4 Countries That Welcome American Retirees

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By Kathleen Peddicord

Some countries roll out the welcome mat for foreign retirees, offering sometimes significant tax breaks, in-country discounts and other perks to anyone who qualifies for resident retiree status. The age you qualify as a retiree can have a broad definition, depending on where you go. For example, in Belize you can qualify for retirement residency and the associated perks as young as 45, and Panama has no stated minimum age requirement for its Gold Standard retiree residency program.

Costa Rica was the first country to make a concerted effort to attract foreign retirees with a program of special benefits. Its pensionado program was responsible for bringing tens of thousands of foreign retirees, mostly Americans, to the country in the 1980s and 1990s. While the pensionado visa is still available in Costa Rica, many of the tax breaks and other special perks it once offered have been discontinued. Costa Rica has also become more expensive, both as a place to live and as a place to own a home. For these reasons, while Costa Rica is perhaps the world's best-known overseas retirement haven, it no longer qualifies as one of the best.

Today, these four countries are working hard to attract foreign retirees:

Belize. Just over a decade ago the government of Belize enacted legislation to allow qualified retired persons to obtain permanent residency in their country. This is a quick and efficient program. As a QRP you could become a full-time resident of the country, but you can also enjoy the benefits if you spend as little as one month a year in Belize.

Belize's QRP residency program isn't only for senior citizens. It's available to anyone age 45 or older, and it grants a host of incentives designed to encourage foreigners to come and bring their money. These incentives include a permanent exemption from Belizean taxes, including income tax, capital gains tax, estate tax and import tax on household goods, automobiles, boats and even airplanes.

The only requirements to qualify for Belize's QRP program are that you be 45 or older, consider yourself to be retired and have at least $2,000 a month in guaranteed income to support yourself in Belize. While pension income can be shown to meet the last requirement, the easiest way to prove financial means is simply to deposit a minimum of $24,000 per year into a Belizean bank account.

In practical terms, the "consider yourself to be retired" requirement means that, as a QRP, you can't apply for a work visa. This is not to say that you can't do international, Internet or even local Belize business as an entrepreneur. You just can't take a job working as an employee of someone else in Belize.

Even if you're not contemplating retiring in Belize for several years, this is the time to apply and lock in the benefits of the current QRP law. Once you've qualified, a one-month holiday in Belize each year will maintain your QRP residency status while you work toward your ultimate retirement plan.

Ecuador. In recent years, Ecuador has raced to the top spot on lists of the world's most desirable retirement destinations, especially for retirees on a budget. The country offers diverse lifestyle options, from colonial Cuenca to cosmopolitan Quito and from the sleepy mountain town of Cotacachi to the fishing village of Playas.

Ecuador's retiree residency program offers the following benefits:
  • 50 percent off all public transportation.
  • 50 percent off national and international airfare.
  • 50 percent off all cultural, sports, artistic and recreational events.
  • 50 percent off electricity, water and telephone service.
  • A special discount on property tax.
  • Relief from Ecuadorian income tax.
  • A discount on vehicle tax.
  • A discount on judicial fees.
  • A refund of value added tax (sales tax).
  • And, perhaps best of all, you never have to stand in line. Seniors age 65 and older always go to the front.
The process of applying for and receiving retiree residency status in Ecuador has gained a (probably deserved) reputation for being complicated. However, the government has made an effort to simplify things. In addition, a new immigration office has opened in Cuenca, where many foreign retirees are choosing to base themselves.

%VIRTUAL-article-sponsoredlinks%However, the program also has some restrictions. As a retiree resident of Ecuador, you can leave the country for no more than 90 days per year for each of the first two years or you lose your status. After the first two years, you cannot be out of the country for more than 18 consecutive months.

To qualify for Ecuador's retiree visa program, you must be able to show guaranteed income of at least $800 per month, plus an extra $100 for each dependent relocating with you. If the income you're using to qualify for the program is from a source other than a pension or Social Security (investment dividends, for example), the amount of $800 per month for five years ($48,000) must be deposited in a bank in the country in advance.

Nicaragua. Nicaragua is a land of contrasts at an interesting time in its development. The civil war is history, and Nicaraguans today want nothing more than peace and prosperity. Geographically, Nicaragua is blessed, with two long coastlines and two big lakes, plus volcanoes, highlands, rain forest and rivers. In this regard, it has everything Costa Rica has, while also being less discovered and less developed. It is available for adventurers, eco-travelers and budget-minded retirees at bargain rates compared with costs in the United States, Costa Rica and almost anywhere else in Central America. Nicaragua is one of the most affordable places in the world to enjoy a comfortable, full and rich retirement.

The challenge for Nicaragua is persuading the world to take the country seriously as a potential retirement option. Nicaragua continues to work hard to overcome its troubled past and the world's general misinterpretation of the current reality in this country. As part of this effort to attract foreign investment, the country has instituted a pensionado program that is competitive with those on offer in Panama, Belize and elsewhere in the region.

To qualify for retiree residency in Nicaragua, you can be as young as 45. The best part of Nicaragua's pensionado program is the minimum monthly income requirement, which is the lowest offered by any country. You need a pension or Social Security of just $600 per month (plus $100 per month for each dependent) to qualify.

As a pensionado in Nicaragua, you:
  • Pay no tax on out-of-country earnings.
  • Can bring up to $20,000 worth of household goods into the country with you duty-free.
  • Can import one automobile for personal use duty-free and sell it after five years, if you'd like, without incurring any sales tax.
Panama. Panama offers what has become the world's best-known pensionado program after the once-heralded program from Costa Rica. Panama's pensioner status offers some of the deepest retiree discounts available anywhere, making it one of the most generous retiree packages in the world.

The government of Panama is fairly relaxed with regard to the minimum age to apply for this visa. Typically if you are over the age of 18 and receive a guaranteed pension from any government entity, including Social Security, the Armed Forces or a private company, then you can apply.

Your pension must be at least $1,000 per month, plus $250 per month for each dependent, including children under 18. Once you've qualified, you enjoy all pensioner visa benefits for life. These include:
  • 50 percent off entertainment anywhere in the country, including movies, theaters and concerts.
  • 30 percent off bus, boat and train fares.
  • 25 percent off airline tickets.
  • 50 percent off hotel stays Monday through Thursday.
  • 25 percent off hotel stays Friday through Sunday.
  • 25 percent off at sit-down restaurants.
  • 15 percent off at fast food restaurants.
  • 15 percent off hospital bills (if no insurance applies).
  • 10 percent off prescription medications.
  • 20 percent off medical consultations.
  • 15 percent off dental and eye exams.
  • 20 percent off professional and technical services.
  • 50 percent off closing costs for home loans.
With Panama's pensionado visa, you are also entitled to a one-time tax exemption on the importation of household goods (up to $10,000) and a tax rebate on every two years of import duties for the importation of a car (sales tax and luxury tax still apply).

In the past it was possible to apply for pensionado visa status on your own. However, the Panamanian government has since enacted a law requiring a lawyer to submit all visa applications. Also, because of the great volume of foreign retirees applying for pensionado visa status in Panama, the process can take up to several months.

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 28 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring and investing overseas in her free e-letter. Her newest book, "How To Buy Real Estate Overseas," published by Wiley & Sons, is the culmination of decades of personal experience living and investing around the world.

4 Countries That Welcome American Retirees
  • Cost of living -- 114.1
  • State tax burden -- 8.4 percent
  • Median house price -- $377,625, per Zillow.com
  • Climate -- 69/39 January, 105/75 July
  • Traffic congestion -- Didn't make the Forbes list
Scottsdale is a retirement mecca, with a reasonable cost of living, state and local taxes well below the national average, a great quality of life and plenty of amenities. But housing costs are nearly double the national average. Winters are warm, but summers are sizzling hot. Peak temperatures can reach close to 120 degrees -- after all, it's in the desert. The locals will dismiss it as "dry heat," but that kind of heat will still send your electric bill for air conditioning soaring, and can necessitate you buying new cars more frequently than you'd like.
  • Cost of living -- 130.0
  • State tax burden -- 9.3 percent
  • Median house price -- $417,600, per Zillow.com
  • Climate -- 74/64 January, 89/80 July
  • Traffic congestion -- Didn't make the Forbes list

Key West offers Caribbean weather in the U.S., an attribute that makes it a natural choice for retirees. And who could resist the Jimmy Buffett-Parrot Head thing, especially once you're living a life of leisure? 

You might be better off if you resist. The cost of living is 30 percent higher than the U.S. average, and housing costs at least twice as much. Travel is another issue. Key West is the most remote location in the continental U.S. The only road off the 6-square-mile island is the Overseas Highway, a 127.5-mile causeway that is largely one lane in each direction.

Hurricanes -- all too common in Florida -- are rare in Key West  -- though Wilma did hit it in 2005. But when they do impact the island, though, it's worth noting that the city has the Atlantic Ocean on one side and the Gulf of Mexico on the other, and there's no part of it that's more than 18 feet above sea level. So homeowners must pay several thousand dollars a year for hurricane insurance.

  • Cost of living -- 132.3
  • State tax burden -- 11.2 percent
  • Median house price -- $482,000
  • Climate -- 66/50 January, 77/67 August
  • Traffic congestion -- Didn't make the Forbes list
As big California cities go, San Diego is a bargain. But compared to the rest of the country, San Diego is certified high-cost. Yes, the weather is near perfect year-round. But the cost of living is one-third higher than the rest of the country, and house prices are nearly 2½ times the national average. Add in California's high state and local tax rates and the earthquake issue, and San Diego should be crossed off your list of potential retirement cities.
  • Cost of living -- 165.7
  • State tax burden -- 10.2 percent
  • Median house price -- $680,000
  • Climate -- 80/66 January, 88/75 July
  • Traffic congestion -- Second worst gridlock in U.S.
Can you imagine a more idyllic place to retire than Honolulu? Probably not. But as beautiful as it is, it shares many of the financial strains common to other cities on this list, plus a few more.

The overall cost of living is second only to New York City. After all, most of the goods people need have to be shipped across thousands of miles of ocean. The state tax burden is only slightly higher than the national average, but the median house price is triple the national average.

Finally, as far as cost of living is concerned, Honolulu has an unusual financial issue: travel expenses. Sooner or later, you'll want to get away from Hawaii. And there's no cheap way to escape from this paradise.
  • Cost of living -- 164.0
  • State tax burden -- 11.2 percent
  • Median house price -- $860,000
  • Climate -- 57/46 January, 70/55 September
  • Traffic congestion -- Third worst gridlock in U.S.
San Francisco frequently makes those "favorite cities in America" lists and for good reason. Situated on a peninsula between the Pacific Ocean and the San Francisco Bay, it is one of the most scenic cities in the world. Mild weather year-round, world class cuisine, charming neighborhoods and an eclectic population make it one of the most desirable places to live anywhere in the world.

But it has the highest median house prices in the country, which should scare off retirees. Its cost of living trails only New York City and Honolulu. And like the rest of California, its state and local tax burden is second only to New York.

One other reason people might avoid living in San Francisco is that it's prone to earthquakes. While that's certainly a concern for personal safety, few people from non-earthquake prone areas realize how it increases your cost of living. Homeowners need to pay several thousand dollars per year for earthquake insurance.
  • Cost of living -- 140.1
  • State/district tax burden -- 4.0 percent on first $10,000 and up to 8.95 percent on income greater than $350,000 in D.C., 10.2 percent in Maryland, 9.3 percent in Virginia
  • Median house price -- $395,000
  • Climate -- 43/29 January, 88/71 July
  • Traffic congestion -- 10th worst gridlock in U.S.
Washington is centrally located, is filled with historic attractions and has some of the most beautiful neighborhoods in the country. It also has one of the highest effective local income tax rates in the country. The district taxes the first $10,000 of income at 4 percent, then 6 percent to $40,000, then 8.5 percent on all income over $40,000 (you can exempt up to $3,000 in retirement income).

Like other cities on this list, Washington sports a high cost of living and some of the highest housing prices in the country. The area also has its share of toll roads, and traffic is a recurring problem. This is especially troublesome during the holidays and summer months. Interstate 95 -- which bisects the metro area -- is the principal travel corridor between the Northeast and Florida. Making traffic matters worse: the near-permanent road construction projects.
  • Cost of living -- 136.4
  • State tax burden -- 11.2 percent
  • Median house price -- $456,000
  • Climate -- 68/48 January, 83/64 July
  • Traffic congestion -- Worst gridlock in U.S.
As recently as the 1970s, Los Angeles was widely viewed as the city that all America was looking to move to -- or at least to imitate. Perfect weather, endless beaches, palm tree-lined streets, plentiful housing, a powerhouse economy and the lure of rubbing elbows with a celebrity or two. Today, about the only things L.A. has going for it are near-perfect weather and In-N-Out Burger. The rest is mostly a faded memory. The city's success was, in fact, a key contributor to its decline: The near-doubling of the metro population since the 1970s has created East Coast levels of human congestion.

Property values are higher than New York's and nearly twice those of Chicago. The state and local tax burden in California is second only to New York, and the overall cost of living in L.A. is more than one-third higher than the national average. California's unfunded pension liabilities are nearly as high as those in Illinois, threatening serious tax increases that could squeeze retirees. Nagging quality of life issues include the worst traffic congestion in the nation and smog that could lead to higher medical costs.
  • Cost of living -- 132.5
  • State tax burden -- 10.4 percent
  • Median house price -- $370,000
  • Climate -- 36/22 January, 81/65 July
  • Traffic congestion -- Ninth worst gridlock in U.S.
Boston is the quaintest large city in America, sporting centuries-old but impeccably maintained architecture, neighborhoods and surrounding communities that just ooze with charm and close access to the beaches of Cape Cod and the mountains of Vermont and New Hampshire. If Boston were a less expensive place to live, it could well be an popular and smart retirement destination.

But it isn't. The high cost of living and high housing prices are the main reasons cited by former residents for leaving the state. The state tax burden is higher than the national average; the cost of living is about one-third higher than the national average; and house prices are nearly double the U.S. median. Translation: a large chunk of your retirement income would be spent just covering basic living expenses.
  • Cost of living -- 116.9
  • State tax burden - 10.2 percent
  • Median house price -- $247,000
  • Climate -- 32/18 January, 84/68 July
  • Traffic congestion -- Didn't make the Forbes list
Based on the numbers, Chicago wouldn't seem to be the retirement financial disaster that other cities on this list are. The state tax burden is only slightly higher than the national average; the cost of living is tolerably higher than the U.S. average; and house prices -- while higher than the nation in general -- are downright affordable compared to the coastal cities.

However, in addition to being a generally more expensive place to live than the nation at large, the area faces burgeoning problems just over the horizon. Illinois faces the highest unfunded pension obligations of any other state in the country, at around $100 billion. Chicago faces a nation-leading $20 billion unfunded pension liability. Such deficits scream out for higher taxes across the board. We can only speculate as to which taxes will be raised (or created).
  • Cost of living -- 216.7 Manhattan, 145.7 Nassau County
  • State tax burden -- 12.8 percent
  • Median house price -- $972,000 Manhattan, $440,000 Nassau County
  • Climate -- 38/27 January, 84/69 July
  • Traffic congestion -- Fifth worst gridlock in U.S.
The area has fantastic amenities -– theater, music, concerts, festivals, ethnic foods, diverse and quaint neighborhoods and close access to beaches and mountains. It also has probably the most comprehensive public transportation system in the U.S. But it breaks down spectacularly when it comes to the costs. The area has close to the highest cost of living in the country, which gets markedly worse the closer you are to Manhattan. House prices are out of sight, particularly in the more desirable communities and neighborhoods. New York State has the highest state and local tax burden in the country. New Jersey has the highest real estate tax burden in the country. And nearby Connecticut isn't much better.

Weather runs from winter-time deep freezes to protracted summer heat waves. The preponderance of bridges, tunnels and their tolls -- as well as antiquated roads running through quaint town centers -- makes congestion a constant problem, even on the weekends.
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