risk that folks take,” he said. “Sometimes it’s higher and sometimes it’s worse.”
