It’s Time to Plan Your Escape From America

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Yesterday I explained that in my Plan B Club, I set out a process that can help potential expats and overseas retirees make one of the most difficult decisions of all: where to live after making your escape from America.

The process of planning an escape from America starts with understanding yourself. The task is to assess your tolerance for the things that may characterize a new home … like ambiguity, a slower pace of life, the absence of certain creature comforts and of course, climate. (If you’re a couple, this applies to the two of you. Nothing gets in the way of a happy life abroad more than disagreements about things like those.)

Today, I’m going to apply my method to the Central American nation Nicaragua, using myself as an example. Nicaragua is in the expat news a lot these days, and I get many calls and letters asking about it. So let’s take a closer look…

Start With Your Goals

The single most important thing to do when planning a major life move is to be clear about what you want to achieve by it. That’s seems obvious, but the fact is that many people get so caught up in the details that they lose sight of what they’re trying to achieve.

For most people, the overarching goal of a move abroad is a better quality of life than they could enjoy where they are now. That includes wealth, lifestyle, personal relationships and home and possessions. The trick is to strike the optimal balance. As I said yesterday, some places that offer outstanding tax and financial benefits are boring, expensive and cold. They may be great places for your money, but not for you. Or maybe they are — but only you can be the judge.

Who Am I?

To find out how to strike that balance, my Plan B process starts with a “Peace of Mind Questionnaire.” It poses questions about each of the four areas affecting quality of life, designed to draw out your preferences.

When I take the Peace of Mind Questionnaire, I score highly on desire for a stimulating environment, tolerance for ambiguity and unpredictability, as well as scoring highly for desire for family and home benefits. So although I want to live in an exciting place, I also want a secure and stable home where my family and I can relax when we’re not out adventuring.

But I score relatively low when it comes to being around other expats — I prefer to mix with the locals — and highly on the desire for personal freedom. As a writer, I can live and work anywhere in the world where there’s decent Internet, but I don’t want to pay additional tax beyond my U.S. tax obligations … which are high enough already.

Example: Nicaragua

Nicaragua is the northern neighbor of Costa Rica, a well-known expat haven. It has the lowest income threshold in the world for a retirement or renter’s residence permit — less than $1,000 per month. It’s well within my price range, so I could move there anytime. And it has a very reasonable cost of living, so my dollars would go a long way.

Nicaragua is tropically warm, but not as wet and humid as Costa Rica or Panama. It’s relatively undeveloped compared to the rest of Central America; the poverty rate is the second-highest in the Western Hemisphere after Haiti. Infrastructure and utilities are OK, but not as good as those in Costa Rica or Panama. The people are warm and friendly, but there is some residual resentment of Americans from the civil war of the ‘80s, and a lot of in-your-face poverty.

The government is technically “socialist,” but it’s stable and very investor-friendly. Tax is only levied on Nicaragua-sourced income, not U.S. income, but I might face local tax since I’d be working from there. Fortunately, tax rates are low. But there is no dual tax treaty between the U.S. and Nicaragua, so I might have to pay U.S. tax if my Nicaraguan income exceeds the Foreign Earned Income Exclusion.

With the exception of a five-kilometer band on the borders, a foreigner can own property outright anywhere in the country. I could therefore live amongst the locals in a beautiful lakeside town like Granada, or on the coast, where there are a number of expat enclaves. And right now, Nicaraguan property is a real bargain.

Finally, Nicaragua’s own health care system is pretty good. There is a socialized medicine program and you don’t have to pay for routine visits. A doctor’s visit costs just $25 and a house call is only $35. Prices for hospital services are about a tenth of what it would cost in the U.S. Anything that a Nicaraguan hospital can’t handle can be accomplished in Costa Rica, a few hours’ drive to the south.

And The Verdict Is…

I would gladly relocate to Nicaragua … but only once I’m ready to retire, not as a possible home after an escape from America. The low income requirement for a residence permit, cheap property, and the low cost of living make it a perfect place for someone like me who is happy to live in a less-developed country. But the lack of a tax treaty makes it unfeasible for me until then, since I’d potentially face double income taxation.

How about you? Where’s your sweet spot on planet Earth? Where would be your perfect refuge after your escape from America? Have a look at the Plan B Club and find out…

Kind regards,

Ted Bauman
Offshore and Asset Protection Editor

The post It’s Time to Plan Your Escape From America appeared first on The Sovereign Investor.

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