Considering a move abroad? Congratulations! Taking your life to another country is a big step, with plenty of opportunities and excitement ahead. While it’s not possible to plan for every eventuality beyond borders, it is a good idea to think carefully about what your finances will look like after moving abroad. Read on for a few key points that every expat should keep in mind.
Local Payment Habits
Some countries primarily pay with cash. Others are almost entirely reliant on mobile payments. Learn the local payment habits of your new home, before you arrive, so that you’re prepared to start shopping and paying as soon as possible. This may mean downloading an epayment app or getting an ATM card ASAP! Another habit to consider is tipping. Should you tip at restaurants? How much? Will there be an automatic service charge added to the bill? Ask your local friends, neighbors or colleagues about what to expect and best practices where you are.
Most expats get a local checking account and savings account, as well as maintaining their account in the United States. To open a local account, you may need to prove legal residency or have a local address. Keep in mind that foreign bank accounts with more than US$10,000 should be reported annually to the IRS. Moving money from a foreign account to your U.S. should be fairly straightforward, but keep in mind that some online-only accounts can’t receive international transfers. Check in with your U.S. bank before going abroad to see if there’s anything else you should know.
It’s typical for new expats to rent rather than purchase a home. Housing is sometimes provided by a job, but get the specifics well before you land. If you’re renting on your own, check local customs in terms of what money is owed up front and in what form, so that you’re not left scrambling to withdraw cash for your security deposit, first month’s rent and real estate agent finder’s fee at the last second. As for utilities, these costs will vary widely depending on where you move, but some good news is that internet and cell phone costs tend to be lower outside of the U.S.!
Financial experts typically recommend keeping your U.S. investments exactly where they are. This is especially true when it comes to retirement accounts, including any IRAs or 401(k)s, as there may be significant tax disadvantages to pulling out your money before reaching retirement age. When it’s time to head back to the United States, you might consider rolling over your local retirement account into an Individual Retirement Account back in the U.S. On the other hand, if your move feels more permanent, consult a local financial advisor on how best to manage your investments and retirement.
The good news is that foreign income under a certain amount isn’t subject to U.S. income taxes. For 2023, the Foreign Earned Income Exclusion (FEIE) amount is US$120,000—so expats with earnings under that figure wouldn’t need to pay U.S. taxes. Still, U.S. citizens do need to file federal taxes every year; even if they are legally residing and working in another country, and even if their earnings are under the FEIE threshold. Some states also require that residents living abroad file a state tax return, especially if part of the year was spent living in-state.
If you’re moving abroad for a job, it’s likely that your employer will support you in securing health insurance. In many countries, the public healthcare system will provide what you need, but some offices still offer an additional level of insurance so that you can access private care, if desired. Check in with your employer to learn that ins and outs of any policy on offer. Your U.S. health coverage may end when you head abroad, which means you’ll need international health insurance or a travel policy to stay covered in case of accident or injury during a visit back home.
It’s never a bad time to reassess and update your estate plan. This is especially true if you’re headed out of the United States or if you’ve been living in another country for a few years and find yourself acquiring bank accounts, investments or other assets. A digital estate planning tool such as Gentreo—now available to HUECU members through a new partnership—can help in the process of revising important documents as circumstances change. The Gentreo team of partner lawyers may also be able to assist in understanding more about how a move abroad will impact your estate plan.