Chuyn | Istock | Getty Images
For those who’ve dreamt of working or retiring abroad, chances are you’ll be tempted by the potential for cheaper housing or healthcare. But there are some things to think about before making the jump.
Jude Boudreaux, partner and senior financial planner with The Planning Center in Latest Orleans, works with several expat clients and said the “modern economy” has made living abroad more feasible for some Americans for the reason that pandemic.
“There are a certain number of people that can work remotely and permanently,” which has opened the doors to living abroad, said Boudreaux, who’s a licensed financial planner and a member of CNBC’s Financial Advisor Council.
While a piece permit for a neighborhood job will be difficult in some parts of Europe, moving abroad could also be easier for Americans who’re “self-sustaining” with distant work flexibility, Boudreaux explained.
As for retirees, he has worked with clients on “either side of the political ledger” searching for more decisions and suppleness of their golden years, depending on shifts within the U.S. political environment.
Roughly 9 million U.S. residents were living abroad in 2020, in response to estimates from the U.S. Department of State.
For clients weighing the move, he often suggests spending a month of their chosen location first.
“It’s different to navigate the food market and health care treatments in a foreign language should you’re not super proficient,” he said.
Listed here are another key things to think about.
Income reporting requirements add complexity
Considered one of the important thing things prospective American expats need to think about is the yearly tax filing requirements, Boudreaux said.
While living abroad, you will need to pay annual U.S. income taxes on worldwide earnings, including your salary, business profits, investment income and more.
With measures just like the foreign income exclusion and tax credit, you will avoid double taxation. But there’s still the added time and expense of filing income taxes in two countries.
A number of times we’ll find people or banks that just won’t take care of U.S. residents because they don’t desire to need to take care of the reporting requirements.
Some financial institutions ‘won’t take care of U.S. residents’
Some expats also must report foreign accounts to the U.S. Department of the Treasury annually via the Report of Foreign Bank and Financial Accounts, or FBAR. The rule applies to expats with foreign accounts with a complete value exceeding $10,000 at any point all year long.
“A number of times, we’ll find people or banks that just won’t take care of U.S. residents because they don’t desire to need to take care of the reporting requirements,” Boudreaux said.
The yearly tax reporting requirements have even led some expats to think about renouncing their U.S. citizenship, in response to a 2022 survey from Greenback Expat Tax Services.
The exchange rate is ‘all the time a priority’
One other possible concern is the possible change in your purchasing power when converting money between countries. “The exchange rate is actually all the time a priority,” Boudreaux said.
While there are some investment options to assist manage that exposure, “more often than not, it’s just type of a risk that individuals carry,” he said. “Sometimes it’s higher, and sometimes it’s worse.”