I. Introduction
More and more foreigners contemplate to retire overseas. They want to retain their citizenship but they want to retire abroad. This idea is enticing. Financial consideration is the main concern. Others include the political conditions in the targeted retirement destination, taxes, cost or standard of living, among others (Todd, 2010). They eye overseas retirement as they want to enhance the value of their retirement money.
In this case, they need to carefully assess their options. For instance, Americans who want to retire in cost effective, exotic place should address many financial planning issues, including taxes, insurance, investments and estate plans, before they leave the US (Knorr, 2001). A retiree can succeed in retiring overseas if he makes the best option on the right place to settle for his retirement. There are three main reasons that explain why retiring abroad present benefits to the involved partisans. Certain countries have good policies that lead to low taxes, reduced cost of living, and a great climate (Todd, 2010). The people who retire in overseas also enjoy the social security benefits that are provided under the social security administration (Knorr, 2001). The ways an individual will invest determines the degree of success in retiring overseas.
II. The strategic plan for retirement
The most strategic way to plan one’s retirement is to successfully balance expenses and savings during working years (West, 2005). A retiree needs to estimate how much money does he needs when he retires. He needs a firm goal and stick with it. While it is more difficult to save while a person is younger, he needs to save more as he grows older. Once the latitude to set aside more money, one needs to take the opportunity to save more for retirement. Those without a retirement pension plan needs to save more. During one’s early working years, he can invest in stocks and market linked investments (West, 2005). In later years, one can also invest in security mutual funds. As one gets near to his retirement, he must be more cautious in his investments (West, 2005). He must preserve his capital and reduce the risks related with new investments.
III. The advantages and disadvantages of retiring abroad.
According to Peddicord (2010), there are many advantages and benefits of retiring overseas. A new life is launched when you live in a new country. This would mean new weather, adventures and various opportunities. There is also a new opportunity of meeting new people and making new friends. There are also considerable tax savings when one relocates to another country (Fischer, 2008).
The fundamental advantage and purpose of living and retiring abroad is the low costs of living. This is because the retirement place being considered if significantly lower in terms of real estate, including retirement home and rent, food, medical care, health insurance, and fine dining (Fischer, 2008).
Retiring abroad means visa and various paper fulfillments, passing a background check, having a large financial funds or pension and adequate health insurance. Many countries will not allow retirees into their countries unless they complete and pass an exhaustive application process (Peddicord, 2010).
There are various security concerns in living abroad. Aside from being an expatriate, there are also basic issues on the country’s tax and currency, political instability, and personal safety (Peddicord, 2010). Health costs and standard of living have also risen in most parts of the world. For instance, out of pocket medical expenses may also be expensive. As such, the difference of moving to another place may be a compromise.
The public services and comfort they have in their own countries are not present in the new destination (Peddicord, 2010). For instance, the electric services and utilities may be less inferior in the new haven. One only has to adjust to the new environment. The culture and the language are major adjustments and this could be frustrating for a retiree (Fischer, 2008).
IV. How to acquire property and invest abroad.
Foreign exchange is one of the best reasons to acquire property and invest overseas (Hunt, 1985). The buying process can be a considerable time and it may involve conversion of assets into a foreign currency. One must not rush into property investing, especially if it is overseas (Todd, 2010). A considerable amount of time must be used for research, evaluation, long term projections for the economy and the strength and fluctuation of the related currency.
The full purchasing process which includes the legal aspects is long and complex. It will need a legal consultant who is conversant in English in the language of the chosen country where one will invest. Other options include buying a property through an offshore company to reduce taxes, taxes, expenses and laws (Franklin, 2000). This may be advantageous but varies from one country to another.
V. The security measures that exist in different parts of the world
The security measures which a retiree must consider in living abroad include the following: political and economic stability of the chosen country, the culture and treatment of foreigners in the said country, currency and tax issues, and personal safety (including criminality rates) (Walker, 2009). Medical and social services and public utilities must also be highly considered.
VI. The most fashionable, affordable and exotic locations which are available overseas
The best retirement locations are listed below, together with the living requirements needed in these countries.
1. Chiang Mai, Thailand
Monthly rent: $400
2. Las Tablas, Panama
Monthly budget: $1,200
Monthly rent: $400
3. Kuala Lumpur, Malaysia
Monthly budget: $1,250
Monthly rent: $500
Cuenca, Ecuador
Monthly budget: $1,300
Monthly rent: $500
Leon, Nicaragua
Monthly budget: $1,300
Monthly rent: $500
Medellin, Colombia
Monthly budget: $1,700
Monthly rent: $500
There are also tax concerns. It does not mean that when one leaves his own country that he will be exempt from paying his taxes (Baeber, 2011). They need to file their income tax statement annually (Bureau of Consular Affairs in the US, n.d.). When a retiree moves all of his assets to a foreign country, he may still be taxed on his income even when it is earned abroad.
Retirees abroad must also pay his taxes obligations in the foreign country of residence. The United States has tax treaties with a number of countries that address double taxation. However, this does not exempt them from the obligation to file a return (Bureau of Consular Affairs in the US, n.d.). Those retirees who acquire any assets overseas will also need to pay the local estate tax.
VII. The financial measures and major aspects of retiring abroad
The first consideration in living abroad is the cost of living at the new location (Piper, 2010). A retiree should make sure that his pension or budget can provide the same or better standard of living in the new country (Piper, 2010). The next big consideration is the banking system in the chosen country. Exchange rates are the primary considerations. Setting up a bank account in a new city should be considered carefully and it is highly advantageous if one can find a bank with connections to one’s home country (Piper, 2010). This will facilitate money exchange and setting up of an account. Insurance is another factor to consider with assets acquired overseas. For instance, most U.S. umbrella liability policies do not cover international assets (Piper, 2010).
VIII. Philippines: One of the Best Place to Retire
Many people have retired successfully in the Philippines. It is located on the southeastern rim of Asia and is bordered by the Philippine Sea on the east, the South China Sea on the west, the Luzon Strait on the north, and the Celebes Sea on the south (Encyclopedia of the Nations, 2012). Its land area, which is slightly larger than that of Arizona, measures 300,000 square kilometers (115,830 square miles). Its capital is Manila. The Philippines has beautiful islands, mountains, seashores and attractive women (Asian Journal, 2012). This place offers a good lifestyle such as golf, beaches, tennis, entertainment, good infrastructure for health care and wellness, gated communities which provide a secure environment and basic services (Asian Journal, 2012).
The Philippine Embassy in the United States (2012) gives the following information:
It is possible to get a Philippine visa and stay in the country for one year. After one year a round trip out of the country is required. There are four types of permanent visas to obtain in order to become a permanent resident.
1. For someone who has a Philippine born parent, there is the Dual Citizenship. This can be obtained at the Philippine Consulate and allows the applicant to retain citizenship to both the U.S. and Philippines for life.
2. For investors there is the Investors Visa which allows permanent residence in the Philippines as long as the applicant can meet the minimum investment amount.
3. There is the Retirement Visa for retirees to become permanent residents if they have the minimum required funds in a bank account.
4. For the spouse of a Philippine citizen, Permanent Residency can be obtained by getting a spousal visa.
All of these visas allow the applicant to retain citizenship in the United States. For retirees military pensions, social security benefits etc. all continue and provide a much better lifestyle than in the U.S. (Live in the Philippines Website, 2012). Direct deposit retirement funds can be withdrawn readily in dollars or pesos. Exchange rates have varied over the years from 20 pesos per dollar to 60 pesos per dollar. The current rate is about 40 pesos per dollar (NSCB Website, 2012).
In terms of housing, there are a wide range of rentals available. Prices depend on lifestyle. A US$400 a month will rent a nice air conditioned apartment or house. American citizens cannot own property in the Philippines (Live in the Philippines Website, 2012). The Philippine citizen spouse can purchase property but in case of divorce, the American spouse would not have claim to the property. Another option is a 15 year lease for American citizens. This is equivalent to the leasehold property in Hawaii. The property can be leased for a term of 15 years and at the end of the term all improvements to the property will be taken over by the original owner. There are many luxury condominiums in Manila that operate on this option (Live in the Philippines Website, 2012).
Transportation is another concern when living in the Philippines. Most expats do not take a vehicle into the Philippines with them. The import tax is very expensive. A driver’s license can be easily obtained and foreigners can purchase a vehicle if they want (Live in the Philippines Website, 2012). Small sedans and jeepneys are affordable. Most have diesel motors and get good mileage. The problem is fuel is very expensive. Philippine Police will sometimes target foreign drivers and accept money in return for dropping a traffic ticket (Live in the Philippines Website. (2012). The public transportation in the Philippines is plentiful and affordable.
In general, food is cheaper than it is in the U.S. with exception to certain foods that are not plentiful. For instance mangoes are very affordable but apples are expensive because they are not native to the Philippines. Most native foods are delicious like chicken adobo, pancit, and lumpia (Live in the Philippines Website, 2012). There are some that may not be tasteful to Americans like diniguan (pork intestines cooked in pork blood) or balut (an egg with a fermented fully formed chicken inside) or bagong (fermented baby shrimp) (Live in the Philippines Website, 2012).
Security is a big concern for foreigners in the Philippines. Certain areas of the Philippines mostly in the south are known for insurgents and are not safe for expats. Over recent years, this problem has become more wide spread with Muslim terrorists targeting Americans. The safest place is in an area where there are many expatriates living like Olongapo City, Angeles City, Cebu or the area surrounding the American Embassy in Manila (InterNations Website, 2012). In these areas there are lots of American owned businesses who cater to expatriates.
Medical care is very good for retirees. Doctors, dentists and Opticians are very affordable as are pharmaceuticals. There is a Veterans Administration office and clinic in Manila near the U.S. Embassy. There are some very large shopping malls in Manila. The largest being the Mall of Asia. There are even recreational activities such as golfing, hiking, and scuba diving.
A few foreigners have successful businesses in the Philippines but a much larger percentage of them fail. It is very difficult to deal with government agencies and landlords who want payoffs in order to provide the needed permits and licenses for foreigners to operate a business (InterNations Website, 2012). Police, government officials and landlords will sometimes expect benefits. It is usually the family business with a spouse who is a Philippine citizen that succeeds because they know the ins and outs of doing business in their own country (InterNations Website, 2012).
References
Asian Journal Website. (2012). Philippines: A Retirement Haven. Retrieved on October 30, 2012 from, http://asianjournalusa.com/philippines-a-retirement-haven-p5893-60.htm.
Baeber, H. L. (2011). Freedom Without Borders: How to Invest, Expatriate, and Retire Overseas for personal and Financial Success: How to Invest Expatriate, and Retire Overseas for Personal and Financial Success. New York: ABC-CLIO.
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