More American retirees are choosing to relocate overseas, but some of the most popular countries for U.S. expatriates are less than ideal, according to a report by the firm Global Citizen Solutions.
The report, U.S. Citizens Retirement Trends Study, ranks 16 countries as best for American retirees. However, some countries to which Americans gravitate are notably not on the list. The report weighed factors including quality of life, integration ease, community acceptance, security and economic conditions. It was developed in cooperation with the Association of Americans Resident Overseas (AARO), the largest organization serving American expatriates.
The factor that should be top of mind for potential expats may be surprising, says the study’s lead author, Laura Madrid, head researcher at Global Citizen Solutions.
“People, when they want to relocate and they’re coming from the U.S., have to think about taxes,” Madrid says. “I know it’s not the obvious answer, but it can give you a lot of headaches when you don’t have a tax consultant who will give you advice on the countries best for investment and migration programs that can give you beneficial tax regimes.”
Some Americans do seem to have taxes top of mind, however. Because of a “punitive” U.S. tax system that double taxes citizens living abroad, an increasing number of expats are renouncing U.S. citizenship, some experts say.
Weighing that and other factors, Global Citizen Solutions offers these 16 countries as the best for American retirees, ranked on a scale of 1 to 100 for overall desirability:
Spain 100
Portugal 99.79
Costa Rica 99.51
Uruguay 97.89
Mexico 97.19
New Zealand 96.53
Italy 95.94
Canada 95.23
Ireland 94.74
France 94.24
Australia 94.20
Panama 94.20
Malta 93.84
Greece 93.22
Malaysia 91.66
Thailand 88.15
Notably absent from the list are countries in the top 10 for hosting the most American expatriates, including, according to AARO, the United Kingdom, Israel, South Korea and Japan. Asked why these countries are absent from Global Citizen Solutions’ recommendations, Madrid cites a variety of factors.
“The U.K. remains a popular choice for U.S. retirees due to strong cultural ties,” she acknowledges, but cites Britain’s “really bad” weather as a primary negative factor.
“Japan and South Korea are safe but expensive and distant,” she adds. “Israel has recently been involved in conflicts. Germany, where many U.S. citizens can claim citizenship by descent, and Switzerland are potential destinations, though their high costs and less-favorable weather are drawbacks.”
The report also ranks the 16 featured countries by various subcategories. For example, in the Quality of Life category, Spain is first with a perfect score of 100, Mexico is second with 98.95, Portugal is third at 98.22 and France is fourth at 94.36. Topping the Security, Acceptance and Integration category are English-speaking countries: New Zealand, 100; Ireland, 98.23; Canada, 96.24; and Australia, 96.24. And leading the Economics category are Malaysia, 100; Thailand, 94.50; Panama, 82.92; and Costa Rica 82.01.
Safety and security are key considerations for prospective expats, according to the report, which notes that the United States was ranked 131st out of 163 countries in the 2023 Global Peace Index. The report notes that the U.S. homicide rate, over six per 100,000 people, is more than six times higher than most Western European countries, and that in 2021, the total number of U.S. gun deaths reached a record high of 48,830, a 23% increase from 2019.
“Consequently, many are turning their eyes towards European countries such as Portugal and Spain with lower rates of violence and higher standards of public safety, where they can enjoy their retirement years with a greater sense of security and well-being,” the authors write.
Economic Considerations Guide Many Expats
With America’s high cost of living, economic considerations are the primary motivator for many retirees contemplating going abroad, Madrid writes in the report. Relocating to a country where the cost of living is markedly lower can extend the reach of their retirement funds and afford them a lifestyle unattainable in the United States, she says.
“In these cost-effective places, retirees often enjoy the dual benefits of lower living expenses and access to affordable, yet dependable, healthcare,” she writes. “In Costa Rica, private health insurance for expats can range from $60 to $250 per month, which is significantly lower than average costs in the U.S.”
A Tough Tax Situation
But the report notes that the U.S. is unique in the world in taxing on the basis of citizenship, meaning that expatriates can be subject to U.S. and local taxation and are subject to other stringent U.S. financial requirements.
“Under U.S. rules, non-U.S. retirement plans, non-U.S. small businesses, and non-U.S. mutual funds and other investments are subject to punitive treatment,” writes report co-author Laura Snyder, a tax law advisor and advocate for AARO. “This includes punitive and highly complex reporting requirements, together with punitive taxation.”
As a result, Snyder says, Americans outside the United States face difficulty investing and planning for retirement, owning small businesses, holding title to their principal residence and other family assets, holding bank and other financial accounts and holding certain positions of employment.
Citizenship Renunciations Reported Up
Calling the U.S. tax system for expatriates “highly complex and highly penalizing,” Snyder notes it affects all overseas Americans except those who renounce U.S. citizenship. But even that is costly, requiring a high renunciation fee as well as a penalizing exit tax in some cases, she warns.
“This is why renunciations have spiked in recent years,” adds AARO President Doris Speer, in an interview published as part of the report. “We believe that Americans should not feel compelled to renounce.”
However, Madrid, the lead author of the report, cautions that the evidence of increasing citizenship renunciations is unclear. “People in AARO are telling us that they hear people talking about the possibility of renouncing U.S. citizenship due to tax challenges,” she says. “So, some people are fed up with this situation, but I think it’s not for me to say that people actually will renounce their American citizenship. I think we need more research on that.”
Politics Spurs More Talk Than Action
Another reason Americans consider moving abroad is dissatisfaction with U.S. politics, but this is mostly talk, according to the authors.
“This trend has been particularly noticeable in the last electoral cycles, motivating individuals to seek security in more stable countries and even consider acquiring a second citizenship as a form of insurance against upcoming events that might destabilize the political and social fabric of their society,” the report notes.
Co-author Amanda Klekowski von Koppenfels, migration and politics lead researcher, writes that political changes in the United States between 2014 and 2019 resulted in a big increase in emigration aspirations among politically involved individuals.
“But overall, U.S. citizens had not acted on the ‘move to Canada’ sentiment which … hit an all-time high on November 9, 2016,” Koppenfels says, referring to the day after Donald Trump was elected president.
On the other hand, prospective American expatriates are less concerned about the politics of the country they plan to move to. For example, Madrid says, although far-right political parties made significant gains in recent European parliament elections, Americans have little awareness of this. “When they make the first movement, of course, they are going to check if the country is politically stable and can safeguard general civil and political rights,” she says. “But they are more detached from local politics compared to their country of origin.”
Engage a Financial Professional
Co-author Paul Atkinson, a banking law advisor for AARO, advises that retirees take steps to safeguard themselves financially before relocating abroad, where financial requirements are more complex and options more limited, than they were at home.
“First, it is a mistake to try to manage payments in two countries with separate currencies with just one bank account,” Atkinson writes, noting that the expat needs basic banking services, including receiving and making payments in their host country and the U.S.
He notes that the U.S, tax code treats mutual funds and defined contribution retirement plans like 401(k)s outside the United States punitively, and he advises that expats should maintain their savings vehicles in the United States. “They should not transfer their savings in bulk to their new host destination without a clear and satisfactory picture of how they will be treated under the U.S. tax code,” he writes.
Atkinson advises prospective expats to retain professional assistance competent in dealing with tax issues both in the U.S. and the host country. Such an advisor can help in three areas:
• Managing taxes. Knowledge of exclusions, credits and tax treaties is key to minimizing double taxation, which often can be avoided.
• Filing returns. Tax filing is often more complicated for Americans living abroad.
• Information reporting. Americans overseas face numerous financial information reporting requirements, not all included in tax returns or even tax related. Untimely or inaccurate filing can result in heavy penalties.
Madrid adds that expats also need professional help to navigate a country’s officialdom. “Look for good immigration and tax advisor because the bureaucracy in many countries is only available in their language,” she says. “So, if you go to Portugal it will be available in Portuguese.”
Learn the Language, Unlock the Culture
But Madrid urges expats to learn their host country’s language. “Start studying even before (you) go, because when you learn the language, you learn the culture. You avoid a lot of culture clashes, you understand local communities and you can integrate better with local communities … because you feel that you are part of your country of relocation, and the community also feels that you’re there to add your culture and integrate with the community,” she says.
“If you don’t want to learn a language,” she adds, “you need to look for a country where English proficiency is super high. Either a country that has English as an official language, or countries like, for instance, in Europe — Nordic countries, the Netherlands, Cyprus and Malta — countries where English proficiency is high.”
American expatriates are generally well accepted in most places around the world, especially when they learn the local language, Madrid says, but there are exceptions, such as Hungary and other Eastern European countries, that are less favorable to migration.
Madrid says prospective expats can get information and support from a variety of sources, including AARO. Another good resource is those who have gone through the transition.
“It is important to talk to people that have already relocated in the country that you want to relocate,” she says. “They started an integration process that will be very important and relevant. If you want to relocate, talk to people, get their experiences, learn from their mistakes, and it is going to make your journey and transition much smoother.”
In a four-decade career in journalism, Ed Prince has served as an editor with many of New Jersey’s leading newspapers, including the Star-Ledger, Asbury Park Press and Home News.
