Moving abroad from the United States is an exciting opportunity, but it’s essential to plan thoroughly to ensure a smooth transition. Here are 10 key considerations to keep in mind, illustrated with specifics from popular destinations like Spain, Costa Rica, Italy, and Portugal.
1. Consider Your Target Country’s Visa and Residency Options and Requirements
Working abroad long-term, or pursuing the digital nomad lifestyle, is becoming increasingly common – and more and more retirees are considering retiring abroad in order to enjoy a more relaxed lifestyle with a lower cost of living. Here are some commonly-mentioned visa options that allow expats with passive income or wages from remote work to relocate temporarily:
- Spain: Offers the Non-Lucrative Visa suitable for retirees or remote workers with passive income.
- Costa Rica: Has a popular “Rentista” visa, which requires proof of stable monthly income.
- Italy: Provides “Elective Residence Visa” for individuals with adequate passive income.
- Portugal: Known for its “D7 Visa,” ideal for retirees or those with passive income, and the “Golden Visa,” available through property investments.
2. Your Taxes May Change
If you become a resident in your country of destination, your tax picture is likely to change. You might be required to file taxes in your host country in addition to continuing to file your US return. Tax laws can vary significantly depending on the country in where you live. Some countries may have favorable rules for temporary residents.
- Spain: Implements the Beckham Law, allowing expats a flat 24% income tax rate for the first six years on earned income.
- Costa Rica: Uses territorial taxation, meaning residents are only taxed on income sourced from Costa Rica.
- Italy: Offers tax incentives like a flat-rate tax regime for retirees moving to certain southern regions.
- Portugal: Provides the Incentivised Tax Status (ITS) program, offering attractive tax rates and exemptions on foreign-sourced income for ten years, for those who meet specific professional criteria.
3. Healthcare and Private Medical Insurance
Many popular destination countries offer affordable public healthcare to their residents. However, it’s not uncommon for expats (and citizens) in these to purchase supplemental private insurance policies. Before making your move, it’s important to research residency requirements to qualify for public health insurance and obtain quotes for supplemental private policies if desired. Costs for public healthcare may also vary, and in some countries may be income-based.
- Spain and Portugal: Both offer affordable, high-quality healthcare through their public systems, accessible with residency.
- Costa Rica: Known for quality private healthcare services at significantly lower costs than in the U.S.
- Italy: Offers universal healthcare to residents, renowned for its quality, though bureaucracy can be complex.
4. Cost of Living
Many destination countries are popular with expats due to their relatively lower cost of living compared to the United States. However, some items may be more expensive in your new locale. Before packing your suitcases (or booking your shipping container), it may be worthwhile to research which goods tend to be more or less expensive in your new home when deciding what to take with you versus what to leave behind.
- Spain and Portugal: Generally lower living costs compared to the U.S., especially outside major cities like Barcelona, Lisbon, and Madrid.
- Costa Rica: Affordable living costs, especially housing and food, but imported goods and cars can be expensive.
- Italy: Reasonable cost of living, though it varies widely, cheaper in southern regions compared to northern cities like Milan.
5. Language Barriers
Some countries have wider adoption and usage of English than others. As a general rule, English tends to be more widely spoken in the commercial areas of major cities, whereas in suburbs or rural areas, it may be more difficult to communicate. Signage in English may be more difficult to find in rural areas, making them harder to navigate. Certain legal documents, such as wills, may also need to be translated and certified in the destination country in order to be valid.
- Spain, Costa Rica, and Portugal: Proficiency in Spanish or Portuguese significantly enhances daily life and integration.
- Italy: Italian proficiency highly beneficial, especially in smaller towns and rural areas.
6. Real Estate
For many expats, buying a beautiful home at prices much lower than those in the US is the dream. Some countries also provide visas to expats who have purchased property in the country. While homes in many popular destinations can indeed be cheaper than comparable property in the US, there may be significant differences in the home buying process and costs. Be aware of differences in transaction costs, taxes, availability of mortgages, mortgage rates, and insurance costs and coverage when doing your search.
- Spain and Portugal: Offer excellent opportunities for property investment, commonly linked to visa schemes like Portugal’s Golden Visa.
- Costa Rica: Attractive for beachfront or nature-close properties, though due diligence is crucial.
- Italy: Often inexpensive properties, notably in rural and less-touristic regions, with incentives available for renovation projects.
7. Banking and Financial Management
If you intend to stay in your destination country long-term, it may make sense to establish banking accounts in your country of choice. However, be aware that you may need to report these accounts to the IRS and potentially pay taxes on investment income. Consult a CPA who specializes in your new country of residence for advice on your specific situation.
- Establish local bank accounts early to manage finances efficiently. Spain and Portugal have advanced banking infrastructure, while Italy and Costa Rica can involve more paperwork.
- Understand currency conversion, international transfers, and tax implications for maintaining U.S.-based accounts.
8. Cultural Adaptation
Part of the joy of living in a new country is experiencing the full uniqueness of its culture. Understanding the cultural norms of your new country can also help facilitate communication, smooth out misunderstandings, and help you make new friends.
- Familiarize yourself with local customs, traditions, and etiquette to integrate smoothly and build social networks.
- Recognize regional differences, for example, Italy’s significant cultural variation between northern and southern areas.
9. Infrastructure and Connectivity
Availability of public transportation and transportation infrastructure may vary significantly depending on your country of choice, and even within the country itself. Consider whether you want to rely fully on public transport or whether you plan to own a car when deciding where to relocate.
- Spain, Italy, and Portugal offer excellent transportation infrastructure including extensive train networks, whereas Costa Rica’s infrastructure is less developed, requiring reliable personal transportation.
10. Education
Depending on your child’s interests and language ability, you may consider whether they would prefer attending an international school with other expat children or a local school with other neighborhood children. College tuition in popular expat destinations can also be quite affordable relative to prices in the United States.
- All four countries offer quality education systems, both public and private. Portugal and Spain boast a high number of international schools, favorable for expat families.
- If you have an existing 529 account, you may still be able to use it abroad. Look for Title IV schools, which participate in the US financial aid system and are able to accept payments from 529 accounts.
Conclusion
Moving abroad requires careful planning around legal, financial, cultural, and logistical aspects. By considering these specifics, you can enjoy a successful and enriching expatriate experience.
