3 Tax Tips to Help You Retire Overseas the Right Way

After chasing and living the American dream, more and more Baby Boomers are considering retiring overseas. According to Travel Market Report, 3.3 million of America’s 78 million Baby Boomers say they are interested in retiring abroad. It’s a growing trend that is motivated by either the desire to develop a second home and financial situation or the need for a lower cost of living to be able to retire early or retire without working.  In fact, approximately 7 million Americans file an expat tax return and millions more are no longer required to file a U.S. tax return due to their reduced income.

If you find yourself in one of these two boats, the good news is that retiring overseas is certainly possible and with good planning, can be very rewarding.  Sitting down with a tax and financial professional with experience in international tax is the best first step.  Making sure that your financial house is in order ensures that you will experience the retirement of your dreams. Typically, at Money Concepts, we start working with clients about 18-24 months before they move abroad to make sure that they have their tax and financial worlds in order.  The IRS especially targets U.S. expats with additional reporting requirements and draconian penalties so we help our clients make sure that they do not have to worry about any IRS surprises when they are abroad.

Money Concepts advisor, Nick Hodges, CPA/PFS, MBA, CFP, CGMA, shares the three tax tips he always talks through with prospective expats:

• Leave from the “right” state: You could save a bundle on state income tax and avoid future harassment from state authorities by making your overseas move from a “no income tax” state. But you have to establish residency there before you leave the U.S. There are nine “no income tax” states you can consider: Florida, Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Move to one of these before you head overseas and you can save significantly. 
• What you need to disclose: There are as many as six additional federal tax disclosure forms when you move abroad. While these forms usually don’t change your U.S. income tax amount, each form carries a minimum $10,000 per year penalty if not correctly filed. 
• Keep important documents safe and accessible: Most of us keep our important documents in a safe deposit
box or filing cabinet. But when you need them abroad, consider scanning
and saving your files to a USB-
or thumb-drive. Alternatively, you can employ a secure, online storage for your important documents and data, which you can then access from anywhere in the world.

If you are considering retiring overseas, make sure you have a firm grasp on your tax and financial situation, a strong sense of adventure and adaptability, and the willingness to exchange some U.S. comforts for the exotic offerings of foreign locations. 

For more information, we encourage you to contact one of our financial advisors and take a look at the following resources:

•  www.Expatcfo.com
•  56 Questions You Need to Ask Before You MoveAbroad
• How U.S. Expats Can Avoid the 13 Most Common Expat Tax Traps
• ExpatTax Lesson Learned from the Gorillas of Rwanda

Sources:
Nick Hodges, CPA/PFS, MBA, CFP, CGMA

3 Reasons That Will Make You Rethink Your Need for Life Insurance

When was the last time you really thought about your life insurance policy or reviewed your life insurance needs? Chances are, if you don’t live in the world of wealth management like us, it’s probably been longer than you’d like to admit or perhaps it’s never even been more than a fleeting thought. You know, one of those, “I probably need to check into that soon”. Well, the reality is that life insurance can often be misunderstood, misconceived or altogether avoided, but when armed with the right information and resources, life insurance becomes a valuable tool in your financial plan.

What is the importance of having life insurance? It’s the peace of mind you get from knowing your loved ones will be taken care of – it can pay off debts and loans, help fund a child’s future education, or provide a steady source of income for family members. And while many Americans see the value in life insurance, less than half actually have life insurance policies – 95 million adult Americans to be exact, according to industry research group LIMRA.

If you’re within that group, we want to provide you with three reasons why you should rethink your decision and add a life insurance policy to your coverage:

1. Income Replacement. This the most basic purpose of any life insurance policy - replacing your annual income until the age you would have retired. When you have lost your ability to get out of bed and go to work, how will you survive without your income? From here, you should be able to determine how much life insurance you need.
2. Protecting and Taking Care of Loved Ones. Consider whom you are leaving behind and how they will be impacted by the loss of your income. Your spouse and your children are the most important part of your life. It goes without saying that you would do anything to ensure their comfort and safety. Financially, you should be able to say the same.
3. Tax-Free Wealth. You have the ability to build up tax-free wealth that you can use either during your lifetime or to be passed on to your heirs. If you build a variable universal insurance policy correctly, you can use it as a big Roth IRA. Post-tax money goes in, but the money grows tax-free and can potentially be pulled out tax-free.

“Life insurance is a financial product like so many other financial products. It is sold out of fear or need instead of out of good solid mathematics,” comments Money Concepts Financial Planner, Christopher Puffer. “Take this into consideration: Life insurance is the only investment vehicle that can guarantee a sum of money to be available when the most critical bills are due.”

Your policy isn’t a gamble; it is a vital part of the economic plan to keep your family financially secure. If you are underinsured, we strongly encourage you to seek the financial protection you need today. Keep in mind the following questions when determining your life insurance options: 

• What is the need for the insurance?
• How much do you need?
• How long of a term do you need on the policy?
• Explore your options thoroughly. Don’t make price your only deciding factor!

When life throws you a curve ball, you want to be prepared for it. Be proactive and select a licensed financial planner to serve as your trusted advisor now and in the years to come.

Sources:

Christopher Puffer, Financial Planner

http://www.lifehappens.org

http://www.limra.com