Which is the best country for retirees?

I’m often asked, which is the best country for retirees? With just under 400,000 retirees living abroad, you can find like minded expats just about anywhere. The best country for you will be where you feel comfortable and that fits your budget.

According to the Social Security Administration, the top 5 countries for retirees are Canada, Japan, Mexico, Germany and the United Kingdom. These are the countries where the SSA sends the most money, so it’s an unbiased list of the most common countries for American retirees.  

I can tell you from experience that most of the “best country for retiree” lists on the internet are complete BS. They aren’t based on what’s best for you, but rather what’s best for the author.

If you search the web, you’ll find all kinds of opinions… most of which you can ignore. The better questions to ask are, where will you fit in the best? Where will you feel comfortable? What country combines the best of quality of life and low cost living?

Of the top 5 countries, Japan has seen the largest increase in American expats. While the cost of living in Japan is very high, the cost of healthcare is relatively low for world class treatment. Certainly no one can afford Japan on Social Security alone. But, if healthcare is a major need, and you have the cash from your IRA or elsewhere to afford Japan, it’s a great choice.

I know American retirees 70 years of age paying about $350 a year for insurance in Japan. This plan covers 70% of their expenses, with the balance made-up through supplemental insurance and their savings. Bottom line is that costs are about 80% lower in Japan than the United States.

And this has led to a 42% increase in American retirees between 2010 and 2014, again according to the Social Security Administration. Japan is the fastest growing American expat community in the world.

Of course, there are other reasons Japan ranks so high. For example, 50,000 military personnel are stationed on the islands and many thousand more have rotated through there over the years.

The country with the largest number of American expats is Mexico. And, it’s the top destination for value seeking retirees. In fact, it’s the only low cost country in the top 5, according to the SSA.

There are over 1 million American expats in Mexico, of which about 150,000  are retirees (receiving Social Security payments). The remainder are Americans commuting to work in the US, living in Mexico but not yet taking SS distributions, and internet entrepreneurs operating from Mexico. For the reasons why, see: Trump is Making Mexico Great Again… for Expats.

The the number of Americans moving to Mexico has increased significantly over the last year. Demand in Northern Baja, from which you can commute to San Diego for work, as jumped 35% over the last year, and looks to continue on this path. For more on Northern Baja, see: The Best Foreign Real Estate Market in 2017.

But Mexico is not all rainbows and unicorns. It’s a diverse and wild place you must spend a lot of time to get to know. Unless you put in the time, you’ll never find a city, town or pueblita that’s right for you.

And Mexico’s tax system is far from ideal. If you’re a resident (because you spend more than 183 days a year in the country), Mexico will attempt to tax your worldwide income… again, far from ideal. For a detailed article, see: Taxation of Expats in Mexico.

The workaround for this is to get legal residency in another country, and to do your business and banking through an offshore corporation. Form your company and get residency in a country that won’t tax your profits and doesn’t have a physical presence requirement for residency.

The country that ticks both of these boxes is Panama. You can form a Panama corporation, and open an offshore bank account, to handle your trades, investments, and/or business activities.

Then you can become a resident of Panama by investing $20,000 in their reforestation visa program. You don’t need to spend a certain amount of time in the country to maintain this residency. I generally recommend you visit once a year to keep up appearances.

And you can make this $20,000 investment using your IRA. In fact, you can decide to move all of your IRA offshore, or just make this one investment to gain residency.

So, you can get legal residency and a trading or business entity from Panama, and maintain your privacy while in Mexico. And this level of privacy is important. As any local will tell you, don’t let the bankers or anyone else in the country know what you have. Privacy is of maximum importance when living in Latin America.

I hope you’ve found this article on the best countries for retirees to be helpful. For more information on structuring your affairs while abroad, please contact us at [email protected] or call us at (619) 550-4732. All consultations are free and confidential,

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