Retiring to the Dominican Republic can be a cultural epiphany if you’re seeking exotica. But without realistic expectations and careful planning, your move abroad could be fraught with frustration.
Even mundane tasks like opening a bank account or getting a plumber to fix a leaky sink could take ages for people used to getting things done quickly in the U.S.
“It’s vitally important to relate your pace to the culture.
Before taking the expatriate plunge, spend a minimum of several weeks in a country immersing yourself in the local culture and honing your foreign language skills, experts say.
Research your newly adopted country’s health care system and tax laws. Make a good assessment of your cost of living. Such preparation will smooth out your transition, helping you avoid potentially costly pitfalls.
Rabbit International Relocation Services located in the Dominican Republic can help you with information or at least point you in the right direction.
firstname.lastname@example.org The following are six issues to consider before retiring abroad.
6 issues for expatriates
1. Cultural concerns
2. Land ownership issues
3. Health care needs
4. Tax considerations
5. Banking logistics
6. Packing decisions
The potential for “culture shock” tops the list of things to consider before retiring overseas.
You can enjoy the experience of discovery without having to mimic the characters depicted on wilderness survival shows — chomping on live grubs and the like — to fit the bill. But it helps if you’re open-minded and love exploring new places.
Flexibility goes a long way, too.
“You have to have the patience to deal with different systems, and if you’re an American who doesn’t know the language, everything is going to take you 50 percent longer.
People who retire abroad are usually seasoned travelers who’ve spent a significant amount of time “on the ground” in a particular country.
Many people retire abroad to save a lot of money and enjoy the good life for less — both valid reasons. But shouldn’t expect to recreate an American lifestyle.
“If you like to eat your early bird special at 5 p.m. and in the Dominican Republic locals don’t eat until 10 p.m., you might feel a little bit strange or you might have to find another way to eat.
Common traits of expatriate retirees:
• Desire a lower cost of living but a higher living standard.
• Want better weather and scenery.
• Appreciate a laid-back lifestyle.
• Have an interest in learning about new cultures.
• Have friends or family already living abroad.
• Adapt to cultural differences.
Land ownership issues
Maybe you’ve found your Shangri-La and are considering buying a home there. Before plunking down a huge deposit on a Dominican villa or beach front condo, try renting first.
If possible, rent for more than one season. This gives you a better feel for the climate, how much utilities cost and what your community is like once the tourist crowd has evaporated.
Check currency conversions and local infrastructure as well. Bad roads can be a fairly common occurrence and not best for BMW’s suspension.
To find a good rental property, go to your chosen location for a few weeks, talk to people in the local expatriate community and try to develop local contacts.
Before making an overseas purchase, hire a lawyer to represent you — and you alone — in any real estate transaction.
Most foreign real estate documents are not written in English, and rights of ownership vary from country to country.
“People fall in love with a house and the idea of it, and they buy it without having the background on the legal tax and estate ramifications. “You need to consult a legal adviser who understands these issues before making a major investment like buying a house.”
When buying property in any foreign country, it’s important to buy from an established real estate firm (The Dominican Republic does not have an equivalent to the Multiple Listing Service system used in the United States) and to make sure you get good English translations of all documents.
“A good lawyer working for you in a foreign country will speak English.
Health care needs
Santo Domingo has the largest number of private hospitals and clinics in the country. You will need to know what to expect from its health care system. Is it modern? How far will you have to travel for basic medical services? Are prescription drugs widely available? Again JDL Relocation Services can help provide you this information. email@example.com
Make a thorough assessment of your own health and determine whether you’ll need access to specialists or other kinds of medical care not commonly available outside the U.S.
Medicare will not pay for services or prescription drugs in a foreign country except under very specific scenarios.
Several health care facilities boast that a number of procedures are comparable to that found in the U.S. — and often at lower cost.
Americans hoping to maintain a youthful appearance were among the first to discover the quality of health care available in the Dominican Republic.
Check your private health plan, if you have one, to see if any services are covered overseas.
While the Dominican Republic has some good medical facilities you may want to consider returning to the U.S. periodically for major services.
Generally, if you are a U.S. citizen or resident alien, you’re required to file an income tax return whether you’re in the U.S. or abroad, according to the IRS.(A resident alien is a person granted permanent legal residency in the United States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Service has issued you an alien registration card, also known as a “green card.”)
If you earn income abroad, the IRS may allow you to exclude from income up to $87,600 off your foreign earnings.
What about Social Security?
• U.S. citizens can have their Social Security retirement checks mailed overseas or directly deposited into a foreign financial institution in certain countries. For a list of eligible countries, check the Social Security Administration Web site. The best bet is to have your benefit check directly deposited into a U.S. bank account that you can access overseas.
• Expatriate retirees should hire a financial planner with cross-border experience. If you don’t, you could be putting your retirement nest egg at risk by paying unnecessary taxes. You also risk running afoul of federal tax law.
• “You have to have someone who is familiar with the tax treaties because once you get outside the U.S., that becomes almost 80 percent of the battle in preparing a tax return.
• If you think you can cash out your retirement account and avoid paying U.S. taxes by renouncing your citizenship, think again.
• The tax regime for high-net-worth expatriates who renounce their citizenship is even more complicated. The IRS requires these individuals to continue paying taxes for up to 10 years after renouncing citizenship (and leaving the country) unless qualified for one of two very narrow exemptions pertaining to dual nationality or age.
• The rule largely applies to people with a net worth of $2 million or more on the date of expatriation or who averaged at least $139,000 (for 2008) in annual net income tax liability for the five years prior to expatriation.
• A new U.S. law raises additional tax concerns for expatriates.
• Passed in May, the Heroes Earning Assistance and Tax Relief Act, or HEART Act, goes a step further and imposes income tax on any net unrealized gain from a property sale in excess of $600,000.
• The tax is based on the property’s fair market value on the day before the expatriation or residency.
• The expatriate provisions of the HEART Act were largely meant to provide revenue to pay for other benefits of the act, mostly benefiting U.S. service personnel. It is aimed at individuals of high net worth who seek to permanently escape the long arm of the IRS, rather than the average expatriate who retires to someplace like Belize.
• John Olivieri, a partner with the New York law firm White & Case, thinks the act was passed to discourage U.S. citizens from renouncing citizenship in order to avoid paying taxes.
• “I think the amount of people who expatriate is still very small, so it’s largely symbolic,” Olivieri says. “But now if you expatriate, you’re essentially paying an exit tax.”
• Prescher contends that most expatriate retirees are not interested in making a permanent break from the U.S., and if they are, it’s not to avoid paying taxes.
• “The two things you don’t want to give up are a U.S. mailing address and your U.S. citizenship,” he says. “Those things to me are incredibly important. I’m not living offshore because I don’t want to be a U.S. citizen. I’m living offshore because it’s cheaper and the weather’s better.”
• When Americans travel for a week or two, they are most likely to exchange currency to pay for things like taxis, souvenirs or dinners.
• But if you’re planning on retiring to the DR, you’ll probably want to open a foreign bank account.
• “It just makes a lot of sense in terms of ease of moving money around.
• When deciding how much to deposit, consider exchange rates and how much money you need to keep in a foreign account to pay bills and buy groceries.
• “The U.S. dollar seems to be taking a bit of a beating right now, so if you feel the dollar keeps weakening, you might want to hold your money in pesos.
• You may want to keeps bank accounts in the U.S. and the DR because it’s convenient.
• “I still keep a U.S. bank account to pay bills and I also have an account in the DR that I can move money into and out of. “There are times where you want dollars and times you want pesos.”
• Fees can add up, too. Foreign ATMs often charge currency exchange fees and withdrawal fees based on a percentage of the withdrawal or a flat rate. The fees are on top of what your stateside bank charges.
• “If a customer is traveling internationally, we encourage them to call us before their trip and inform us of their intentions,” Wachovia Bank spokeswoman Jennifer Darwin says. “This would ensure no disruption to their service.”
• The U.S. Treasury Department wants to know if you have any foreign bank accounts with over $10,000 in them. If you do, you’ll need to report it on a Form TD F 90-22.1.
• The penalties for not filing the form are stiff — up to a $500,000 fine and prison time.
• “It’s to make sure you are including and reporting all your worldwide income.
• If you’re going overseas for a few months, you may be able to get by with a couple of suitcases. But if you’re planning to retire abroad, you’ll need to start packing months in advance.
• “I think you should take the least amount possible,” she says. “It’s just easier to move around and you save money on shipping.”
• Bring along heirlooms and photos, and rent storage in the U.S. for any other things you want to leave behind.
• You should sell or get rid of large pieces of furniture and major appliances. Now is the perfect time to have the “mother of all garage sales” and pocket some of the money toward your new furniture.
• Remember to focus on why you’re making such a gargantuan move in the first place.
“This is a great time in the life of someone to disengage from the material stuff and just really travel light with an open mind and see what this new opportunity may have to offer.
Retirees seldom kick back and live off retirement income. Expatriate retirees nowadays are trying new things and getting more involved in their newly adopted communities. “They’re moving to try new stuff and reinvent themselves.
“They’re in it for the adventure and the new horizons that are opened up by this.”