The idea of expatriation isn't new and in fact, more and more US citizens are retiring abroad. If living overseas is your idea of a dream retirement plan, you've probably already identified where you'd like to live, but you need to consider the financial landscape and social service infrastructure as well.
Let's start with basic banking services. You will need a bank account in your new locale to handle your everyday financial transactions such as paying bills. If you thought fees and charges were expensive in the US, you really need to stay on top of these while working in an international setting. As you transfer funds from the US, you'll be faced with higher transfer costs and currency exchange rate risk. Currency risk occurs as a result of the differences in price between one currency and another on a daily basis. You should look for a financial institution that charges no more than 0.5% for asset transfers. Too often, you can unwittingly find yourself paying as much as 3% just to have access to your savings. To help reduce your exposure to credit risk and associated costs, you should consider converting a solid portion of your assets into the currency of your new home country. Before you do this though, be sure the country has a stable economy such as Western Europe.
Another option is to work with a foreign exchange specialty firm, which often can move money at lower cost than a bank, and can also smooth out exchange rate volatility using forward rate locks. “We need to be competitive because we’re an added step to the bank,” says Michael Ward, CEO of one such firm, USForex. These companies often work directly with advisers; make sure you’re working with a firm that is licensed by regulators in your state, and by the U.S. Department of the Treasury.
In March 2010, the Foreign Account Tax Compliance Act (FATCA) became law. The provisions were put in place to enforce tax compliance by those living outside the US. One of the repercussions has been that foreign banks are less willing to work with US customers due to increased reporting requirements demanded by the IRS.
As a US citizen, you could be responsible for paying taxes in two counties. Most developed countries require you to pay your taxes based on where you live, but the US bases their tax system on your citizenship. Each year your US tax return may be eligible for tax deductions for the tax you pay to the country in which you live, but you'll still be responsible for your US obligation. This means you could pay taxes in both countries, but not that you'll pay double the taxes.
Your tax obligations can become extremely complex living abroad. You'll need to find a CPA who is not only well versed in the US tax code, but also that of the country in which you intend to live. Be sure to consult with your tax advisor well before you retire so that you have a plan in place and understand what you're getting into.
Work to build a portfolio which incorporates investments which are steeped in the currency of the country in which you live. You can continue to invest from US based exchanges and still accomplish this task by using an ADR (American Depositary Receipt), Foreign Currency Exchanges, and more.
-As reported by BenefitsPro.com
10. Luxembourg dropped from third to 10th place this year. It is one of the most prosperous economies in the world, has the third-highest income per capita in the world and an outstanding health care system. It has relatively low levels of unemployment, at 5 percent in 2014, and remains one of the most equal nations in terms of income. Luxembourg outperforms the top 30 average in the Health sub-index, with high life expectancy and impressive figures for health expenditure per capita.
9. New Zealand improved its overall score to 78 percent, moving from 22nd to ninth place on the Index. In Finances in Retirement, the country moved from 88thto fifth place due to a lowering of tax pressures and increased performance on various indicators such as bank non-performing loans. Unemployment levels increased since 2008 but it continues to outperform the top 30 countries average with policies remaining focused on environmental issues. It placed 26th in Health, although it does have a good health care system, it experienced lower indicators compared to last year, with decreases in physicians per capita and life expectancy.
8. Finland dropped two positions this year. It is a country with an overall high quality of life, and although its ranking in Finances in Retirement and Material Wellbeing have decreased, it still maintains a great healthcare system and a sound financial system. Finland has low levels of inflation and has one of the highest levels of income per capita. In terms of Health, it had an overall good performance in health care services and expenditure. The country jumped to 16th in the Quality of Life sub-index.
7. Germany increased its ranking from ninth to seventh this year. It is the largest economy in Europe and has a top welfare and health care system. It ranked second in Health and improved its standing in the Quality of Life sub-index as German policy has continued to focus on environmental issues, Natixis found. In Finances, although increased tax pressures could hinder economic prosperity, low levels of inflation and sustainable government debt have helped boost Germany’s standing in this category.
6. Denmark jumped to sixth place from eighth last year even though its score remained 79 percent. Denmark is considered a modern market economy. Its people also benefit from extensive government welfare measures and comfortable living standards. Denmark has extremely low levels of income inequality while possessing one of the highest levels of income per capita, with about $40,000 per capita. Denmark ranked 26th in the Finances in Retirement sub-index, with a reduction of inflation and overall lower levels of governance. IT also improved its ranking on the Health sub-index with one of the most favorable levels of health expenditure per capita coupled with a high number of physicians per capita. It ranked third on the Quality of Life sub-index.
5. Australia moved from 11th to fifth place in 2014. Australians benefit from a strong welfare system and high income equality, but unlike other large economies, Australia has extremely low levels of unemployment, about 5 percent in 2014. It ranked second in the Finances in Retirement category with low tax pressures and low levels of inflation. Improvements in the number of physicians per capita and stability in the total health expenditure covered by insurance resulted in a rise from 22ndplace to 11th in the Health sub-index. The country also improved its standing in the Quality of Life sub-index.
4. Sweden maintained its position in fourth place in 2014 even though its overall score decreased to 79 percent. The country’s universal health care system, with high levels of physicians per capita and high life expectancy makes it one of the top health care systems in the index. Swedes benefit from high levels of income equality and one of the highest levels of income per capita in the EU with around $42,000 per capita. To sustain a generous welfare state, tax pressures have substantially increased, which have impacted the Finances in Retirement sub-index. Sweden ranked fifth in terms of Quality of Life.
3. Austria took third place on the index, up from fifth in 2013. The country has a well-developed social market economy and a high standard of living, with an exceptional universal health care system. It is also one of the wealthiest nations in the European Union with about $44,000 in income per capita. It topped the Health sub-index, with impressive figures in the physicians and health expenditure per capita indicators and had a higher relative life expectancy compared to last year’s figures. Austria placed third in Material Wellbeing because of high income equality and low levels of unemployment.
2. Norway dropped from first to second place in the index this year, but it has an extremely high quality of life, an outstanding healthcare system and a sound financial system, according to Natixis. It is one of the wealthiest countries in the world with a sovereign wealth fund worth $800 billion. Norway saw improvement in a number of indicators and outperforms the average of the top 30 countries in all 4 dimensions of the Global Retirement Index, particularly in Material Wellbeing and Quality of Life. The country had a lower level of inflation, which prevents the loss of purchasing power of savings, a decrease in unemployment and an improvement in the curtailment of factors that lead to climate change. It underperformed in the Old-Age Dependency indicator because its ultra-low interest rate environment makes it hard for investors to grow their retirement savings and its high levels of taxation, 43 percent of GDP, hurt disposable incomes and the capacity to set aside savings for retirement.
1. Switzerland overtook Norway to claim the top spot on the Natixis Global Retirement Index. Its overall score was 84 percent compared to 87 percent last year, showing that overall country scores have gone down in 2014. Natixis points out that the index included government indebtedness as an indicator for the first time and it is developed country governments that generally have higher levels of debt as a percentage of gross domestic product. This new indicator, coupled with historically low real interest rates and a rise in the proportion of bank loans that are in default relative to other countries in the index, resulted in Switzerland falling from first to 6th place in the Finances in Retirement sub-index. Decreasing income inequality and rising incomes saw the country jump from 9th to fifth place in the Material Wellbeing sub-index. Improvements in the number of physicians per capita and the proportion of total health expenditure covered by insurance pushed Switzerland from 9th to 5thplace in the Health sub-index. It also placed first in the Quality of Life sub-index.