For many Americans, the idea of relocating abroad is both the stuff of just-out-of-college adventuring and early retirement fantasies. But how realistic is relocating abroad, and what are the hidden roadblocks?
Nick Woolsey recently sat down with Business Insider to talk about his new company that helps Americans relocate to Japan. Woolsey, himself an American, lived in Japan for seven years after college, fell in love, got married and had a family (1).
After returning to the U.S. to raise young children closer to family and spending several years working in tech, Woolsey lost his job during the post-COVID downturn and decided to turn his experience into a business helping others relocate to Japan.
Here’s what you actually need to consider if you want to relocate overseas: how visas work, how taxes follow you, and the financial and non-financial variables that can determine whether moving abroad is realistic or risky, based on Woolsey’s advice.
It has become much harder for working Americans to earn a U.S. salary while living full-time in a lower-cost country.
Recent JOLTS data from the Bureau of Labor Statistics suggests that the post-pandemic “Great Resignation” era of high worker bargaining power has shifted. With fewer job openings and a decrease in the “quits” rate, employees feel less confident about their ability to demand concessions like fully remote work in a different time zone, and according to Fortune magazine, for the first time since the pandemic, the majority of Fortune 100 companies are mandated to be in the office (2, 3).
Foreign countries have also gotten wise to American workers who want to live large far from home. Foreign taxes, compliance fees and the loss of professional and social networks can also be calculated as financial losses. Woolsey and his partner moved back to the U.S. from Japan exactly because they could get more free childcare from their family.
The most expensive mistake a relocator can make is an unstable plan that fails to account for the fact that cost of living is not the same thing as quality of life. A move that looks great on a spreadsheet can become a financial nightmare if that move results in social isolation or professional stagnation.
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Non-citizens in nearly all countries are not allowed to overstay their tourist visa unless they either get a special long-term stay visa or are refugees. U.S. citizens can apply for asylum in other countries (like Canada), but they have to prove significant risks to their life, freedom or safety to get asylum status (4).
Some countries offer so-called “golden visas,” which allow people to live there if they make large investments. These visas usually do not grant citizenship and do not change U.S. tax obligations. Because the U.S. taxes citizens based on citizenship rather than residence, Americans living abroad under a golden visa must still file U.S. tax returns (and often pay U.S. taxes) even while paying local taxes abroad.
Malta, which does offer a path to citizenship (and an EU passport), charges at least $812,590 at today’s exchange rate for the chance to earn that privilege (5). (Malta allows for dual U.S. citizenship, if you change your mind, however.)
Most other countries in Latin America or Southeast Asia also do not offer a path to citizenship, even if they do offer long-term stay visas. In Thailand, for example, people of working age can only get a Destination Thailand Visa (DTV) that allows for consecutive 180 day stays up to five years. That visa does not allow you to work for a Thai company, and you do have to register in Thailand to pay taxes (6). You also have to show 500,000 Thai baht (about $16,000) in your bank account to get it.
The takeaway: long-term legal residency is often temporary, restrictive or expensive, and permanent status is far harder to obtain than many people expect.
Woolsey says many people underestimate how different daily life feels once the excitement of a big move wears off.
Many Americans are surprised to find that their tax obligations follow them across borders. The Internal Revenue Service maintains a citizenship-based taxation system, meaning that even if you live in Osaka, you must still file in the United States. While tools like the foreign earned income exclusion and the foreign tax credit can mitigate double taxation, they require meticulous record-keeping and professional guidance.
Non-financial variables often carry the most weight, however. Language barriers and cultural differences are, in a sense, financial variables because they influence how quickly you can find a new job or recover from a setback. Relocation is riskiest when you are simultaneously switching industries, rebuilding your friend circle and learning a new legal system.
To decide if moving abroad is a viable solution, you have to move past the romance of living like a digital nomad and instead hold yourself to a “two-country budget test.” This means mapping out every line item from childcare to emergency health coverage and stress-testing it against potential job loss or a weakening dollar.
The goal should be to identify a path that offers long-term stability and to confirm that income is truly portable. De-risking the move with a trial run and maintaining a U.S. re-entry fund ensures that if the experiment fails, it doesn’t result in financial ruin.
Moving abroad can be a fun and even profitable move for young people without a lot of ties to their home country. Retirees with a lot of saved cash and fewer family and work obligations may also find the expat life enticing. But without portable income, visa security and a realistic exit plan, moving abroad can turn a search for freedom into a costly detour that’s hard to undo.
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Business Insider (1); Bureau of Labor Statistics (2); Fortune (3); Relocate (4); Immigrant Invest (5); Life With Vetta (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.