Moving Overseas as a Financial Planning Tool
Many people know that they can live for less in many foreign countries, but few consider moving as a financial planning tool.
In financial planning there are several aspects to consider – income, investment return, tax issues, retirement, etc. What isn’t always considered are future expenses and inflation, since they are very hard to predict.
By moving to many other countries you can gain a great deal of control over your expenses.
For one, your medical expenses will probably be much lower, and will rise far more slowly. Did you know that private health insurance premiums in the States have risen 90% since 2000?
For another, you will probably use much less energy than you do in the States. In many 37￼popular retirement places you don’t have to heat your house – no big gas bill in the winter. Natural gas has more than tripled in the last 5 years. If you use fuel oil, that’s more than doubled.
In many places overseas you aren’t forced to own a car, or if you have one, you aren’t forced to use it to get things done, since there are good taxi and bus systems in place in most other parts of the world. In the States we’re often forced to own and use a car, whether we want one or not, since life is extremely inconvenient without one. Taxis are expensive and buses in most places in the States are infrequent or inconvenient. Owning a car is a huge expense when you add up everything – gas, insurance, car payment, repairs, tires, registration. But you’re forced to pay all these costs because our mass transit is usually lousy.
Even if you don’t buy health insurance, your employer does, and that’s money that could have gone into your pocket if they didn’t have that expense. In much of the world you can pay cash for health care (no insurance) and the cost is less than your deductible would have been in the States. And you don’t have to fight with your insurance company over payment.
When you move to a place with very inexpensive health care, a good public transport system and warm weather, you lose the health cost worries, the car expense (unless you want one for leisure use) and the heating bill. Now you don’t have to make all that money to pay those things – actually you can take that money you saved and multiply it by one and a half, since your taxes are usually at least a third of what you make. You have to make one and half times your expenses just to get by, because of the taxes you must pay in the States when you’re working.
In retirement your taxes will normally drop – no more social security tax, and your tax bracket is normally lower. If you live overseas and have a mailing address in a no-income-tax state, no more state income tax on your US-source income.
In many cases, you can have a good lifestyle in a poorer country on half the income – sometimes less. As I pointed out above, in many other countries public services are provided which we have to pay through the nose for in the States. And in a poorer country the charges for the things you do have to pay for will often be much cheaper. After all, the local goods and services providers can’t stay in business if they try to gouge everybody, since none of the locals could afford their services.
If you have a therapist or are taking anti-depressants or medication for high blood pressure, some of those things may become unnecessary if you choose the right kind of lifestyle overseas. Lots of illnesses are stress-related, and when you remove the stress they sometimes go away. Our “health care” system does enable you to function within a high-stress society, but it does not remove the source of the stress in the first place.
If you can live on half as much overseas, it’s like making twice as much money. Except you don’t have to pay taxes on the money you save, and you might find the life to be more pleasant than staying in the States.
Excerpted and adapted from the ebook “The A to Z of Moving Overseas” by Brent Wilson.