The Caribbean offers a sunny oasis for retirees. With the laid-back lifestyle, affordable healthcare, and tax incentives, retirees are drawn to the Caribbean islands. But before you throw your winter clothes away and spend your golden years under a palm tree, you need to understand what it entails to retire in the Caribbean. Here’s a breakdown of the immigration laws, taxes, safety and other key factors to consider before retiring in four of the most popular Caribbean destinations: Bahamas, Belize, Jamaica and the Dominican Republic.
A financial advisor can help you create a financial plan for your retirement needs and goals.
Getting a Visa in the Caribbean
There are 26 countries in the Caribbean. Each one has a unique culture. The countries there variously speak English, Spanish, French, Creole and other languages, and many have their own currencies. Some are territories of European nations and some are independent.
As you might imagine, then, each island has unique visa restrictions.
To get a retirement visa in the Bahamas, there are a couple of options. The first is to purchase a property in the Bahamas worth over half a million U.S. dollars, then apply for permanent residency. The second option is to purchase a property in the Bahamas then apply for an Annual Homeowner’s Card. This will allow you and your family to stay in the country throughout the year. The annual fee for this card is $500.
In Belize, retirees must be 45 years old to apply for the Belize Retired Person’s Incentive Program (QRP). QRP’s must move $2,000 per month into a Belizean bank account, have proof of a pension or Social Security, and have adequate funds to stay in the country.
In Jamaica, Americans can stay for up to six months without a visa. To stay longer, you’ll need to apply for residency status. As part of your application, you’ll need your passport, evidence that you can financially support yourself without working and a completed application form, which you can find at the Jamaican consulate. If you prefer, you can also apply for your residency status through the Jamaican consulate while you’re still in the U.S. This is probably the safer plan: While plenty of Americans obtain permits for retirement, receiving one isn’t a guarantee.
The Dominican Republic offers a special Pensionado Visa for retired people that provides tax benefits, provided they have an income of $ 1,500 per month. That income can come from a private or government pension, such as Social Security. Upon approval, applicants get permanent residency status. Plan for the application process to take between one and two months.
There are many other countries to choose from in the Caribbean. For example, France, the Netherlands, and Great Britain all have territories in the Caribbean that adhere to the countries’ European laws. It’s important to note that France and the Netherlands are part of the European Union and Schengen Zone, so any time spent in their offshore territories counts as time spent in the European Union, and visa laws in the Caribbean are the same as retiring in the actual countries.
Cost of Living in the Caribbean
Understanding the cost of living is one of the most important factors when planning for retirement. In Belize, where the overall cost of living is almost 32% lower than in the U.S., rent is about 75% lower than the United States according to Numbeo.com, a cost of living calculator. The national average for a one-bedroom apartment in the city center of Belize City is about $332. This is compared to the national average of a one-bedroom apartment in the U.S. is about $1,671. However, it’s important to note that most retirees do not stay in Belize City. Instead, they head for Ambergris Caye or other small paradise-like islands. In Ambergris Caye, the average cost of a one-bedroom apartment is about $700 per month.
In the Bahamas, where consumer prices are about 25% higher than in the U.S., rent is almost 16% lower than in the United States according to Numbeo.com. The national average for a one-bedroom apartment in a city center of the Bahamas is about $990 per month. In Nassau, the most prominent retiree destination, the average rent for a one-bedroom apartment is $1,050.
In Jamaica, the overall cost of living is about 25% lower than in the U.S. If you’re looking to live on Jamaica’s coast, houses in port towns like Ocho Rios is typically less than $200 per square foot. If you’d prefer to live in the city, a one-bedroom apartment in the center of Kingston will cost around $640 per month, according to the pricing data website Numbeo. On average, renting in Jamaica will cost you between $425 and $935 a month, and properties for sale will range between $175 and $250 per square foot.
The cost of living in the Dominican Republic is roughly 40% lower than in the U.S. Rent in the nation is about 75% cheaper in the U.S. Ex-pats can live in the Dominican Republic on a monthly budget of $1,000, with some $300 and more to rent a one-bedroom apartment outside of the city center. Utilities will run about $150 each month.
Housing in the Caribbean
Foreign residents and Nicaraguan residents can purchase property in both Belize and the Bahamas. Other similarities between buying homes in the two countries are that both countries speak English, there are few restrictions on foreigners buying property, and there is no capital gain tax when you sell your property.
In Belize, the home-buying process begins with you choosing a home and negotiating with the owner a price. Then, you will put a deposit down on the home and hire a lawyer for a title search and to request a survey plan. Once all the documents have cleared, you pay the seller. Mortgages are available. Finally, you’ll pay the stamp duty of 8% on the selling price (with the first $10,000 exempt) and transfer the title to your name.
In the Bahamas, buying a home is a clear path to residency status and is the same process as in the United States. When someone purchases a home, there is a stamp tax of 10% paid to the government by the seller. There are other fees involved that vary including an inspection fee and a lawyer’s fee, and they are like what you would pay in the U.S.
Ex-pats may buy property in Jamaica. The process is simple: Find a residence you’d like to purchase; make an offer to the seller; upon acceptance of your offer hire a real estate attorney to do a title search and prepare an agreement of sale; upon signing, you’ll need to pay a deposit of 10% to 20%; pay an assortment of duties, fees and taxes.
In the Dominican Republic, real estate transactions are often all-cash deals. Typically, funds are transferred for the sale to your lawyer’s escrow account in an American bank, and later disbursed by your lawyer to the seller. While mortgages do not exist in the country for foreigners or in special cases only, there are occasions where the seller is willing to offer financing.
Taxes in the Caribbean
In general, the Caribbean is known as a tax haven for ex-pats. A tax haven is a country that imposes low or no taxes on individuals and businesses. Many Caribbean countries have a 0% tax rate and a low annual business license fee and substantial financial privacy. As a result, many Caribbean islands are equally as advantageous to live in and purchase property in as Belize and the Bahamas.
In both Belize and the Bahamas, there is no capital gains tax, and residents do not pay taxes on their income from outside of Belize. As a U.S. citizen, you will be expected to file taxes in the United States each year. You will have to report any foreign bank accounts as well, and you will likely have a bank account in your country of residence.
Jamaican residents are taxed on their global income at either 25% or 30% on income above a tax-free threshold. Ex-pats living in Jamaica are considered residents for tax purposes if they spend at least six months in the country in the tax year or if they have a home in Jamaica and they visit Jamaica at all in the year, or if they visit Jamaica “habitually,” defined as at least three months a year for four consecutive years. Jamaica does not tax pension money, whether government or private.
Tax rates in the Dominican Republic are progressive and capped at 25%. Three years after you gain residency in the country you will be required to pay the island nation’s taxes on your global income. Non-cash compensation is considered taxable, as are capital gains. Finally, the nation has a 18% value added tax.
If you earn any money outside of the U.S., you can use a few different provisions to reduce your U.S. taxable income. These include the foreign earned income exclusion, the foreign tax credit and the foreign housing exclusion, among others. If you’d like to forecast your tax burden more specifically, you may want to consult with a tax expert who is familiar with both the U.S. and your country of residence’s tax laws.
Healthcare Systems in the Caribbean
Belize has both a public and private health system. Belize’s public system is not generally up to American standards, so many ex-pats leave Belize to travel to Mexico for healthcare. The government subsidizes medical trips to neighboring countries, but patients often still must pay quite a bit for medical care out-of-pocket. If you choose to use the private healthcare system, you will have to pay for your care out-of-pocket or with private insurance. If you have unexpected health issues, this could end up being very costly.
The health system in the Bahamas is known for providing a high quality of care. The larger islands of Grand Bahama and New Providence have several hospitals, and the smaller islands have clinics with limited services. Private international insurance is recommended because while free care is provided to all residents, foreign citizens can’t contribute to the national health insurance program. This means that anything more than basic care can be costly.
The World Health Organization (WHO) ranks the healthcare system of Jamaica as the 53rd best out of nearly 200 nations. Public hospitals are routinely overcrowded, leading to notoriously long wait times. There is at least one hospital in every parish in Jamaica, but the largest and best-equipped facilities are in Kingston and Montego Bay. Even in these largest cities, though, serious medical conditions often require evacuation to facilities in the U.S. Ex-pats are encouraged to use private facilities in Kingston or Montego Bay.
The Dominican Republic’s healthcare system ranks 51st on the WHO list. There are four types of facilities in the country: public hospitals; tourist area clinics; private clinics; and major public/private hospitals. There are three tiers of healthcare funding in the country: government funded for poor and indigenous people; privately funded by employers and their workers; and a combination of government and private funding. The U.S. embassy lists medical facilities and resources on its website.
Safety in the Caribbean
The safety of Caribbean islands varies widely. Some islands, such as Jamaica, have a problem with crime, and the U.S. State Department has issued a warning about this. It also has issued a warning about the Dominican Republic. The most dangerous place in the Caribbean may be Haiti, which drew a Do-Not-Travel warning from the State Department because of widespread kidnappings and armed robberies.
The weather can be a safety issue. The area sees hurricanes most years in the fall, and some of these storms result in injuries and fatalities, as well as diseases in the aftermath. The U.S. Centers for Disease Control keeps an updated database about any diseases and other risks on areas in the Caribbean.
The Caribbean has many islands and locales to choose from when deciding where to retire. Although this article focused on popular destinations like Belize, the Bahamas, Jamaica and the Dominican Republic, other options include the U.S. Virgin Islands, the island of Roatan in Honduras, or some of the Dutch islands. Regardless of where you choose to retire, you should go in knowing details about taxes, healthcare, safety and more.
Tips for Achieving Your Retirement Goals
- A financial advisor can help you sort out your retirement plans. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- It’s tough to plan for your retirement if you aren’t sure what kind of costs you’ll have when you retire. To get an idea of what to expect, stop by our retirement calculator. To use this, you’ll need a few details about where you want to retire, when you want to retire and how much you have in savings.
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