It’s now been nearly a year since I began offering one-on-one consultations to subscribers to my Global Citizen service. I’ve helped dozens of people plan for a move abroad, either at once or in the future.
And I’ve learned some important lessons along the way… with one in particular I want to emphasize as 2024 draws to a close.
Everyone has their own reasons for wanting to move to a foreign country. It could be lifestyle, cost of living, or an ancestral connection… or beautiful images of a place you just can’t get out of your head.
But every country that would welcome you as a resident is interested in one thing: your money.
That sounds crass, especially considering the romantic ideals all of us have about the places we’ve come to love and live, like South Africa for me. But it’s the truth.
For example, Portugal didn’t launch its residential Golden Visa program (now defunct) because it was desperate to have tens of thousands of Chinese, Russians, South Africans, and later British and Americans, living in its cities and towns. It faced an urgent need to boost property values, lest its mortgage lending banks go bankrupt. So, it offered foreigners the chance to have five years of residency if they invested a certain amount in a home.
Likewise, Panama doesn’t hand out pensionado visas because it loves having gringos speaking questionable Spanish all over the place. It wants the spending, economic growth, real estate development, and tax revenue it gets from foreign retirees who move there. The same goes from Mexico, Costa Rica, Ecuador, and the rest.
That’s the case for every country that offers a retirement visa, like Portugal’s D7, Spain’s Non-Lucrative, Italy’s Elective Residency, or Greece’s Financially Independent Persons visas.
As much as we want to think foreign countries love us, then, what they really love is our money. Of course, the friends and neighbors we’ll meet along the way will become near and dear to us... but they’re not the ones stamping our passports with residency permits.
That leads to my lesson: if you want to establish a life abroad, make sure you have enough money to do it.
Easier said than done, I know. Most people who start thinking about moving abroad are towards the end of their careers, not the beginning (although that's changing fast). Especially for retirees, it can be well-nigh impossible to increase your monthly income or savings on short notice.
But there are some tricks and tips that you can follow to make it easier for you. Here are several that I would encourage anyone thinking of moving abroad to start practicing ASAP:
Shift as much of your 401K and IRA stockholdings as you can into dividend-paying stocks and bonds. You'll need to start the required minimum distributions eventually, but if you’re generating lots of dividends, you can draw on those and leave your stockholdings alone. Those dividends will top up your Social Security nicely.
Consider rolling over some of your traditional retirement funds into a Roth IRA. That will mean paying taxes on the rollover transaction, but many countries treat withdrawals from Roth IRAs as savings rather than income. That will reduce your foreign taxes when the time comes. And, of course, if you invest your Roth resources in dividend-paying stocks and bonds, you can withdraw that income tax-free, both in the US and abroad.
Time your Social Security carefully. People who have substantial non-Social Security retirement income can get away with taking it early, at age 62. But for many of us, it's important to wait to 65 or even 67 to get a larger amount. I know it's tough when you're impatient to make a move, but it may make more sense to spend most of your year traveling and then wait until your Social Security income is maximized before applying for a long-term visa.
Consider converting fixed assets into income-generating assets like dividend payers. Rather than hanging on to your current home, run the numbers to see whether it wouldn't make more sense to sell it and invest the cash rather than renting it out. I've been doing that calculation and decided to sell our house in the US and reinvest it for long-term passive income.
All of the suggestions above involve tweaking and rearranging your finances to maximize your monthly income, so you'll qualify for a passive income visa somewhere. It’s not like those financial “advisors” who hector people into saving more money than they can afford… It's about making the most of what you've already got saved!
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