Thinking of Moving To Another Country In Retirement? (pension, Canada, federal)
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A bunch of new overseas banking laws (FATCA) are about to kick in soon to prevent tax evasion by Americans with overseas accounts. That's fine, but the law is such a pain in the butt for overseas financial institutions to deal with that they are simply choosing not to deal with Americans, period.
"The 2010 law, to be phased in starting Jan. 1, 2013, requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients. It means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which could affect their ability to generate returns."
The "collateral damage" as a result of the new law,is that "U.S. citizens who live in countries that aren’t served by U.S. banks may find themselves unable to bank at all."
“Bank accounts, investment accounts, mortgages and insurance policies are being refused to American clients, and those with accounts are seeing them closed or have been threatened with closure.”
The article is long and most or all of it probably won't concern you, but if you are thinking of moving overseas in retirement you might want to keep an eye on this law and assess, along with your other retirement considerations, how it might impact your ability to bank in the country that you are thinking of settling.
Unless you are a millionaire investor/businessman interested in all of it, I recommend reading from the section titled "Collateral Damage" and down.
No. I've reseached this a little. Figured out that, yes you can retire very cheap, if you give up the life you're used to, forget AC, eat local diet. IMHO, you can cut your lifestyle here in the USA, or move to a low cost area in middle america or both and your cost of living will be about the same as in these other foreign countries, and save yourself A LOT of hastle.
There are many possible foreign residency countries for people holding USA citizenship where USA based banks have branches. For example, have a look at the list of countries where there are branches of Citibank. Additionally, many ... maybe most ... expats maintain their principal bank account(s) in the USA and withdraw funds by wire transfer or from an ATM machine in the foreign country in which they live (outside of the USA). Probably for the vast majority of expats ... this is a non-issue.
Good, what they don't pay in taxes the rest of us get to make up. Why should we make it convenient for people to help some other country?
Providing their incomes originate from the States, all American expats pay federal taxes, no matter where they reside. Does not matter the name of the bank with whom they do business, filing federal income tax return is mandatory for American expats who receive any money from any source in the US.
Soon after retirement, we moved to Italy and lived there for almost seven years (April 2001 - November 2007). Our bills were paid by an Italian bank, our credit cards were issued by an Italian bank, our money was in an Italian bank, and we paid our medical insurance to the Italian National Health. We received absolutely no benefits from the States, still, we had to pay federal tax every year, simply because the pension was from the States.
Last edited by Ol' Wanderer; 05-09-2012 at 12:17 PM..
I bet this law will affect US residents who maintain offshore accounts where money made outside the US is deposited. Agree, won't be more than a minor adjustment for people who really want to live abroad.
The IRS is getting desperate. My sister emigrated to Canada in 1969 but never renounced her American citizenship. Beats me how the IRS tracked her down but they did, telling her that because she failed to file US tax returns (even though she didn't make any money in the USA) she was subject to fines. So.... she had to go to Toronto, hire a lawyer, blah blah blah, and now has to go to the US embassy in Toronto to renounce her citizenship to stop from being harassed. It still isn't over. I told her to just write the IRS a nasty letter and NEVER come back to visit the US ever again.
The IRS is getting desperate. My sister emigrated to Canada in 1969 but never renounced her American citizenship. Beats me how the IRS tracked her down but they did, telling her that because she failed to file US tax returns (even though she didn't make any money in the USA) she was subject to fines. So.... she had to go to Toronto, hire a lawyer, blah blah blah, and now has to go to the US embassy in Toronto to renounce her citizenship to stop from being harassed. It still isn't over. I told her to just write the IRS a nasty letter and NEVER come back to visit the US ever again.
The solution which you offered your sister (last sentence of your post) would only be effective if the US and Canada have no treaty whereby the Canadian government cooperates with the American government in collecting financial obligations of former US citizens incurred while they were still US citizens. I'm not saying such a treaty exists, but I am saying she did the right thing by hiring a lawyer. These things are too complicated and too fraught with danger to fly solo.
I am assuming that your sister's ignorance of her obligation to file US tax returns was just that - innocent ignorance - and not any attempt to evade anything. And that is easy to understand. However, one cannot be too careful in covering one's bases in these technical matters, so your post serves as a red flag alert to anyone considering becoming an ex-pat.
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