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Moving abroad from the US: your financial checklist
If you’re making the make the move to another country from the United States to live life as an expat, there are lots of things you need to take into consideration. Once you’ve hunted for a new house, picked up the lingo and secured a new job, you’ll probably want to put your US property on the market, organise a farewell party or two and get ready to make the big move.
But before you jet off, make sure that your finances are in order ready for your new life overseas. The chances are that banking services, taxation, and regulations will be different in your new country, and if you’re not prepared, you could be caught off guard and struggle.
Today, we’re offering a helping hand. Whilst we can’t sit down with you to discuss the ins and outs of your mortgage payments and investments, we can give you a financial checklist - run through everything on this list before you leave, and everything should run pretty smoothly…
Tell your bank you’re planning to move abroad and provide dates and contact information where possible. If you’re not closing your account, you may need to switch to an expat or international bank account to keep your money in order.
Find the best foreign exchange rate to move your US dollars into another currency. Don’t assume that your bank will offer you the best deal and don’t move currency to a US dollar account abroad, as you could be stung with withdrawal and exchange fees when you move. If in doubt, hold onto your US account and transfer your money as and when it’s required to find the best deals and foreign exchange providers.
Ask about fees and accessibility to see how much it’ll cost you to withdraw money when you’re away. If it’s prohibitive, closing your account is highly recommended.
Cancel any Automated Clearing House (ACH) transfers and standing orders that you no longer need - Netflix subscriptions, gym memberships, and your cell contract.
Pay off any debt, such as credit and store cards, so you have a ‘clean slate’ when you move to another country. If you can’t, speak with a financial advisor to determine the best course of action for your debt management and make it a priority to close any outstanding accounts as soon as you can. You’re likely better off paying off credit cards with high interest rates than letting your money sit in your savings accounts.
Open an offshore bank account to keep your money safe - and consider opting for a bank that has multi-currency options to help cut your fees. Do your research to find the best deals and remember that you may need to switch every year or two.
Open a local bank account in your new country of residence to manage your day to day finances - and look for mobile banking options to manage your money online.
See whether you can make contributions to your retirement account in your new country of residence, rather than sacrifice or cash in your retirement account before you make the move.
Research into access to ensure you’ll be able to receive your monthly pension payments should you choose to retire as an expat. Some providers only pay out to US citizens, although there are loopholes in these cases such as maintaining a US bank account and applying for dual residency. Speak with an independent advisor.
Understand the tax system in your new country and calculate your potential monthly allowance should your pension payments be impacted. Consider investing in a new pension abroad to top-up your payments and give you additional assurances.
Get to grips with your 401k. You cannot transfer your 401k balance from the United States to your new country of residence, although the benefits of owning the account can travel with you (aka you’ll be able to receive your benefits as an expat). Note that any withdrawals from your 401k could trigger both US and foreign taxes, and you’ll suffer an additional 10% tax penalty if you withdraw under the age of 59.5, so hold tight unless you absolutely have to withdraw from your account before you emigrate.
Look into your current investments and see whether they will be affected by your move to another country. If they are, consider selling them off or research into where you can hold investments to generate the best returns and avoid double taxation.
Research offshore investment opportunities to make your money work for you and reduce tax burdens as an expat. Be careful and seek independent advice to avoid being burned by an advisor on commission, and always spread the risk.
Contribute to your savings account to avoid penalties or consider wrapping up your accounts and transferring assets to your new country of residence for easy access. Take into account exchange rates and look for a low-cost intermediary.
Find an investment specialist who can offer guidance and organise your portfolio before your big move. Some investment companies will manage your assets in the US whilst you live your life as an expat - but they do charge fees and commission.
Hire a real estate agent to market your property for sale and stress that you’re looking to sell quickly. If you’ve already found a new home abroad you’ll need to act fast if you don’t have the cash at hand - consider selling your home for less than asking to speed up the process, or hold on if you’ve got the patience and capital.
Find a property manager if you’re going to hold onto your property. They’ll be responsible for finding you tenants, collecting rent, carrying out repairs, and insuring your property on your behalf. A friend or family member could be able to help with this to cut costs, but consider drawing up a contract to determine the finances.
Inform the relevant tax authorities that you’re moving to another country.
Get to grips with the tax system in your new country of residence and find out whether there’s a double taxation agreement between the two countries. Note that individuals who earn less than $100,000 per year abroad can benefit from double taxation deals. Other per-country benefits apply, so do your research and know what you’re eligible for. Again, working with an accountant or advisor could help you here.
Know your responsibilities if you’re planning to generate an income in the US when you’re living abroad as an expat (US investments, real estate) and determine where you’ll pay tax - you may need to submit annual returns in the US and abroad.
Moving to a new country is about much more than packing a couple of suitcases and finding a new place to live - it’s about uprooting your life and carefully considering your finances.
It is important to focus on money before you move onto the fun parts - like hosting parties and selling off your furniture and unwanted belongings - as it’s easy to bury your head in the sand. Speak with a professional if you’re stuck, and check back with the Money Saving Expat blog regularly for more tips and tricks on living your best expat life on a budget.