The intricacies of handling finances when moving abroad can be plentiful; investment portfolios, dual-nation taxation, foreign earned income, real estate, medical insurance, and international currency transfers or money management are just a few of the issues a new expatriate will face.
Having a trusted financial advisor who specializes in the nuances of a transnational lifestyle can be your saving grace when it comes to cash because what you don’t know can very well hurt you financially. Be wary, though, of going to just any financial adviser that specializes in assisting expatriates. You will want to look around for a “fee only” advisor; one who charges a flat fee for his services rather than a commission based on percentages. Those who charge a commission based on percentage may be more interested in lining his or her own pockets, rather than looking out for your best interests.
Without the need to call in an advisor though, here are a few basics that will get you on the road of financial planning for your life overseas.
Decide what to do about your real estate
Hanging on to your residence in the United States will mean that you will continue to be responsible for property taxes, homeowners association fees, insurance and maintenance. Should you decide you rent out your US residence, this can be a terrific source of cash flow income, but you will also need to take into consideration the need for a good property management company to collect rents and deal with any maintenance issues that may arise.
Of course, even if you don’t rent out the property, the home will still need to be looked after. Some expats choose to hire a good house sitter or caretaker to watch out for their house and property. There are a good number of websites available to help find someone reliable, and generally, unless there are excessive chores to take care of or animals to deal with, no stipend is required; just the residence is sufficient compensation and they will typically be responsible for any utility bills.
Once in your new country of residence, you will need to decide whether to buy or rent a home there. If you think you want to buy property in your host country, be sure to check out the legalities of alien resident ownership of the country in question; some countries have restrictions on non-citizens owning property, while others, like Mexico, allow foreign ownership but have restrictions on certain areas such as beach front property.
Finally, keep in mind that property ownership in foreign countries will most definitely come with its own set of tax obligations and rules. Find out what’s up before you buy; the benefits, the drawbacks, the obligations and the process before you begin.
Understand Taxes and Foreign earned income
You may very well want or need to work while living abroad. As a US citizen, you are still expected to pay your income taxes, regardless of where you live in the world. Nevertheless, you are entitled to what is called the foreign earned income exemption (FEIE). The tax exemption amount for foreigners living and earning abroad is set at $97,600 for 2013.
In addition to the FEIE, there is a little known benefit called the Foreign Housing Exclusion (HE) which is for people who are employed, as well as the the Foreign Housing Deduction (HD) that is for expatriates who are self employed. Your tax advisor can tell you more about these exemptions.
Know What to do About Medical Insurance and Medical Care
Medical care can sometimes be one of the major motivations for moving abroad as health care is much more affordable in most countries outside the United States. Expatriates can take advantage of cheaper health care that is still excellent by International standards, and they can also opt to purchase long term comprehensive global medical insurance so that no matter what, their needs will be met.
If you are a retiree over 65, you need to keep in mind that Medicare will not cover your overseas medical insurance needs, so it is very important that you make sure you are covered where needed. You may also look into local insurance once relocated into your host country. Many countries, like Costa Rica for example, have socialized medicine; a foreign resident can opt in to the social security system (called the Caja Seguro Social) by paying a small fee each month, and then take advantage of the public medical system. Be sure to check the medical situation of the country you are planning on moving to; you may have a similar advantage.
A quick look into U.S taxes when living overseas