As Baby Boomers retire in droves, many are downsizing their homes to reduce their expenses to free up money to enjoy things like traveling, recreational activities, and spending time with family.
Other retirees are turning to another alternative – retiring offshore in places in Central America like Costa Rica, Panama, and Belize, where the dollar will go further because the cost of living is lower- making for a higher quality of life.
Many Central American countries have significant retirement incentive programs for qualified retirees.
Between the benefits of those programs and the relatively lower costs of living for things like medical care, transportation, utilities, and many goods and services, the quality of life to cost of living ratio drastically improves for many retirees. According to nextavenue.org, 53% of retirees living abroad in Central America were “much happier” after relocating, with 43% of ex-pats surveyed reporting cost of living that was 25 to 50 percent less than in their home country.
So why downsize to a mobile home near a golf course when you can spend retirement in a bungalow on the beach in the Caribbean with far lower living expenses?
With the stock market at an all-time high, the market is bound to retreat. It’s a fact of life. The stock market gained more than 30% in 2019, boosting many 401K and IRA accounts, but just as quickly as those paper profits were gained, they could vanish as easily as they did during the Financial Crisis.
Instead of a traditional retirement plan, many future retirees are taking a different approach. They’re acquiring their beach house years in advance and earning income from that property as they inch towards retirement.
Their future retirement home is currently an investment property backed by a tangible asset. Unlike the stock market, where gains and assets can be wiped out in a day, this is less likely with a tangible asset like real estate that has historically and reliably appreciated over time.
The benefits of offshore investing are numerous – from diversification to asset protection to tax advantages.
Why Offshore Real Estate?
The next market crash will wipe out non-diversified portfolios. Just ask those who lost more than half their retirements less than a decade ago. Real estate is a hard asset that doesn’t get wiped out.
By adding offshore real estate to a portfolio, investors can diversify, across asset types, across markets, and across currencies. Not all world markets are perfectly correlated. Take the current U.S. economy, for example, while the economies of Europe, Canada, and Japan struggle, the U.S. economy is booming. On the flip side, a recession in the U.S. will not necessarily lead to a recession in another part of the world.
In Central America and parts of the Caribbean, property ownership opens up doors to residency, allows you to open local bank accounts, invest in a business or corporation, and exercise other rights and privileges of residents.
Establishing accounts and a relationship with an international bank in a desired offshore location can be invaluable. A good international bank can provide information about tourism trends, the types of loans that might be available, and comment on the feasibility of investment properties or a future retirement home in a particular location. They also offer asset protection because in most cases, they have no legal obligations to disclose or even report account holder information to foreign authorities.
Investing offshore moves your wealth and assets out of the reach of many seeking deep pockets. Offshore assets don’t show up in commercial asset searches used by attorneys, creditors, and law enforcement.
In addition, foreign real estate is one of two assets exempt from the reporting of foreign assets on IRS form 8938. Precious metals is the other exempt asset.
More Room for Appreciation
Growth in emerging markets will, over time, outpace growth in developed economies of the U.S., Japan, Europe, etc., where populations are getting older and with plateaued population growth.
Emerging markets like those in Central America have young, fast-growing populations who are underserved, lacking the consumer goods we take for granted. Offshore investing in those areas promises to deliver higher growth while acting as a hedge against volatility elsewhere.
Diversification is meaningless if the country in which you’re investing is prone to economic and political upheaval. That’s why Belize is gaining much attention from foreign investors. A member of the British Commonwealth, Belize’s legal system is based on British common law. As a result, Belize has a stable, democratic government, as well as a stable and balanced economy.
The offshore financial services industry in Belize is also highly regarded and well regulated. With stable political and financial systems, investors can rest assured that their investments won’t be disrupted by political or economic upheaval.
With a stable government and financial systems, Belize is poised for growth, and with its stability, it will be able to handle that growth.
In Belize, foreigners purchasing land or property are afforded the same rights as Belize citizens regarding property ownership. Additionally, there are no capital gains or inheritance taxes in Belize.
Belize has also implemented a program that allows foreign Qualified Retired Persons to make application for long-term residency in Belize and, if accepted, to live in Belize completely tax-free for life. The simple process of qualifying as a Qualified Retired Person exempts retirees from the payment of all taxes and levies on all income or receipts which accrue from a source outside of Belize (whether income is from work performed or an investment).
Booming Tourism and Economy
Belize is gathering momentum – backed by strong tourism indicators – and this is before its new international airport has even launched.
2019 was another impressive year for Belize tourism, with a more than 2% increase in overnight arrivals. Since 2015, the total number of overnight arrivals has seen a steady increase. The increase in overnight visitors has occurred by air travel and by sea with more than 70% coming from the United States and Canada.
Now is the Time to Act!
The tourism indicators point to a Belize real estate market that is poised to boom. It is far from peaking and is still full of values and opportunities. That is why now is the ideal time to strike while the market is in an upswing. Early adopters will be rewarded.
By investing in real estate in popular offshore destinations like Belize, you can protect your portfolio from market volatility, safeguard your finances with a tangible asset, and secure a more comfortable future lifestyle.