Hi there, I'm an American living in the UAE. I'm also an expat financial coach. If you think you're ready to leave the US and move overseas here are a few questions to ask yourself about the financial practicalities of expat life:
Where am I going?
American tourists can travel easily with visa on arrival in many countries around the world. Don't be fooled, as soon as you want to live or work in a new country you're going to run into hurdles. The first one being your visa. In some places it's relatively easy to get a long stay visitor's visa, but this won't allow you to work. If you want to be able to work you either need to secure a job before you move (so the employer sponsors your visa) or you will have to secure another form of visa for yourself, like an entrepreneur visa. The rules for visas vary greatly from country to country, even within the EU. You're not going to get anywhere searching for advice on "moving to Europe" You need country specific advice. So choose a place before you start your search.
How will I handle taxes?
The US is one of only five countries in the world that tax their citizens when they're living abroad (Hungary, Eritrea, Myanmar, and Tajikistan are the others). Because of this, you will have to file a US tax return every year, whether or not you're also paying tax in your new country of residence.
You may not end up owing tax due to the FEIE (Foreign Earned Income Exclusion), which allows you to exempt a little over $100k in earnings each year, but you'll still have to file. You may also qualify for the Foreign Housing Exclusion. There are also numerous tax treaties the US has with other countries, so knowing where you're going is really important. You can't know what tax credits and rules will apply to you if you don't know what kind of income you will have and where you will be living. As with most things internationally, it mostly depends on where you're living.
What about banking?
Many US institutions make it very difficult for expats to work with them, often requiring a US phone number for 2 factor authentication or customer support. If you can keep your US bank account open while you're abroad it will be helpful, but be prepared to have some headaches. It's usually better to simplify your financial accounts before you move. If you have multiple accounts, figure out the friendliest one to keep open. Some institutions will close your account if you move abroad so best to do some searches for other expat's experiences with your specific bank.
You will almost certainly need to open a bank account in your new country of residence. Because the US has extremely stringent reporting requirements, some banks won't want you as a customer, apprently this is often an issue in France. When you do open an account, you will have to fill out additional paperwork because you're American and if your account ever has the equivalent of $10,000 or more in it, you will have to fill out an FBAR form online every year that your balance exceeds this amount.
What will happen to my Roth IRA, 401k, HSA etc?
These are all US tax wrappers around investing or savings accounts. In general they don't apply to expats with some exceptions. Most the the finance advice you will hear from the US becomes irrelevant because to a large degree it's about taking advantage of these tax wrappers, which you will most likely not have access to. Additionally, you may or may not qualify for similar tax advantaged accounts in your new country of residency.
Can I continue investing?
Most US brokerages will not allow you to continue to invest with them if they find out you're living abroad. IBKR is the most expat friendly, and Charles Schwab is the second most expat friendly. Many others have been known to close accounts if they find out you're not a US resident. However, even with IBKR and Schwab, if you're living in the EU or the UK you will not be able to continue investing while living there due to conflicting regulations around retail investing between the US and the EU (the UK retained these rules after Brexit). In this case your existing investments are fine, but you can't reinvest dividends or add to your portfolio without significant hurdles.
Generally it's a bad idea to invest with a brokerage outside of the US as an American. This is due to punishing tax laws for certain types of investments. In some ways this is good, because there are so many investment traps and scams targeting expats. But it limits you, particularly if you're trying to invest from the UK or Europe. It's best to stick with either IBKR or Schwab, or hope that your other US broker doesn't realize you've relocated.
Will I still be eligible for Social Security?
You cannot contribute to social security with foreign earned income, so it's a good idea to check and see if you already have enough credits for social security before you leave. Some people knock social security, but it's a defined benefit, which is gold in the retirement planning world. So even if it's just a couple hundred dollars, it will make a big difference when you're 80 and can't do five side hustles any more. However, if you are self employed as an expat, you will be REQUIRED to pay self employment tax, which includes social security. So there is an option for people like me who moved abroad 2 credits shy of being fully vested.
What should I do about Health Insurance?
The good news is that healthcare is cheaper than the US everywhere else in the world, an often times the care is as good or even better than the in the US. When you first move you will need a temporary travel insurance plan while your'e in transition, but after that you'll be dealing with the local health coverage system. Again, you can't know much about this until you pick a location.
What happens if I die?
No one likes to think about this, but when you're moving internationally it's important to note that inheritance law differs greatly from one country to another. If you don't have a locally valid will and you die while resident abroad, the local law where you died will take precidence. In many jurisdictions spouses do not automatically inherit when one partner dies. In some places joint bank accounts get frozen if one of the parties dies. It's important to know what you're getting into, especially if you have dependents. You may consider having an international will registered, but even these are not valid everywhere. If you have no dependents this may not be as high on your priority list, but it's still worthwhile being aware of what your family will be dealing with if you don't make it quite as long as you had planned.
Who can help me with all of this?
Finding tax planners, lawyers, and financial advisors who work with expats is difficult, because you really need someone who understand the laws and regulations of every country in which you have assets. So it's not just about the country where you live, it's also your nationality and any other place you own property. I can help you with financial planning and investing, but at some point you may need to hire a cross border specialist for specific tax planning and filing requirements, filing a will or estate planning, or even a visa specialist. The good news is that I can help you know when you need to hire someone else and when you're safe to do it on your own. Schedule a free call to see how I can support you.
Sometimes moving abroad can supercharge your timeline to financial independence, it did for me. When left the US and moved to the UAE in 2009, I had over 30k in debt. Now I'm retired from teaching, financially independent, and working for myself on my own terms. I can help you navigate a path towards the life you want too.
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