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by Barry Golson, AARP The Magazine, September/October 2010 issue
Can I live comfortably on Social Security?
In much of Latin America, the answer is yes, especially for couples receiving two Social Security checks. Monthly costs in the region’s less expensive countries, such as Nicaragua and Belize, are typically about $1,500. A smart idea: rent a home before buying one—be sure you like where you live before making a major financial commitment.
In the more developed countries of Europe—and even the pricier parts of Latin America—you may need an additional source of income. You can find low-cost living in the regions we’ve reported on, especially in Spain and Portugal, but you’ll need a minimum of $2,000 a month for frugal comfort in Europe. Some expats insist they live on far less—or far more—but $2,000 is a reasonable figure for people of average means. Books and websites touting a new life abroad for $900 a month aren’t always realistic.
How good is the health care?
Better than you might think. In Latin America you’ll find good-to-excellent private, low-cost care in and around big cities. Mexico has a progressive health care policy, with clinics established in even the smallest villages and first-rate care in cities such as Guadalajara and Mexico City. Panama City has very good health care; in fact, many Americans fly from Miami to Panama City to get inexpensive medical treatment. Even in poor countries such as Nicaragua, competent private care is available in the capital city, Managua, at a fraction of the U.S. cost. Doctors’ visits in these countries can be $30 and drugs are inexpensive, many available without prescription.
In Europe, French medical care is considered the best in the world. You must be a legal resident to be eligible for nonemergency care. If you pay into France’s "social security" and pay French taxes, you get great care for the rest of your life. Italy, Spain, and Portugal also have excellent care and strong national systems. The chief complaint about nationalized health care everywhere is long waits for nonemergency treatment. Private care—common among expats everywhere—is prompt.
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Some key things to know about health care abroad:
1) You can't use Medicare. That can be a deal breaker for some. Expat organizations are lobbying for the use of Medicare in Mexico, though it’s not expected to happen anytime soon. A good percentage of expats in Mexico make regular "Medicare runs" back to the States, so bear that in mind when you choose a locale. (And keep up those Part B payments, folks!)
2) You can join most national health care systems. They’re subsidized and sophisticated in Europe, basic in Latin America. And while you can’t always find a U.S. insurance policy that covers you abroad, you can get reasonably priced international insurance that will cover you for serious problems. (BUPA, a European-based insurance company, is the most common.)
3) Many doctors speak English. They are generally available at private hospitals, and many of them have trained in the United States.
4) The hospitals are good. In Europe, they range from good to superb. In Latin America, as medical tourism increases and more retirees migrate from North America, hospital care is slowly improving. Costa Rica is a major destination for medical tourism, for example, and its hospitals are good. You can check with Joint Commission International, the hospital accreditation agency (www.jointcommissioninternational.org/) for hospitals abroad that meet high standards. (Mexico currently has eight.)
What will I owe in taxes?
Expats receive a $91,400 exemption from the IRS for all income earned while living abroad. Interest from your savings, dividends, pensions, or annuities are not exempt—it must be earned income.
Here’s the bad news: The United States is one of the few countries that taxes its citizens anywhere they live on their worldwide income. Fortunately, the U.S. government has agreements with many countries that prevent expats from paying income tax both to their adopted home and to the IRS. Yes, the only sure things for Americans are death and taxes.
What about foreign taxes?
Taxation abroad can be complex and subject to change. In general, property taxes are very low in Latin America, but capital gains taxes can be hefty. Property taxes in Europe are similar to those in the U.S.
Many Americans are unfamiliar with the VAT, or value-added tax. In Europe a 15 to 21 percent VAT is tacked on to nearly everything you buy, with the exception of such staples as food. Some Latin American countries have similar sales taxes, but they’re often ignored.
As for taxes on income and capital gains, consult a local tax attorney. Let’s say that again: Consult a local tax attorney. Don’t use the Internet—hucksters selling their services are common. Visit the country, talk to expats, and ask for a professional with experience in taxes. In France, for example, you enter a labyrinth of taxation, with higher taxes than Uncle Sam’s. Do your homework.
Do retirees get special senior benefits?
U.S. foreign residents of a certain age—it varies, but can be as low as 45—typically receive the same benefits as local seniors. In Europe, standard senior benefits are similar to those in the United States. (Europeans retire considerably earlier than Americans, though that is changing.) In Latin America, special benefits for foreign retirees—tax breaks and lower import duties on personal belongings, for example—can be generous, with Panama a prime example.
How do I collect my Social Security payments?
Many expats have their Social Security and pension checks deposited into their U.S. bank account and withdraw money at local ATMs (at the most favorable exchange rates) as needed. New federal regulations—part of an effort to track down drug and terrorist transactions—have made it difficult for U.S. expats to open an account abroad, and in some cases to keep their accounts open in the States. The inconvenience has led some expats to renounce their American citizenship, a drastic move.
What residency requirements should I expect?
Generally, the main requirement is proof of income. The government wants assurances that you won’t become a ward of the state, or take away a local job. Your income requirement varies from $600 a month per couple in low-cost countries to as much as $2,000 a month and more elsewhere in Latin America and Europe. You also have to prove you’re healthy and have no criminal record. Each country has its own hoops you’ll jump through to become a legal resident, so study the official government sites and take your leads from local expats. Many hire a local “facilitator” to walk them through the process.
Can I own land abroad?
The short answer is yes, though you’ll need a good lawyer to help cut through the red tape. One major exception is Mexico: Within 50 kilometers of a coast or 100 miles from a border, foreigners may not own land outright. Instead, coastal expats rely on bank trusts; the bank holds the title in trust for you. You have all the rights of a property owner, and can buy and sell the trusts. In other Latin American countries, some land is restricted (you can’t own an island in Panama, for example) and some property may have murky documentation. In Europe, ownership has its own red tape, but buying a house is comparatively straightforward. Building a house, however, is severely restricted in some European locales, such as Italy. Let’s say it once more: Consult a local attorney.
Are the crime rates high?
Europe has a lower crime rate than the United States does, but in much of Latin America, burglary and robberies are a problem for expats and prosperous locals. Violent crimes are rare in major tourist and expat locations, and though you may see gruesome shootouts between drug gangs on the news, the drug wars are largely limited to rougher urban neighborhoods and highly dangerous border cities. If you take the same commonsense precautions you would take in any American city, you can live a safe, low-stress life.
Will I have to learn a new language?
English is the world’s second language, so in the countries we’ve spotlighted in print and online, most people will understand you. But the farther you get from cities and expat enclaves, the more difficult it becomes if you only speak English. If you live in a gated community of Americans, you can probably get by without ever using the local language. But where’s the fun in that? Knowing at least the basics of a local language will enrich your life abroad immeasurably.
Can I get domestic and garden help?
In Latin America, yes. Service in these low-cost countries remains very reasonable: $15 per day for a maid or gardener is common. Domestic service in Europe is rare for the average expat.
Can I see American television and movies?
Europe gets American movies after the United States does, many dubbed. Latin America also gets U.S. movies after they open here, but illegal bootleg videos are frequently sold on the streets. As for TV, the U.S. networks are generally not available abroad, though specialty cable channels via satellite are everywhere. Figuring out how your satellite dish can pick up U.S. signals is a major expat sport.
Can I buy my favorite American foods?
Yes, many are available, but at a considerable markup. Best advice is to stick to local products and food. If you don’t like the local food, what on earth are you doing there?
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