This article takes a look at 15 tax-friendly countries to consider for your retirement and includes a detailed analysis of the US tax burden.
Handling the Tax Burden in Retirement
The 1st of January, the 4th of July, the 25th of December, and the 15th of April. All four of these mark important dates in the US, but while the first three are celebratory, the latter often brings stress, panic, and even breakdowns. Yes, it’s Tax Day, the day on which the IRS sets the annual deadline for federal individual tax filing and payments.
According to FiscalData, the 2023 fiscal year saw a whopping $4.44 trillion collected in tax revenue by the US government. While this amount is an accumulation of various tax forms, the majority of it is made up of corporate and individual income tax. In fact, FiscalData reports that the 2024 fiscal year to date has seen 51% of all revenue being collected attributed to individual income tax.
These numbers are in line with US sentiments. According to a poll conducted by The Associated Press-NORC Center for Public Affairs Research and the University of Chicago Harris School of Public Policy, over 66% of American taxpayers view federal income taxes as unfair, saying that the amount they pay is too great. Citizens also expressed displeasure with how the government decided to spend the collected tax revenue.
“The government spends too much on war-making. I would prefer a focus on national healthcare and investment in education”
-Danny Velasquez, US Taxpayer, Democrat, and Business Manager
“There could be more support for education and for the homeless — there are a lot of people under the bridges still”
-Loretta Mwangi, Retired US Taxpayer, and Democrat
Tax burdens in the US don’t come to an end when retirement rolls around. CNBC reports that of the US states, only thirteen exempt residents from retirement income taxation. This means that retirees are free from paying taxes on 401(k), pension, and IRA payments. Taxes on Social Security payments are more lenient – only eleven US states applied taxes on Social Security benefits for the 2023 year.
Of course, all this talk of taxes is not without an accompanying business sector. Gannett Co. Inc. (NYSE:GCI) owned USA Today reported that 2021 saw 53% of taxpayers turn to a professional for paid assistance. While the Gannett Co. Inc. (NYSE:GCI) backed report did not mention which corporations US taxpayers are turning to, there are certain companies that hold prevalence in the market. Among the most popular are H&R Block Inc (NYSE:HRB), Liberty Tax Service, and Jackson Hewitt. According to Forbes, H&R Block Inc (NYSE:HRB) alone serves over 20 million customers, making it one of the largest and most well-known tax preparation companies in the US.
As such, US retirees often look for tax-friendly policies when deciding where they want to spend their Golden Years, among other factors such as the weather, the cost of living, and the housing market. This includes moving to states that don’t tax your retirement income, or even searching for the best expat retirement countries in the world.
To assist US retirees in the tax-beneficial move abroad, we have compiled the following list of tax-friendly countries to consider for your retirement.
Pixabay/Public Domain
Methodology
To compile this list of 15 tax-friendly countries to consider for your retirement, we consulted several sources including our list of 10 Tax Free Retirement Countries for US Citizens, and Taxes For Expats, Greenback Expat Tax Services, Finance Buzz, The Motley Fool, and Chase Buchanan. Once a list of countries was shortlisted using these sources, we then ranked them across multiple factors, namely, their cost of living, their quality of life, and their ease of retirement policies. These areas were political and economic stability, the legal system and civil rights, health services, safety, climate, costs and income, and popularity. As for the country’s cost of living and ease of retirement policies, multiple sources were consulted, including expat opinions on forums such as Reddit and Quora and official government sites.
Each country was then awarded a cumulative score, with the highest-scoring country being awarded the number one rank. The resulting list is presented in ascending order. It is important to remember that personal preference plays a big part. The best course of action is to visit the place you plan to move to, converse with locals, take advice from a financial consultant, and only then make your final decision.
By the way, Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using a similar consensus approach, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or a professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders.
Here are 15 tax-friendly countries to consider for your retirement:
15. Panama
Insider Monkey Score: 8
Cost of Living: $1,453
Retirement Program: Panama Pensionado Visa
Starting off our list of tax-friendly countries to consider for your retirement is Panama. A water-bordered country, not only does Panama not tax any form of retirement income, but it also offers retirees on the Pensionado visa various benefits. This includes a 50% entertainment discount, 30% off certain types of transport, 25% off at eateries, and a 25% discount on utilities, among many others. Combine this with the country’s rich biodiversity, and it’s a win-win retirement plan.
14. St Kitts and Nevis
Insider Monkey Score: 10
Cost of Living: $1,350
Retirement Program: Citizenship by Investment Program
Next up is St Kitts and Nevis, one of the best places to retire for tax purposes. Devoid of capital gains, inheritance, or income tax, this island nation is a majestic retreat for any US citizen seeking a retirement abroad. With a low cost of living that can easily be covered with meager retirement savings, a St Kitts and Nevis retirement is achievable without breaking the bank.
13. Belize
Insider Monkey Score: 11
Cost of Living: $1,310
Retirement Program: Belize Qualified Retirement Program
Belize offers all QRP residents permanent tax exemptions from categories such as income, estate, capital gains, and import. Combine this with its tropical climate, English-speaking population, and overall welcoming environment, and US retirees will feel themselves to be right at home.
12. Mexico
Insider Monkey Score: 12
Cost of Living: $1,511
Retirement Program: Mexico Retirement Visa leading to Mexican Permanent Resident Card
US retirees who receive more than 50% of their income from within the US are considered Mexican non-residents for tax purposes. This helps retirees safeguard themselves from double taxation and use their retirement income for other purposes. With its sandy beaches, distinct culture, and delectable cuisine, a Mexican retirement can prove to be very fulfilling – and a welcome break from the often high costs of living found in the US.
11. Ireland
Insider Monkey Score: 13
Cost of Living: $2,992
Retirement Program: D-Reside Visa
Ireland is a magical retirement retreat. The land of leprechauns and shamrocks, Ireland offers a welcoming environment, friendly people, and hearty soul food. On the financial end, US retirees can benefit from the US-Ireland double tax treaty which awards foreign tax credits and helps senior citizens escape a double charge on their income. Additionally, Ireland is also exempt from the wealth tax.
10. New Zealand
Insider Monkey Score: 15
Cost of Living: $2,259
Retirement Program: Temporary Retirement Visitor Visa
New Zealand provides overseas residents entering the country a 48-month period where they can live tax-free in the country. This is ideal for US retirees looking to move to the island country on its Temporary Retirement Visitor Visa. Once here, residents can enjoy a laid-back lifestyle complete with an expansive outdoors that is ideal for camping, fishing, hiking, biking, hiking, and the like.
9. Costa Rica
Insider Monkey Score: 16
Cost of Living: $1,446
Retirement Program: Pensionado Visa
Costa Rica has consistently been named one of the best expat retirement countries, and it also claims the number nine spot on our list of tax-friendly countries to consider for your retirement. With a warm climate, reasonable cost of living, and an abundance of nature, Costa Rica offers US senior citizens everything they could need for a pleasant retirement. Rich rainforests and beautiful flora dot the country, and the country also offers excellent healthcare services.
8. Malta
Insider Monkey Score: 17
Cost of Living: $2,103
Retirement Program: Malta Retirement Program
Malta welcomes US retirees under the Malta Retirement Program and it is among the countries that is most tax-friendly for retirees. This is due to the US-Maltese tax treaty which states that US Social Security payments flowing into Malta can only be taxed by the US. There are also many other benefits of a Maltese retirement – welcoming people, great weather, boat trips, and fresh seafood. US citizens can live out a truly peaceful retirement in this European gem.
7. Spain
Insider Monkey Score: 18
Cost of Living: $1,693
Retirement Program: Spain Golden Visa or Spain Non-Lucrative Visa
Spain is one of the best tax-friendly countries to consider for your retirement in Europe. While Spain does generally tax foreign residents, the US-Spain double-tax treaty helps retirees avoid double deductions. Under this treaty, US retirees earn foreign tax credits that can be used for taxation purposes in the non-awarding country. Given these benefits, many US senior citizens choose Spain as their retirement destination, reveling in its beaches, warm weather, and delicious food.
6. The Philippines
Insider Monkey Score: 18
Retirement Program: SRRV – Special Resident Retiree’s Visa
With a cost of living that is as low as $1,000, The Philippines has become a popular retirement spot for US citizens. Retirees can move to this Asian treasure under the Special Resident Retiree’s Visa and benefit from tax-free living thanks to the US-Philippines tax treaty. The treaty states that US retirees will only be taxed for income that they generate within the Philippines, giving them the benefit of fully realizing their overseas retirement income. Best known for its stunning natural landscape and rich culture, a Filipino retirement is truly fulfilling.
5. Nicaragua
Insider Monkey Score: 19
Cost of Living: $941
Retirement Program: Nicaraguan Retirement Visa
Nicaragua is one of the best countries to retire on a budget, and it takes the top five spot on our list of tax-friendly countries to consider for your retirement. Nicaragua has in place the Retiree Benefits Program which allows retirees to avoid taxes on all income earned outside of the country. Known as the ‘Land of Fire and Water’, Nicaragua enjoys scenic views of its mix of volcanoes and lakes, letting senior citizens live out their retirement in stunning landscapes.
4. Ecuador
Insider Monkey Score: 20
Cost of Living: $1,000
Retirement Program: Jubilado Visa
Ecuador residents living in the country under the Jubilado visa enjoy benefit from the double-tax rule. This states that any income that is already taxed in another country is not liable for taxation in Ecuador. Set in Southern America – and free from tax burdens – US retirees can experience pleasant climates, widespread biodiversity, and fresh ingredients such as bananas, cocoa, coffee, and seafood.
3. Greece
Insider Monkey Score: 21
Cost of Living: $1,300
Retirement Program: Greece Golden Visa Program
Greece offers retirees a host of benefits. This includes a low cost of living at just $1,300, favorable weather across the year, delectable cuisine, and of course, serene beaches. Add to this the US-Greek tax treaty which states that the same income cannot be taxed in both the countries, and US retirees are in for a peaceful and fulfilling retirement. The country hosts a variety of great cities, with Nafplion, Santorini, Athens, Thessaloniki, and Corfu being among the best places to retire in Greece.
2. Malaysia
Insider Monkey Score: 24
Cost of Living: $787
Retirement Program: Malaysia My Second Home (MM2H) Program
Among our top two selection of tax-friendly countries to consider for your retirement is the Asian country of Malaysia. US retirees can move to the country under the Malaysia My Second Home Program and benefit from tax exemptions. These exemptions include the tax-free transfer of foreign pension and income into Malaysia, and fixed deposit bank interest income also being tax-free. With these financial benefits and the country’s low cost of living, Malaysia has the best value for money to retire in. With this, retirees can also revel in the country’s natural beauty and delicious cuisine.
1. Portugal
Insider Monkey Score: 25
Cost of Living: $1,073
Retirement Program: Portuguese Retirement Visa or Portuguese Golden Visa
The last – and best – country on our list of tax-friendly countries to consider for your retirement is none other than Portugal. What makes the country ideal from a financial perspective is the option to embody Non-habitual Residence status which entails tax-free income for a period of ten years. To qualify for NHR status, retirees must spend a minimum of 183 days a year in Portugal.
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