Corcovado National Park, Osa Peninsula, Costa Rica.
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Why Is Costa Rica A Hot Retirement Spot?
Costa Rica is perhaps the world’s best-known foreign retirement haven.
It began its bid to attract U.S. retirees back in the 1980s when the Costa Rican government hired a Madison Avenue advertising agency to put the country on the map as the world’s premier overseas retirement haven.
The campaign was a success and tens of thousands of foreign retirees, many of them North Americans, made the move. They were lured in by Costa Rica’s attractive pensionado program of discounts and tax savings, its low cost of living, and its abundance of natural beauty and vast stretches of pristine Pacific coast.
In the years since, there’s been a lot of change in Costa Rica, its pensionado program was reformed losing many of its tax breaks, the cost of living rose considerably, and its soaring popularity with travelers means deserted beaches are harder to come by than they once were, however, it remains a popular choice for North Americans looking to retire outside home borders.
It’s easy to see why Costa Rica remains in favor with U.S. retirees. Here, you can live an active lifestyle in a tropical climate, enjoy an abundance of fresh produce, settle into a welcoming community, have easy access to excellent, affordable health care, and likely lower your cost of living from the U.S.
How Many Americans Retire In Costa Rica?
According to U.S. Department of State figures, some 120,000 private U.S. citizens, including many retirees, live in Costa Rica. The country also welcomes around 1.5 million U.S. tourists each year.
What Are The Pros And Cons Of Retiring In Costa Rica?
Some of the pros of retiring in Costa Rica include…
Pro: An Extensive And Diverse Expat Community
Costa Rica has a long history with American expats so settling in and finding friends with common interests shouldn’t pose a problem. The support network on offer is wide reaching. There are expat communities throughout the country—some of the biggest for retirees are found in Tamarindo, Santa Ana, and the Central Valley.
Costa Rica also offers lots of volunteering opportunities, which is both a great way to meet new people and give back to your new community. From helping protect the sea turtles to cleaning up the countryside to educational assistance, there are plenty of charities and causes to get involved in.
Pro: Impressive Health Care
Costa Rica boasts excellent health care options and has become increasingly popular with North Americans as a medical tourism destination. Treatment costs are lower and the standard of treatment is often better than in the U.S.
Plus, Costa Rican companies are going all-out to appeal to Americans and offer VIP health care packages which include everything from chauffer pick-up from the airport to recovery in a luxurious spa or five-star hotel.
Pro: Stunning Natural Beauty
With over 600 miles of coastline, Caribbean to the east, Pacific to the west, mountains, jungles, and even volcanoes, Costa Rica is a nature lover’s paradise.
Whales, dolphins, jaguars, sloths, turtles, and monkeys, number among the half a million species known to live in Costa Rica.
Squirrel Monkey hanging on palm leaf in Costa Rica.
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Hiking, kayaking, boating, swimming, and surfing are just some of the activities on offer here that let you enjoy the beautiful natural surroundings of this geographically blessed region.
The country’s tropical climate varies considerably depending on what region you choose to base yourself in. The Pacific side offers a hot and dry climate; the Caribbean side is humid and warmer; while in the highlands, there’s more rain and lower temperatures.
Pro: Lifestyle
Costa Ricans are extremely friendly and welcoming, with a laid-back attitude to life. If you can learn to go with the flow and embrace this relaxed attitude then Costa Rica could be a great fit for you.
Some of the cons of retiring in Costa Rica include…
Con: Cost Of Living
When U.S. expats first began arriving in Costa Rica in the 1980s, the cost of living was remarkably cheap. In the years since, it has risen considerably. For those who wish to maintain the same lifestyle as they had in the U.S., they may find their budget remains the same, too.
For a couple living in a popular expat area, renting a modern home, and owning and running a car, a monthly budget of $4,000 is a good guide.
That said, for those who opt to embrace local life, shopping at local produce markets, using public transport, etc., the cost of living can be considerably lower than in the U.S.
Con: Language Barrier
Spanish is the official language in Costa Rica so to get the best from life here, you will need to speak Spanish. Outside of tourist areas and expat havens, most people don’t speak English.
Con: Safety
Generally, Costa Rica is a safe country but, as anywhere, you need to take basic safety precautions. In more recent years, crime has become more of an issue and the U.S. State Department recently issued a new travel advisory for Costa Rica, updating it from Level 1 to Level 2: Exercise Increased Caution, due to crime.
According to the update, petty crime is common throughout Costa Rica and more serious violent crime is also impacting tourists.
A level 2 advisory doesn’t mean you need to reconsider your travel plans but it does mean you should exercise increased caution when traveling in Costa Rica.
How Does Retiring In Costa Rica Affect Your Taxes, Retirement Investments, Social Security Benefits, Etc.?
Moving to Costa Rica does not remove your obligation to pay U.S. taxes. U.S. citizens must file a return with the IRS every year, no matter where in the world they choose to live.
However, Costa Rica uses a territorial approach to taxation, so expats can live there without a local tax burden depending on the source of their income. For retirees that means you do not have to pay local taxes on your Social Security or other retirement income sourced from outside of Costa Rica.
In addition, living abroad can reduce your U.S. tax bill. For Americans overseas there are three main tax advantages available.
The Foreign Earned Income Exclusion (FEIE) is one of the most well-known and most often used expat tax advantages. The FEIE allows you to exclude up to $126,500 (for 2024 ) of your income from U.S. taxation. The income must be earned outside the U.S. and your tax base must also be outside of the U.S.
The Foreign Housing Exclusion (FHE) allows expats to exclude thousands in foreign housing expenses from their U.S. taxes.
Through the Foreign Tax Credit, you receive a U.S. tax credit for every dollar you pay in tax to a foreign government. This may suit people who don’t qualify for the FEIE, or Americans who are tax resident in countries with a higher tax rate than the U.S.
If you pay more abroad than you would have in the U.S, you can carry the excess taxes paid as a credit for 10 years. The FTC can also apply to so-called unearned income, such as dividends, interest, and royalties.
Do You Need A Visa to Retire In Costa Rica And How Easy Or Difficult Is It To Get?
Yes, you need a visa to retire in Costa Rica. The most popular choice for retirees is the Pensionado residency visa. To qualify, you will need to be able to show a monthly income of at least $1,000 in retirement income. This income can take the form of a pension, social security, an annuity, etc.
Other visa options include the Rentista visa which requires a monthly transfer of $2,500 from a guaranteed source into a Costa Rican bank account for a two-year period. Alternatively, you can deposit $60,000 into a Costa Rican bank account with a disbursement schedule of $2,500 a month over a two-year period.
Costa Rica’s Inversionista residency requires a $150,000 investment in real estate, stocks, bonds, a Costa Rican business, or similar.
The country also offers a digital nomad visa which requires a monthly income of at least $3,000.
Is It Ethical To Retire In Costa Rica?
As anywhere in the developing world, wealth disparity can be very obvious in Costa Rica.
Although expat retirees can create unnatural inflation in areas such as real estate, they also spend money and create the need for new jobs, businesses, and services. They can also help out their new communities in a positive way through volunteering in local projects, bringing their experience and resources to those in need.
Tourism also plays a vital role in Costa Rica’s economy and a rapidly growing sector of that is eco-tourism, which not only contributes significant income for the country but also allows visitors to enjoy Costa Rica’s attractions in a sustainable way.
Who Should Consider Retiring In Costa Rica?
For those with a comfortable retirement income, a passion for nature, a relaxed attitude to life, and a willingness to learn a new language, Costa Rica could be a dream retirement destination.
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Publish date : 2024-12-24 05:33:00
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