How To Choose The Best Place To Retire Overseas

A reader of my wife’s Overseas Opportunity Letter wrote in over the weekend to say that a friend told her Ecuador is closed. That country is full up and not taking any more American retirees. Therefore, the friend will be moving to Granada, Nicaragua, instead and suggests that we update our recommendations. We shouldn’t be telling our readers to retire to Ecuador. There’s no more room.

While Ecuador does have the highest population density of any country in South America (about 54 people per square kilometer), I’m sure they have room for a few more expats. Mexico’s population density is about 58 people per square kilometer, and American retirees are still finding room in that country.

Jokes aside, this reader’s email reminds me of a couple of important points. The first is that rumors to do with living, retiring, and investing overseas abound. I have no idea where the friend got the idea that Ecuador doesn’t have room for more Americans. Maybe he found something on an Internet forum and misunderstood what he read.

A second thing this email highlights is that you have options. This person has gotten the idea somehow, somewhere that Ecuador is full, so he took that country off his list of places to retire and identified another. Fair enough. Both Ecuador and Nicaragua are good options for an inexpensive retirement. Note that Nicaragua has a population density of only 44 people per square kilometer. It’s unlikely that Nicaragua will find itself in the same position as Ecuador anytime soon (smiley face).

While the cost of living in both of these countries falls into the super-cheap category, these are two very different places (population density notwithstanding). Ecuador has high mountains where the weather is described as spring-like. In fact, temperatures in Cuenca, one of the most popular choices for highlands retirement in this country, average in the upper 60s Fahrenheit daily. Nightly lows can fall to the high 40s. I come from Phoenix, Arizona. I’d call that winter weather.

My point is that climate, like all things to do with choosing the best place to live or retire overseas, comes down to personal preferences. Maybe you, like me, would find evening temperatures in the 40s too chilly for your taste. If that’s the case but you like the idea of a mountain city, consider Medellín, Colombia. The cost of living in Medellín is a bit higher than in Cuenca… although the current strength of the U.S. dollar versus the Colombian peso makes the cost of living in that country more affordable than it’s been in six years.

Deciding where to focus your attention when considering options overseas for banking, for setting up a company, or for retirement, is a matter of prioritization. No place suits everyone. The good news is that you have plenty of options, especially when it comes to retirement.

For the record, Ecuador is still a good option despite the rumor that it is full. So are Panama, Belize, Colombia, Nicaragua, the Dominican Republic, Uruguay, Argentina, Chile, and Mexico. And that’s only the Americas. Malaysia, Thailand, Philippines, and Vietnam are good options in Asia. In Europe, you could consider Ireland, Italy, France, Spain, Portugal, Croatia, Romania, or Turkey. There are lots of options. (Please don’t write in to give me a geography lesson. Three percent of Turkey is in Europe. That 3% includes part of Istanbul, a city I’d put at the top of any list of world’s best cosmopolitan lifestyle options.)

How does one choose? As I said, it’s a question of priorities. Maybe weather is a priority for you. Maybe your priority agenda is to do with cost of living. Or maybe all you care about is that you can walk out your door and put your toes in the sand. Some want the charm and history of the Old World; for them, nothing could substitute for Europe. Etc.

How should you not choose? I don’t recommend making a decision about where to spend your time or your money based on a rumor that a country is full… or on any other rumor either.

Ideally, you should visit every country that gets your attention in person. That’d be a thorough but not a cost- or time-effective approach.

“Lief, for around the past 10 years I have been a satisfied buyer of your wife’s various information products. They have been illuminating and helpful to me, and for that I am very grateful. They have helped me to design an early start to enjoying my golden years.

“I have recently relinquished my U.S. citizenship and am currently a permanent traveler in Southeast Asia.

“Now I am in the midst of choosing the country where I will seek to obtain permanent residence. In making that selection, I have narrowed down the list to the shorter list of countries that tax their residents only on a territorial basis, such that income from sources outside of the country of residence is not taxed in the country of residence.

“While I am honestly happy to pay my fair share through withholding and sales or VAT taxes, a big part of my happy retirement quest is to live form free by eliminating any tax form-filing duties (and all associated exposure to penalties for any failures).

“So while I have appreciated your information regarding what sources and types of income are actually taxable in each country, I am hoping that you can help with the question that remains, as follows:

“Can you please tell us which countries do not require us, as foreign residents, to file the residence country’s tax returns as long as our only sources of income are from our investments (or other sources) outside of the residence country?

“In particular, I am very interested in some of the countries in Central and South American with which you are already very familiar, including Nicaragua, Paraguay, Panama, Costa Rica, and Guatemala.

“If you would include that key preselection criteria in your many wonderful writings, I for one would be extremely grateful. My next step is going to be to attend one or more of your conferences.

“Thank you again and keep up your good works!”

G.G., Permanent Traveler, Southeast Asia

Focusing on the Americas, Belize, Nicaragua, Panama, Costa Rica (for the time being… this could change), Guatemala, El Salvador, and Paraguay all tax on a jurisdictional basis. Unless you had revenue in those countries, you wouldn’t need to file a tax return.

In the part of the world where you’re currently traveling, Malaysia and Singapore fall into the jurisdictional category, while Thailand taxes income from outside of the country only if it is remitted to Thailand in the year it is earned.

Europe offers no real options other than Ireland, where nondomiciled residents (the definition of domicile can be argued, but, in this case, let’s use the simplified definition that you’re not Irish born and not an Irish citizen) pay no tax on income earned outside of the country and not remitted to the country. You’d have to live off savings (not interest, but savings) to reside tax-free in Ireland.

Here’s the full list.