Retirement guide for US citizens

International Retirement Migration (IRM) is a complex and increasingly significant trend in global migration, predominantly observed among individuals from wealthier countries. The history of retirement migration traces back to the early 20th century, initially within countries before gaining an international dimension in the post-war era. In the UK, retirees moved from industrial cities to coastal resorts during the 1920s and 1930s, a trend also observed in other European countries like France and Belgium. This pattern continued and expanded globally following the post-war tourism boom, notably with the advent of affordable holiday packages to Mediterranean destinations starting in the 1960s and 1970s. These developments planted the seeds for what would become a significant movement of Northern Europeans retiring to warmer, sunnier locations like southern Spain and the Canary Islands, as described in an early study by Myklebost in 1989.

This phenomenon is influenced by various demographic, economic, and lifestyle factors and is closely linked to tourism patterns and popular destinations. Benson and O’Reilly define IRM as ‘lifestyle migration is thus a search, a project, rather than an act, and it encompasses diverse destinations, desires and dreams’.

While IRM is often perceived as a movement of the socio-economically advantaged seeking leisurely retirements, it also appeals to individuals who merely are seeking to maximize their financial resources. These individuals aim to enhance their quality of life by relocating to regions where their savings afford them a more comfortable and fulfilling lifestyle. The decision to retire abroad can be driven by various factors, including the desire for a lower cost of living, better climate, or more favorable tax conditions. Political stability also plays a role in the desire to relocate, as more people are seeking destinations with stable and reliable institutions.

As we put our focus on the American diaspora, according to a study conducted by the Association of American Residents Overseas (AARO), at least 5.4 million Americans were living abroad in 2023. These numbers are disputed, as the State Department has estimated the figure to be around 9 million. However, it is important to note that the State Department’s estimate includes all Americans outside the US, including tourists. In any case, the numbers indicate a robust and continuing trend of American presence worldwide. Unlike traditional diasporas, which often begin as a result of economic hardships, conflicts, or forced migration, the American diaspora is largely a phenomenon of expatriation where individuals choose to live abroad for a variety of reasons including employment, retirement, education, or personal preference.  The concept of an “American diaspora” is relatively modern, largely taking shape in the latter half of the 20th century as global mobility increased. This increase was facilitated by advances in transportation, the expansion of global businesses, and an interconnected world economy which made living and working abroad more accessible and attractive to Americans. It is difficult to identify a specific starting point for the American diaspora, but it is clear that the number of Americans living abroad has grown significantly in recent decades.

The merging of IRM and the American diaspora illustrates the growing trend of US citizens retiring abroad. Internal factors like the cost of living, tax optimization, and political stability are pivotal; many American retirees are drawn to countries where their pensions can buy more, tax burdens are lighter, and the political climate is stable and predictable. These internal mo(va(ons are o\en complemented by external desires such as favorable weather and the enriching experience of immersing oneself in new cultures and being part of local communi(es.

Additionally, acquiring a second citizenship emerges as a significant motivator for some retirees, offering practical benefits like easier travel and access to other countries’ social services. This phenomenon is underpinned by broader global trends towards increased mobility and the globalization of retirement lifestyles. As retirees become more adventurous in their post-working years, choosing a retirement destination has become an opportunity to optimize personal and financial satisfaction, reshaping the traditional concept of retirement.

However, relocating abroad, especially for US citizens, comes with its set of challenges despite the appealing aspects of IRM. One significant hurdle is unlike most countries that tax based on residency, the US taxes its citizens on their global income regardless of where they live. Another common difficulty for American expatriates is accessing banking services in foreign countries as many US citizens face challenges opening and maintaining bank accounts overseas due to the Foreign Account Tax Compliance Act (FATCA).

In any case, in recent years, particularly following the latest elections and the global pandemic, there has been a noticeable increase in the number of Americans exploring options for relocation or acquiring a second citizenship. This trend reflects a growing interest in finding alternative living arrangements that offer better quality of life, economic benefits, and a sense of security and acceptance.

This comprehensive guide integrates public data, academic research, expert opinions, and industry insights to identify the top 16 countries favored by American retirees, based on factors like quality of life, integration ease, community acceptance, security, and economic conditions. It employs eight key indicators across three areas to rank these countries. The guide further enriches its content with expert insights on critical topics such as IRM, US citizenship complexities, and the nuances of tax and banking abroad. Targeting a diverse audience including investment migration and wealth management planners, media professionals, and potential expatriates, it offers essential information for navigating the legal and financial challenges of international retirement.

The Global Citizen Solutions retirement index for US retirees is composed of seven target-oriented indicators grouped into three thematic sub-indices: Quality of Life, Security and Integration, and Economics. Data for these indicators are gathered from reliable secondary sources, such as Numbeo for cost of living, rent prices, climate, and healthcare system ratings, and other databases for indicators like the Global Peace Index, Migrants Acceptance Index, and English Proficiency Index. Tax optimization scores consider countries’ agreements to avoid double taxation, special tax regimes for expatriates, and non-taxation of foreign-earned income. Additionally, flight availability and distance are assessed based on factors like flight duration and availability of direct flights, ensuring accessibility for US expatriates.

Establishing normalized indices involves identifying minimum and maximum values to construct a target-oriented performance index. Each data point is normalized using the Min-Max Normalization formula to ensure comparability, and weights are assigned to each indicator based on their relevance and impact on the decision-making process of US retirees. These weights are derived from publicly available data, research on retirees’ preferences, and expert opinions. Missing data is addressed using a regional averaging and proximity-based weighting method, providing contextually enriched imputation to maintain regional and local accuracies. The final index for each country is calculated by multiplying the normalized value of each indicator by its assigned weight and summing these products, resulting in composite scores that represent the overall suitability of each country for US retirees.