I’m a long time lurker but decided to log in when I saw this post, mainly because of the danger it poses to both the OP and any others who might be thinking the same thing.
Without commenting on your reasons for wanting to retire abroad, you should realize that for tax purposes, it doesn’t matter. You are an American citizen. It doesn’t matter where you are living, you are still subject to US taxation, regardless of whether a tax treaty is in place with your chosen country or not.
For retirement accounts, such as 401K and IRA or other securities, it’s all considered ordinary taxable income the moment you start drawing on it. Income you earn from business you are doing in that country might have some tax exclusions for you under the Foreign Earned Income code. You are still required to file a 1040 and failure to do so can result in a $10,000 fine.
The other option is to renounce your citizenship, but this poses its own financial problems. At the time of such a renouncement, you would be required to add up the value of all your assets (retirement, checking, savings accounts, homes, cars, artwork, etc.) and pay a lump tax on the value of them all. It’s called an Exit Tax and it was enacted to discourage the kind of thing you seem to be wanting to do.
Hope this helps and I strongly advise speaking to both a lawyer and a competent accountant before making any major decisions.
Good information. So one CAN leave after paying an exit tax - it might be a small price to pay for a nice climate, low cost of living and to be free of Obamaphone lady.
Thanks for the tips, yeah the global taxation is in fact one of the reasons we’re moving in this direction, because all the earnings we acquire from our import-export work in the Mediterranean and elsewhere still gets taxed at outrageous levels in the US. The US is the only country that does this, and the system is so burdensome and punishment-oriented that even the most honest taxpayers get shafted by it. The banks overseas have to comply with the reporting demands and pestering from the US, and it’s so costly to them that some will close the accounts of Americans based there. We’d also heard of the exit tax and have no illusions about it, it’s just that in light of the outrages from the US worldwide taxation system, we’re starting to think it’s worth it to renounce our passports and be done with it.
It’s interesting that even the liberal Democrats we work with overseas absolutely hate the US global taxation scheme, and it’s one of the things that Romney stupidly ignored in his campaign- he would’ve gotten 90% or more of the vote from returning expats, exporters and anyone else working in international trade, if he’d bothered to put more emphasis on improving this universally hated, unfair and preposterous global taxation. That (along with the legal thievery of US divorce laws) is one of those rare things when you can really find almost universal consensus across ideology lines, since it’s so plainly ignorant of the working realities of American expats, so atrociously disproportionate and so damaging to otherwise well-meaning, hard-working and productive people. We’re not even using services in the US when we work aboard, not using any of the roads, foodstuff inspection, libraries, police or fire services, we’re working in a different country. And most of us aren’t billionaires with Swiss bank accounts, we’re hard-working and prosperous but still usually upper-middle class or so. What justification is there then, to tax us so viciously, take such a punishing stance and all but force us to lose our foreign accounts in overseas banks? It’s obvious common sense that global taxation of US citizens is an outrage, which is why no other country does it.