In this episode of Adam Talks, IRA Financial’s Adam Bergman Esq. explains how you can stretch your retirement money if you decide to move out of the States and live abroad.
Extend your Retirement Dollars by Living Abroad
Hey everyone, Adam Bergman here, tax attorney and founder of IRA Financial. On today’s podcast, we’re going to be discussing how you can potentially stretch your retirement dollars and live abroad during retirement. And one of the impetuses for today’s podcast was lately I’ve been talking to a lot of clients and some potential clients who’ve inquired about using retirement dollars to invest in countries in order to secure golden visas, i.e. Portugal, which is a very popular country for retirement. Number one, you get a European Union passport. Portugal is a beautiful country and very cost effective to live in plus, you are very close to Spain and other beautiful European countries. So, it’s seen as a really good opportunity to have dual citizenship, or in some cases even renounce US citizenship to move to Portugal, for example. But in most cases, it’s just a dual citizenship thing. The idea is, hey, when I retire, I want to live abroad, maybe spend six months, eight months, ten months, and be able to do that.
So, I’m going to go into some basic rules here. I’m a tax lawyer, but this is not a legal podcast, so I suggest if you are interested in thinking about how you could potentially acquire a golden visa or maybe even a passport in another jurisdiction and want to think about tax ramifications, talk to a tax professional, i.e. an accountant, international tax attorney or CPA that can kind of direct you in the right spot. I’m not going to focus much on Puerto Rico; it’s mostly going to be European countries and the idea of stretching the U.S. retirement dollar. Why? This is a really good time to be holding U.S. dollars. The U.S. dollar is at the highest it’s been in 20 years. It’s stronger essentially, than the euro. It’s very strong compared to almost every currency in the world. Why? In times of uncertainty, inflation, people around the world want to buy U.S. dollars because they’re secure; they’re backed by the U.S. Treasury, the strongest economy, and most stable government in the world. So, it’s really good to be American and have U.S. dollars because we have more buying power today than we did in the past. So, with more buying power means you can buy nicer homes or take nicer vacations in other countries because it’s cheaper.
For example, this summer I was in Greece, and hotels are still expensive, but on the ground, the food, the entertainment, alcohol, things like that, that’s cheaper than most cities I visit in the United States. So, I look back at my credit card, and I, for example, went out for dinner and looked at the bill in euros, I was like, oh, that’s not great. Then I did a quick calculation based off the value of the euro and the U.S. dollar, it’s like, oh, it’s not horrible; not so bad. In fact, the prices in Europe, I think, at least my experience, has been there at par, or probably a little cheaper than U.S. prices, especially in New York and Miami, where I spend most of my time. So, having U.S. dollars matters; especially EU or you go to other countries like Canada. I was in Canada about a month and a half ago, and, wow, I mean, it’s significantly weaker, the Canadian dollar, and you have so much more buying power. So, if you want to buy a home for a million dollars in Canada, you would need maybe $700,000 U.S. And in Europe, you’ll be able to buy homes, probably a nicer vacation, permanent home than you would in the U.S. for less money, because comparably prices are cheaper in Europe and your dollars will stretch.
So, people obviously have been looking to retire in the last couple of years with the pandemic. There’s some stats I found that, a poll showed that 50% of US adults 55 and older said they were retired, compared to 48% in 2019. So, between 65 and 74 age groups, 66.9% said they were retired, compared to 64% in 2019. So, more and more people retired with a strong dollar.
Healthcare – European countries seemingly have better health care. I am not sure about that; this is just an argument a lot of my clients talk to me about. I would have to push back on it. I grew up in Canada. Yes, it’s socialized. You may think it’s cheaper because it’s free, but it’s not a good system. It’s good if you have a cold or flu or maybe minor, minor medical issue that you need someone to look at. But I can tell you I have an aunt who is stuck in this abyss of a medical system. It took her almost four months to see a doctor, and she’s been diagnosed with Parkinson’s. She couldn’t get a doctor for four months to see her when she got turned out from two hospitals that didn’t even have time or an interest in seeing her. So, Europe – the system’s a lot like Canada, maybe a little better, but the quality, I don’t think anywhere compares to the United States. It’s not cheaper if you’re paying for it. Although, hey, if you become a citizen of Portugal, you would be able to avail yourself of that medical system, but I wouldn’t move to Europe, put it that way, through the medical system. I would move there for the quality of life, the ability to stretch retirement dollars, adventure, live in a different country, different culture, kind of rejuvenate your soul. But, I wouldn’t move there for the healthcare. That’s my personal opinion. You can disagree with me, but I’ve had some experience.
So what’s your options? So, most countries you can go to and spend less than six months from the United States, most European countries or other places around the world, if you stay under six months, you don’t have an issue. If you stay over six months, most countries are required to have a visa. So, some justification for you staying, whether it’s student or a retiree visa. Now, it’s not as easy, student visa is a lot easier to get. You register for school, language school in Italy or Spain or France, and you pay the school and they’ll give you a visa to study; supposed to attend classes, but hey, that’s a nice little workaround if you just want to have the experience of living in a foreign country like Spain or France, even the UK, you can find a language school, it’s pretty inexpensive, and they’ll be able to help you get a visa and let you stay there for a year, at least six plus months. But, if you wanted to stay more permanent, let’s say for the next five years or ten years, and more flexibility, then you’re probably going to have to go what’s called the golden visa where route, where you basically make an investment in that country and have the ability to stay based off that investment.
Now, obviously other countries like Italy or Germany, if you have grandparents from there, Spain, for example, a lot of Cubans are able to use Spain for their ancestral rights; obviously for Jewish – Israel. But, in other cases, you generally have to invest to be able to live in that country. So, different countries have different rules, it’s known as a golden visa. Essentially, you must personally invest in that country. You have to maintain the investment for a certain amount of time. Obviously, you have to have no criminal background and you must have the financial resources, just sustain yourself.
So basically, these countries are saying, listen, invest in our country, as long as you’re not a burden on us, yeah, we’ll let you stay. Why not? Right? We’re going to collect tax dollars, you’re going to invest in the country, you’re going to spend money at restaurants, buy a home, you’re going to live there, maybe your family will live there, and it’s good investment into our economy. Now, again, the amount you have to invest is different; capital commitment is different. So, some of the most popular countries for golden visas are Anguilla, Austria, Canada, Germany, Greece, Ireland, New Zealand, Portugal, Singapore, Spain, St. Kitts, Switzerland, Caymans, UK, Turkey, UAE. Those are probably the most popular ones and every country out of those countries, each country has different rules on how much. Like Anguilla, you need $150,000 minimum investment. Let’s see, Canada, about $1.2 million, okay, that you have to invest.
So, what has been happening in Canada, because I know from just friends and family, is over the last 20 years, Chinese people from Hong Kong, especially mainland China, have come and taken their money out of China because of communist system, the instability, well, I shouldn’t say instability, but more about the fact that the communist country and the inability really to have freedom of economic expression; they’ve taken money out of China and bought homes, let’s say, especially, in Vancouver, Toronto, now even Montreal; big cities where there’s universities, where it’s a good investment on the real estate. And they’ll take the million or a million and a half, and they’ll invest it; they’ll buy the real estate, get their kids to potentially go to school there, and have an investment, at least; even if no one uses the home, at least they have an investment in the country, so, God forbid, they need to get out of China, they at least have a $1 million investment in Canada, a place to stay, and they can get there. And they’d have a visa; their kids would have a visa, their wife, spouse, whatever it is. So, that’s a very popular option. They’ve actually driven up the price of real estate across Canada enormously over the last 10-15 years. But, that’s been a big catalyst.
Germany is about €360,000, Greece, $250,000, so you’d have to buy real estate for $250,000. You’d have to sign a lease for at least ten years. You’d also have to invest $400,000 in a registered company in Greece; buy government bonds for at least $400,000, and deposit at least $400,000. So, you’re looking about one and a half million euros.
The other one, let me just focus real quick on Portugal. So, Portugal, it’s about $400,000-$500,000. It’s generally $400,000, where you can invest even a real estate fund or buy real estate, and you technically don’t even have to live there, you just have to make that investment. And then you can apply for permanent residency and citizenship and get an EU passport. It takes a couple of years from well, as soon as you make that investment, you can technically apply. It will take time. But Portugal is probably the most popular country that Americans are looking to acquire a golden visa because you get the EU visa and it’s less of investment than Greece and Germany. It’s also popular, but you need to wait three years to get a permanent residency, and eight years you can apply for citizenship. Obviously, Portugal is a little bit quicker and less investment. So, Spain also has a program with $500,000 in real estate, but Portugal is the least expensive and probably the most popular for golden visa interest from U.S. persons.
So, a lot of people are saying, hey, could I invest retirement funds in those countries and then potentially acquire a golden visa personally. It’s a little gray because technically, you’re supposed to use personal, you’re supposed to make that investment in personal funds. Now retirement funds are your funds, so there’s some workaround. Some countries are very specific about who makes that investment. In other places, the fact that it is your retirement account, you’re technically in control of it. You can make that investment, but the issue’s in then the fact that you are personally receiving a golden visa. Is that a self-dealing conflict of interest? It could be, right? If you’re only making that investment to secure the golden visa, it may be tough to defend yourself against IRS audit if they are inquiring, because you’re supposed to make an IRA investment to exclusively benefit your IRA, not you personally. So, if you can’t show that you’re not exclusively personally benefiting, or the IRA is not exclusively benefiting, so you’d have to show that, no, I’ve invested, let’s say, a million in Portugal, and they only needed $400,000 and the golden visa is just a byproduct of this; it’s not why I made the investment. It’s a good fund, or I want to rent out the real estate. Maybe you have a good argument, but if it’s really clear that you’re only doing this, you’re investing exactly the amount, minimum you have to, and it’s really the only reason for it, that’s your intent, it’s definitely pretty gray because it could be self-dealing.
But honestly, this is what’s going on. There’s lots of Americans that, it’s not even a political thing, some clients are like, oh, if this party wins, I’m out of here. That party wins, I’m out of here. But more and more people like, hey, U.S. dollar is strong; I want adventure; I want to have the option of having a European visa, European citizenship. I love America. I probably want to live here also, but I want that option to be like, hey, I’m going to spend ten months in Europe or seven months or all year, and I don’t need to worry about the six month thing. I just want the flexibility. God forbid I need to move or I want to move, I have another passport. The whole idea of, like, let’s say in the future, God forbid, but there’s a military call up, there’s a draft, and maybe some people don’t want their children to have to go off the military and say, hey, I’d love to get another passport just in case I can run away or God forbid, something happens in this country, I always have another escape, another passport to use so I could move to that country. So, it’s just freedom, flexibility, freedom of movement. For whatever reason, it’s important to know that this is a good time to be American. The U.S. dollar, at least from a financial standpoint, we’ve got the strongest economy in the world; yeah, we got inflation, we have a lot of debt, but it’s better than being anywhere else in the world. And we have the most powerful currency, the U.S. dollar. So, it goes a long way and it goes further than it’s ever gone in the last 20 years. So this is a good time to stretch that dollar, flex it. You want to buy real estate in different countries, good opportunity, and then the golden visa will be another way for you to get dual citizenship, so you can have a U.S. and European passport, to travel, to have freedom of mobility, security, whatever the case may be, it could be of interest.
So, that’s really the point of the podcast. Also, I wanted to mention that U.S. has tax treaties with a number of, most European countries, and most modern countries like Canada, so that means you shouldn’t be subject to double taxation because the Canadian or Portugal or Spain or whatever country, Germany, UK, have tax treaties to eliminate double taxation. So, you should be able to eliminate any of those tax issues from income; one country being taxed from the other, like capital gains, things like that. Treaties generally do provide that if it’s real estate, it would generally be taxed in the country where the real estate is located and you should get a credit for what you pay in that jurisdiction to the United States when you file your return, because the last thing I’ll mention is, unless you renounce your U.S. citizenship, you still have to file a 1040 U.S. return, even if you live permanently in a foreign country. United States citizens, residents, green card holders are taxed on their worldwide income. But, the tax treaty, hopefully the jurisdiction you live in will have a tax treaty; Cayman Island doesn’t, Belize doesn’t, but other countries do, and that should be able to reduce any potential double taxation from sources of income.
So, hope you guys enjoyed today’s podcast. It was a fun one. But it’s crazy. The last, I’d say, six months or so, I’ve been inundated really by clients, non-clients, just inquiring about how to use retirement money to get a golden visa or can I use my retirement money, should I use it to just take it out and buy a villa in Spain or Portugal or wherever and just live there? It’s a great time. Prices are expensive, but U.S. dollars are strong. Let it roll. I think prices will come down in the next six months. Hopefully, the U.S. dollar stays strong and I will get bang for my buck; buy a great villa or apartment, whatever it is, a flat, and either live there, rent it out, and potentially even get a golden visa, so I can have dual citizenship and have more security, more freedom, mobility, and even make a good investment at the same time.
So, really fun topic. I hope you guys enjoyed it. And listen, I have a Canadian passport, U.S. passport. I love America, greatest country in the world. But hey, you never know, right? I’m going to make sure my kids also get Canadian passports because always good to have options. Hopefully, you never need them, but you never know what can happen. So, I totally understand why people would be interested in golden visa and getting dual citizenship so they can figure out what they need to do or can do with it.
So, appreciate you guys listening. You can pick up this podcast, obviously wherever you’re listening to your podcast, but I have two other podcasts that drop on Tuesday and Thursday: AdBits, which provides a bit of information on various self-directed retirement topics, which drops every Tuesday; and Thursday is AdMail, which is a mail bag of three of the best questions of the week on Self-Directed IRAs, 401(k)s, ROBS, investments, alts, prohibited transactions UBIT. You name it, we address it; a lot of fun, and check that out. That drops every Thursday. Otherwise, have an amazing, amazing week and I’ll see everyone again next week. Take care.