The Best Countries For Retirement if You Want to Pay Less in Taxes
The Best Countries For Retirement if You Want to Pay Less in Taxes
For many Americans looking to retire abroad, living well on a fixed income ranks among their highest priorities. You’ve paid into social security through your working years and want to relax. Maybe you have a pension or a 401(k), too, and intend to stretch that retirement income as far as it’ll go. If you could enjoy a lower cost of living, warm climate, and countries that don’t tax social security, that would be the dream, right?
For many retirees, that dream has come true in each country on this list. Many of them entice American retirees through good healthcare, friendly locals, and lucrative tax treaties. They offer clear paths to permanent residency and, for the truly invested expats, a chance for second citizenship. Most countries on this list have nice beaches and national parks to explore at your leisure. And each country wants you to live out your golden years with them.
Why do these countries want retirees to move there?
You might ask why these countries are invested in bringing foreign retirees to their shores. The answer is simple: they want your money. Whether you’ve worked until your mid-60s or left the workforce due to disability, Americans retiring abroad bring steady dollars without taking jobs or disrupting political stability. You invest American dollars into their local economies, paying for housing, food, entertainment, and healthcare. In return, each country here offers benefits like not taxing your foreign income or pensionado visa programs that grant discounts on services you’d use everyday. It’s a win-win for Americans living abroad and their foreign country home!
1) Belize
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If you’re seeking permanent residence on the sea and many comforts of home, take a close look at Belize. The first of two Caribbean countries on this list, Belize is surprisingly close to the US in more than just location. It uses the US dollar for currency. English is the official language, bordering other countries like Mexico and Guatemala. Return flights to the US or any of the Central American countries are readily available if you want to keep your Medicare doctors or explore the continent. Even with its low cost of living, we haven’t gotten to Belize’s best reason to retire abroad here: the QRP.
The Qualified Retirement Program, or QRP, offers a number of tax benefits to entice foreign retirees into living permanently here as young as 45. Participants pay zero income tax on foreign income; this includes social security, capital gains, inheritance tax, reverse mortgage, etc. There’s even provisions for buying property and importing your personal vehicle into Belize. With allowances to bring spouses and children under 18 years, this country of just over 400k people is certainly a viable option for American citizens looking to leave the US behind.
2) Costa Rica
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Second on our list is Costa Rica, a classic destination for American retirees who’re moving abroad. Bound by the Pacific Ocean and Caribbean Sea, the country collects zero income tax on money earned outside Costa Rica, including social security benefits. Enrollment in the Caja, Costa Rica’s universal healthcare plan, charges only 7-11% on your income and covers all in-country medical fees—another means to stretch retirement income in those golden years. Add in its numerous national parks, low cost of living (37% cheaper than the US) and a seven-year path to second citizenship to find a country that just might be your retirement home.
3) Ecuador
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We head down to South America to find Ecuador, next on our list of tax-free retirement countries. Bordered by 1200 miles of Pacific Ocean coastline, this country continues the trend of friendly locals, nice beaches, and low cost of living. Paying zero income tax on social security and other retirement income is just one of many benefits for American retirees here. Ecuador uses the US dollar and offers a $250 monthly refund on their sales tax, known as the value added tax (VAT). This country encourages buying property and establishing permanent residence, applying low property tax on homes. Expats over 65 who obtain residency in Ecuador may even get a discount on the property tax!
Once you get established here, be sure to explore the Galápagos and other Pacific islands off the coast. Other countries like Colombia or our final Caribbean country may thrill so much with their beauty and natural resources, you’ll never come back to the US.
4) Nicaragua
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We head back up to Central America and find Nicaragua, our next destination for retiring abroad. Bordered by Costa Rica, the Pacific Ocean and Caribbean Sea, the nation offers tropical lowlands and mountainous highlands for those looking to explore the tropical climate. Nicaragua’s pensionado visa program offers strong incentives for American retirees: zero income tax on your retirement benefits; sales tax breaks on home construction materials; duty-free imports on your own household goods up to $20,000; and many more. Many retirees choose Nicaragua if they’re looking to escape the workforce early. Their pensionado visa starts at age 45 and requires only $600/month in monthly income, with an additional $150/month for your spouse and each dependent. If a second citizenship is in your plans, Nicaragua offers a 3-year path to permanent residence and 4-year path to become citizens.
5) Panama
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Panama completes our list of low tax countries in the Americas, and what a finish it is. The third of our Caribbean countries, Panama offers foreign retirees its pensionado visa, a program giving significant discounts on import taxes, utility bills, personal mortgages, and many more aspects of daily life. Social security, a pension, or an annuity can meet the lifetime income requirement for this particular visa. No need to worry if you haven’t reached US retirement age, though; Panama says Americans living abroad can retire as early as 18.
Beyond these enticing benefits, Panama also applies zero income tax to outside retirement income. A lower cost of living carries your US dollar even further here, allowing Americans retiring abroad to live well under $2000 per month. Panama’s national parks, sunny beauty, and world-class healthcare make it the envy of many countries and an ideal home to set up permanent residence.
6) Greece
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We head across the pond to Greece, our first European country on this list. Retiring abroad works a bit different here compared to the previous countries; instead of showing a small, steady retirement income, we recommend establishing permanent residence here through the Golden Visa program. You’d invest €250,000 in Greek property, earning your tax resident status in the process. You can also rent a home in the country and apply for their tax break for pensioners: a 15-year agreement pay taxes at a flat 7%. While it isn’t quite as easy to get into as some countries on this list, Greece continues to attract expats retiring abroad with its Mediterranean cuisine and warm, breezy climate.
7) Malta
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We head west across the Mediterranean Sea to find Malta, the next European country on our list. This English-speaking island nation continues the trend of breathtaking coastlines and warm weather, along with favorable tax treaties. The Malta Retirement Program (MRP) excludes expats retiring abroad from paying income tax on social security and other retirement funds. Capital gains from outside the country should be exempt, though you’d be required to pay them on transactions from within the country, such as selling your Maltese home. Malta expects an annual retirement income of at least $26,039 or net worth of roughly $40,000 when applying for the MRP—well within the limits of many American retirement plans. With a cost of living that’s about 40% lower than the US average, lifetime healthcare rights, and queer-friendly locals, you might find yourself living permanently in this island paradise.
8) Portugal
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Portugal is up next as we round out our list of countries that charges zero income tax on your pension funds. Roughly 10,000 US expats make this small European country their home, enjoying local port wines in Porto and the Algarve, popular among the European elite. Health insurance runs cheaper here, too, with the free national health plan when you qualify for permanent residence after five years. You can retire as early as 18 here, provided you show about $830 in monthly income for a single person. Expats retiring abroad file for Non-habitual Residence (NHR) status, allowing you to pay zero income tax to Portugal over your first 10 years. This includes exemptions on capital gains tax, making for a very favorable tax situation when you retire abroad.
9) Romania
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Our final country in Europe, Romania beckons from the coast of the Black Sea. Its temperate climate is similar to Portugal’s, with the addition of continental warm summers in certain regions. American retirees seeking cooler climates find a cost of living that’s 50% lower than the US average, stretching those retirement investment options even further than most countries. As before, they don’t collect income tax against social security or pension income. While Romania doesn’t offer an explicit retirement visa, a temporary residence permit serves the same purpose. You’d need to show about $660 in monthly retirement income and pay the annual fee of about $58; permanent residency becomes available after five years. If you’re looking to retire abroad and really bring down that cost of living, cooler Romania may be the foreign country for you.
10) The Philippines
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Our final foreign country takes us all the way to Southeast Asia, where nearly 300,000 Americans living abroad called the Philippines their home. While most expats moving abroad start in Manila, there’s about 2,000 inhabited islands to choose from. Retirement begins as early as 35 on the Special Resident Retiree’s Visa (SRRV), where a $1500 monthly income and $10,000 retirement account deposit grants you residency. Aside from the tax-free benefits on your pension, the SRRV also offers multiple entry privileges and a $7000 import tax exemption on your household goods. Like with Romania, cost of living in the Philippines is 50% cheaper than the US, on average. Many retirees move to the Filipino life every year; maybe you’ll find yourself living your golden years among them.
Final Thoughts
So there you have it—10 select countries you can retire to that won’t tax your social security. Aside from the warm weather and tax breaks, most of these countries offer good healthcare and welcoming citizens. There’s one key factor to remember when you retire abroad as a US citizen: submit your US income tax filing every year. Expats are not exempt from filing their income taxes; however, numerous US tax treaties and income tax exemptions apply to lower that tax burden, if not eliminate it outright. Consult your expat tax professional to insure tax compliance and protect that hard-earned nest egg.
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Brett Andrews is the co-founder of Expatsi, a company that helps expats discover how to leave the U.S. Brett and his partner Jen developed the Expatsi Test to recommend countries to move to, based on factors like budget, visa type, spoken languages, healthcare rankings, and more. In a former life, he worked as a software developer, IT support specialist, and college educator. When he's not working, Brett loves watching comic book movies and reading unusual books.
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Brett Andrews is the co-founder of Expatsi, a company that helps expats discover how to leave the U.S. Brett and his partner Jen developed the Expatsi Test to recommend countries to move to, based on factors like budget, visa type, spoken languages, healthcare rankings, and more. In a former life, he worked as a software developer, IT support specialist, and college educator. When he's not working, Brett loves watching comic book movies and reading unusual books.