Wharton: How Much Money Will You Need for Retirement?

Financial Independence/Retire Early -- Learn How!
therealchips
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Thanks, KenM. Taxing US citizens living and dying elsewhere.

Post by therealchips »

Which goes back to my original point - even when you compromise and forgo expensive western stuff like cheese etc, if you want a lifestyle similar to your home country then it will cost roughly the same except for, possibly, real estate, tax and medical costs.


Thanks, KenM. Your comment, based on lots of experience, confirms my impression from a little experience travelling in Africa, Asia, Europe, the Middle East, and the Caribbean. I remember my travelling companion looking up from her club sandwich in a fancy Istanbul hotel and saying, in a surprised and disappointed tone, "This isn't particularly good." I think the cheapest place to live like an American is the USA.

Afterthought: American citizens do not (officially) escape US income taxes wherever in the known universe they reside. (Even death doesn't provide an escape.) As I understand it, an American citizen remains subject to US income taxes as long as he holds that citizenship, and for a period of ten years after giving it up. The US government assumes without proof or the possibility of rebuttal that the purpose of renouncing US citizenship is tax avoidance and forbids that person ever entering the US again, even briefly. I recall reading about an American who gave up his citizenship and became a citizen of Belize. In order to visit his family, he got the Belize government to offer to open a consulate in Florida, with himself as the consul. The US government declined the offer. Please tell me I'm wrong about this, or that there are exceptions, especially if you can cite an authoritative source.

I have no interest in living for long in another country. It would feel like exile.
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
bpp
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Post by bpp »

Hi Chips,
Afterthought: American citizens do not (officially) escape US income taxes wherever in the known universe they reside. (Even death doesn't provide an escape.) As I understand it, an American citizen remains subject to US income taxes as long as he holds that citizenship, and for a period of ten years after giving it up. The US government assumes without proof or the possibility of rebuttal that the purpose of renouncing US citizenship is tax avoidance and forbids that person ever entering the US again, even briefly.
[...]
Please tell me I'm wrong about this, or that there are exceptions, especially if you can cite an authoritative source.


I think that the presumption of tax evasion kicks in if you have more than some amount ($500,000?) in net worth and/or a high income. Wanderer might be able to cite the relevant statute.

I also recall stumbling across exceptions for people who were born dual citizens, and for people who had taken up long-term residence in another country before giving up their US citizenship. I can try to find the details later, but anyway I do recall that there were a few exceptions granted.

Cheers,
Bpp
Last edited by bpp on Sun Aug 31, 2003 8:59 pm, edited 1 time in total.
[KenM]
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Post by [KenM] »

In thinking about cheap countries for RE I find the quote from Chips in the "Best states for retirement thread" interesting.....
A salary of $30,000 in Los Angeles has the same buying power that a salary of $13,448 has in Tucson. For Las Vegas the figure is $13,241.....New Yorkers' third-favorite refugee camp is North Carolina. Easy to see why: You've got to earn $45,000 in the Big Apple to buy what $7,191 gets in Durham. . . .

I'm not sure what $7,191 gets you in Durham but IMO you can probably apply similar reasoning to cost of living in SE Asia and, presumably, S America as compared to, say, median cost of living in the US. I would think that it is entirely possible to live a simple basic pleasant lifestyle in the US (small town in cheap state; no car; travel by Greyhound; a lot of rice/noodles/vegetables but small amounts of meat; no expensive processed foods; books from the library; clothes/appliances as special offers at supermarket; etc) at a similar overall cost for an equivalent standard of living in what might be seen as cheaper SE Asian or S American countries. Global economics, economy of scale and transport logistics are such that these days a cheap TV set is a cheap TV set is a cheap TV set wherever you are in the world. Imported bananas from S America may be cheaper in SE Asia than the local plantain product. As my previous post, imported US frozen chicken is quite probably the cheapest meat available in many places - if not US then maybe Bulgarian chicken :wink:
Governments distort prices by taxation/subsidy policies and obviously supply/demand is a factor so it is easy to quote things that are cheap (perhaps domestic help, local vegetables) - and just as easy to quote things that are expensive (perhaps books, magazines, gas, beer, breakfast cereal) - but overall, basic total costs would probably work out roughly similar for a similar quality of lifestyle (which does not mean consuming expensive American brand products but buying the local equivalent).
KenM
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bpp
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Post by bpp »

Hi again, Chips,

Found the relevant tax code: Section 877 of the Internal Revenue Code.
http://www.intltaxlaw.com/inbound/fdap/irc.htm (Click on "Section 877" after going to this link.)

Basics:
For purposes of paragraph (1), an individual shall be treated as having a principal purpose to avoid such taxes if--

(A) the average annual net income tax (as defined in section 38(c)(1)) of such individual for the period of 5 taxable years ending before the date of the loss of United States citizenship is greater than $100,000, or

(B) the net worth of the individual as of such date is $500,000 or more.


Exceptions:
c) Tax avoidance not presumed in certain cases

(1) In general
Subsection (a)(2) shall not apply to an individual if--

(A) such individual is described in a subparagraph of paragraph (2) of this subsection, and

(B) within the 1-year period beginning on the date of the loss of United States citizenship, such individual submits a ruling request for the Secretary's determination as to whether such loss has for one of its principal purposes the avoidance of taxes under this subtitle or subtitle B.

(2) Individuals described

(A) Dual citizenship, etc.
An individual is described in this subparagraph if--
(i) the individual became at birth a citizen of the United States and a citizen of another country and continues to be a citizen of such other country, or
(ii) the individual becomes (not later than the close of a reasonable period after loss of United States citizenship) a citizen of the country in which--
(I) such individual was born,
(II) if such individual is married, such individual's spouse was born, or
(III) either of such individual's parents were born.

(B) Long-term foreign residents
An individual is described in this subparagraph if, for each year in the 10- year period ending on the date of loss of United States citizenship, the individual was present in the United States for 30 days or less. The rule of section 7701(b)(3)(D)(ii) shall apply for purposes of this subparagraph.

(C) Renunciation upon reaching age of majority
An individual is described in this subparagraph if the individual's loss of United States citizenship occurs before such individual attains age 18-1/2.

(D) Individuals specified in regulations
An individual is described in this subparagraph if the individual is described in a category of individuals prescribed by regulation by the Secretary.


Cheers,
Bpp
[KenM]
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Post by [KenM] »

Chips
I think the cheapest place to live like an American is the USA.

.... but the US is such a big country and Americans have such a wide range of choice - from mountains to desert to sub-tropical, from rural to small town to cosmopolitan city - that living like an American can mean almost whatever you want it to mean. Those of us from much smaller countries perhaps have more of an excuse for trying other countries' lifestyles :wink:
However it's always a question of perception. I plan to spend some of my retirement time in Malaysia. A Malaysian friend thinks I'm crazy - in his view - it's hot and humid everyday; you have to run the aircon all day; public transport is poor so a family needs to keep several cars; good quality clothes and good quality food is expensive or of limited variety; limited cultural stuff; etc. If he could retire (he runs the family business so it's unlikely anytime soon) he would be off to London straightaway - in his view, if you've got your own apartment living costs are reasonable; it's a cool temperate climate; if you stay out of the rush hour, public transport is OK so no need for a car; good quality stuff at reasonable prices; good access to museums, libraries, theatres, recitals; excellent public parks; etc.
KenM
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[KenM]
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Post by [KenM] »

American citizens do not (officially) escape US income taxes wherever in the known universe they reside
........ but I thought there was an allowance (is it $80,000 a year?) before which overseas resident US citizens started to become liable? Maybe I'm wrong - I've always meant to ask.
As a Brit, as long as I don't spend more than 180 days in a tax year or more than an average of 90 days a year over a 4 year period in the UK then I'm not liable for income tax on overseas income/assets. Inheritance tax is a different issue - after 30 years away I may have escaped it, but only my heirs will find that out after I die - it's only then that the Govt will give a decision :)
KenM
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bpp
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Post by bpp »

Hi KenM,
I thought there was an allowance (is it $80,000 a year?) before which overseas resident US citizens started to become liable?


Yes, the Foreign Earned Income Exclusion. Only applies to earned income (wages, salary), not interest, dividends or capital gains. So useful for workers, not so useful for retirees.

Though I think it also applies to rents, so could be an inducement to acquire some overseas income-producing properties... hmmm... :idea::!:

Cheers,
Bpp
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Post by wanderer »

I'm late to this. bpp did a good job with Section 877. The FEIE does not apply to rents - just earned income.

Excluding shelter, taxes and health care costs in comparing COL sounds like the equity wonks' exclusion of imputed rental income in coparing RE returns to the currently favored asset class. :wink:

Don't get me wrong, there are a bunch of advantages in the States (e.g. libraries, decent public education in some places, at least for the time being). Still, I find it hard to seriously debate the COL issue ($300 for a sprawling 6BR/4BA house in a decent area in the RP).

Beyond that, we have found that all sorts of soft issues come to the fore overseas - incredible intellectual stimulation, healthier lifestyle, less boredom, etc.). It was huge benefit we (mostly) overlooked when contemplating relocation.
regards,

wanderer

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bpp
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Post by bpp »

Hi wanderer,
The FEIE does not apply to rents - just earned income.


Oh well, there goes that idea.

Actually, I went back to Pub. 54, and it seems it is in principle possible to consider up to 30% of rental income as earned income, but only if it represents personal services you perform in connection with the production of the rent. (See Pub. 54, p. 16.)

By the way, regarding Section 877, another thing I noticed is that the expatriation tax rules apply not only to (ex-)US citizens, but also to US permanent residents who give up/lose their residency status. I hadn't been aware of that before.

Cheers,
Bpp
[KenM]
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Post by [KenM] »

Excluding shelter, taxes and health care costs in comparing COL sounds like the equity wonks' exclusion of imputed rental income in coparing RE returns to the currently favored asset class

My original point (I think) was that http://www.chiangmaimall.com/expats/retirement3.shtml implies you can live well on US$500 a month excluding housing, medical and tax costs. That, to me, is "affluent backpacker" living - great for a long vacation - but, for me, not suitable for long term retirement. I tend to get slightly excited over this topic :lol: because on occasions (my wife collects strays and lost causes) I've had to help over-enthusiastic, totally unrealistic retirees repatriate to their home countries when they find that long term living in SE Asia, to the standards to which they or their spouses aspire, is not as incredibly cheap as they had assumed. I don't know about the UAE but at times it seems that life is full of either whinging expats or expats who are always comparing how to save another US50cents by fiercely bargaining with some poor third world guy trying to earn enough to send his kids to school. Balance in all things..... :)
KenM
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Post by therealchips »

Thanks to all for your research and your comments.

Here is a public service from KenM:
I've had to help over-enthusiastic, totally unrealistic retirees repatriate to their home countries when they find that long term living in SE Asia, to the standards to which they or their spouses aspire, is not as incredibly cheap as they had assumed.


I found this article from a while back ago:
http://www.migrationint.com.au/news/rom ... 9-01mn.asp Some 4,415 Americans have renounced their US citizenship over the past five years. In 1996, a law was enacted that presumes that those citizens with a net worth of $500,000 or more, or a federal income tax bill of $100,000 or more, who renounced their US citizenship did so in order to avoid US taxes. The 1996 law permits the US to levy income taxes on US income for ten years after renouncing US citizenship.


Continuing with KenM's comment, I think there is more than just economics involved in repatriation. Here is a public service from Sir Walter Scott: http://www.bartleby.com/101/547.html
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
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Post by wanderer »

chips, quoting kenm:

Here is a public service from KenM:

I've had to help over-enthusiastic, totally unrealistic retirees repatriate to their home countries when they find that long term living in SE Asia, to the standards to which they or their spouses aspire, is not as incredibly cheap as they had assumed.

I'm sure glad we didn't let scary stories deter us: we're up 135% through this 'bear'. :wink:

Sir Walter Scott seems to have been hit by the same frying pan that recently glanced off hocus' temple. Not sure what to make of that, chips. Seriously.

Oh, one P.S. : we just hired a filipina maid; also against kenm's better judgment. Can wanderer be saved from his folly? Tune in next week for our continuing 'drama'. :lol:
regards,

wanderer

The field has eyes / the wood has ears / I will see / be silent and hear
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ataloss
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Post by ataloss »

was that http://www.chiangmaimall.com/expats/retirement3.shtml implies you can live well on US$500 a month excluding housing, medical and tax costs. That, to me, is "affluent backpacker" living


actually I get $915/month for the 37,500 bhat monthly cost
Have fun.

Ataloss
[KenM]
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Post by [KenM] »

actually I get $915/month for the 37,500 bhat monthly cost
From the website
Housing = THB 15,000 = US$370
Food, transport, entertainment etc etc = THB 22,500 = US$550
Total= THB 37,500 = US$920

Note that medical costs, trips to home country, alcohol (even beer can be expensive) etc etc are not included.

I'm even confusing myself on this topic :lol: but my "semi-backpacker" comment was meant to imply that Housing=US$370 is good quality, good value-for-money, suitable for long term living (i.e. not backpacker) but that, for me, monthly living expenses=US$550 (US$6 for transport :shock:) is affluent backpacker style. Most people for long term expat "living quite well" (quote from website) would probably want such stuff as a car, belong to clubs, play golf, hire domestic help, take trips to other countries, go back to their home country once a year, etc etc. By the time it's all added up and medical costs are included it probably comes to at least US$30,000 a year for "living quite well" - not the US$10,000 a year implied by the website. I'm sure MaiPenRai and others at NFB are aware of actual conditions and will carefully make their own calculations of the realistic cost of their expected lifestyle and US$10,000 a year is do-able ...... but it's amazing how many others I've met over the years who've believed it's possible to live very luxuriously very cheaply in SE Asia. I therefore would disagree with the website "....the cost of living, which is of course microscopic in comparison to most western countries"

I seem to have given the impression that I'm trying to discourage retirees from living overseas - which is a bit strange considering that I've been very happy living as an expat for many years and would recommend it to everyone who has realistic expectations of what's available. I seem to remember suggesting some months ago that even in a supposedly expensive place such as Hong Kong it's possible to live happily as a retiree on $30,000 a year if expectations of lifestyle are adjusted to suit.
Last edited by [KenM] on Mon Sep 01, 2003 9:26 pm, edited 1 time in total.
KenM
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Post by [KenM] »

we just hired a filipina maid; also against kenm's better judgment

I feel very much misunderstood :lol:
I seem to recall saying something that, as with everything else, with Filipia maids you get what you pay for. We employed Filipina maids for 20 years when our kids were growing up and both of us were working - and the advantages definitely outweighed the disadvantages so I would recommend it. But try and employ one too cheaply and there is the risk of a very unhappy employer/employee relationship - I assume there are enough horror stories about maids in the UAE as everywhere else - a favourite topic of conversation of expat wives :).
KenM
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Sir Walter Scott expressed a normal, human attitude.

Post by therealchips »

wanderer:
Sir Walter Scott seems to have been hit by the same frying pan that recently glanced off hocus' temple. Not sure what to make of that, chips. Seriously.

The reference is simply to the fact that people usually love their native countries and prefer to live there. I think this is a characteristically human reaction. Evidently Scott did too. Most people prefer to live among people who share their cultural traditions, including language, and attitude toward law and democratic government. Does that strike you as deranged?

I recently had the experience of moving from a U.S. urban area dominated by foreigners to one dominated by Americans. It was like coming home. Even after three years, I exclaim almost every day about how much better life is here. The key word is "dominated"; I'm not talking about having a few immigrants in the neighborhood, but of having only about 15% of the people in a large urban area who are not recent immigrants to the US or their minor children. In the 1990 census of that district, with 800,000 people, whites and blacks together made up a 30% minority. Many of the whites were refugees from the former USSR and its former possessions. By the 2000 census, even more Americans had left California. When I sold my house in North Hollywood in 2000, about twenty groups of potential buyers came by to see it. They were mostly Latino, of course, but also Armenian, Thai, and Philippino; except for one of the Philippinos, none of them spoke English. Four Armenian families bought my little house, although the neighborhood and particularly the public schools there are almost entirely Latino. The Armenians did not care about the public schools since they send their children to private, local Armenian schools. The buyers put up another house on my former property, in addition to what was there, to accommodate so many people living in one place. Southern California has the most over-crowded housing in the US, last I heard.

You find it stimulating to live among foreigners; I found it threatening sometimes and inconvenient other times. The pleasure you take in that stimulation may wear thin and disappear after twenty years or so. It did for me. I remember a local television station that used to follow the stock market in English. Around 1995, It switched to an entirely Spanish language format, dropping all financial news. It put up a billboard in my former neighborhood announcing that change. Television sets may be cheap everywhere, but the set does me little good unless it is broadcasting in English.
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
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Post by wanderer »

I assume there are enough horror stories about maids in the UAE as everywhere else - a favourite topic of conversation of expat wives .

I only chat with one of the 'hens' with any frequency. Based on my limited observations, the filipinas are getting, by far, the shorter end of the stick. Frankly, it's embarassing being associated with some of my peers' behavior. It wouldn't surprise me if some of the filipinas do go 'bonkers'.

Most people for long term expat "living quite well" (quote from website) would probably want such stuff as a car maybe, belong to clubs tilt, play golf tilt tilt, hire domestic help ding ding ding, take trips to other countries much cheaper to do so from other countries rather than states, go back to their home country once a year sir walter scott i'm not - still it will be bundled in with business i need to transact in the states, etc etc.

(my comments in bold :wink:).

I do appreciate you being an informative voice of experience, kenm. as you say, the bit about rural HK living was interesting.
regards,

wanderer

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[KenM]
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Post by [KenM] »

mjlijewski
I really liked Thailand & would be interested in knowing how to stay there long-term

Have a look at Malaysia. Similar climate and costs to Thailand. Multi-cultural Malay/Chinese/Indian. Wide range of locations to stay. Common language is English including Government forms, business etc. I think that Wanderer considers there are disadvantages to living in a muslim country but in Malaysia it is not at all obtrusive into everyday life as it might be in the Middle East. It's a question of balancing advantages against disadvantages - for example Malaysia is more stable and has less corruption than other places I could name.

One advantage is that rolling 5 year social visit multiple re-entry visas are available to persons of any age if they can show a monthly overseas income of at least US$2,500 (which need not all be transmitted to Malaysia) or if they place US$38,000 on deposit in a bank in Malaysia (which needn't be a Malaysian bank but can be a branch of international banks such as Citibank, HSBC, etc).
KenM
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Post by wanderer »

I'm not sure what $7,191 gets you in Durham but IMO you can probably apply similar reasoning to cost of living in SE Asia and, presumably, S America as compared to, say, median cost of living in the US.

'I hope the quoted numbers are not as wildly inaccurate as those found at the expat forum'.

I would think that it is entirely possible to live a simple basic pleasant lifestyle in the US (small town in cheap state; no car; travel by Greyhound; a lot of rice/noodles/vegetables but small amounts of meat; no expensive processed foods; books from the library; clothes/appliances as special offers at supermarket; etc) at a similar overall cost for an equivalent standard of living in what might be seen as cheaper SE Asian or S American countries.

Yes. there are places where land is realtively cheap and plentiful. unfortunately many of those places are not terribly desirable in the states. BC, Canada, OTOH, offers incredible bargains. Comparing Chiang Mai with some podunk in Vermont (or North Dakota) really isn't much of a comparison to me. At least, at this point in my life. I wouldn't mind podunk VT at some point, prolly, but I would mind podunk, ND. Still beautiful, natural scenery and warm weather are a real turn on at this stage. (BTW, I have travelled thru podunk VT several times and it didn't seem that much cheaper.)

Global economics, economy of scale and transport logistics are such that these days a cheap TV set is a cheap TV set is a cheap TV set wherever you are in the world. Imported bananas from S America may be cheaper in SE Asia than the local plantain product. As my previous post, imported US frozen chicken is quite probably the cheapest meat available in many places - if not US then maybe Bulgarian chicken

Try Brazil. and NZ/Australian beef and lamb. yummy.

Governments distort prices by taxation/subsidy policies and obviously supply/demand is a factor so it is easy to quote things that are cheap (perhaps domestic help, local vegetables)

now you're getting it! cheap domestic help and good health due to much lower caloric intake and being out in the sun doing outdoors stuff in incredible natural surroundings would give us a great sense of 'the good life'.

sitting around with a bunch of paunchy, whinging, self-indulgent expats at some over priced golf course/country club while they bitch about 'problems' that 90% of the world would give their eye teeth to be afflicted with just doesn't cut it for me. :wink:

for some reason, you dismiss really cheap, great quality housing and access to high quality, cheap health care. as a prospective oldster, those are real appealing to moi.

- and just as easy to quote things that are expensive (perhaps books, magazines, gas, beer, breakfast cereal) - but overall, basic total costs would probably work out roughly similar for a similar quality of lifestyle (which does not mean consuming expensive American brand products but buying the local equivalent).

i would definitely need reasonably fast internet hook up. no libraries necessary then. Maybe we would share a car. Beer in the RP is $.50 a pop (they're a little smaller). Beef and pork are very reasonably priced.

i guess we'll have to agree to disagree. :wink:
regards,

wanderer

The field has eyes / the wood has ears / I will see / be silent and hear
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Post by wanderer »

I should probably look more closely, if that 5 year visa process and not having to deposit in a Mmalaysian bank is correct (any web sites you use, kenm?) - Thailand and the RP require far too much hassling at this point.

I think that Wanderer considers there are disadvantages to living in a muslim country but in Malaysia it is not at all obtrusive into everyday life as it might be in the Middle East.

I agree - UAE is an anomaly. Turkey is supposedly much more Islam 'Lite'.

A student of mine (Muslim) just came back raving about Malaysia. A fourth of the price compared to here for a 5 star restaurant.
regards,

wanderer

The field has eyes / the wood has ears / I will see / be silent and hear
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