If you’re considering retiring abroad, Puerto Rico ought to be on your radar. Of course, Puerto Rico isn’t “abroad.” It’s an American territory. And that is not the least of the five reasons some Americans choose to retire to this particular sun-kissed Caribbean island.
For the Tax Breaks
If you have any money invested, Puerto Rico will help you make the most of it. The island government’s Act 22, or Individual Investors Act, exempts residents entirely from taxes on dividends, interest and capital gains. For U.S. citizens to qualify for the exemptions, Puerto Rico must be their real home – they must reside in Puerto Rico at least 183 days of the year. The island’s government recently extended the program to Puerto Rican-born people now living in the states, in hopes of luring successful Puerto Ricans back home.
There’s another tax-related benefit for Americans living in Puerto Rico. Since it is part of the United States, albeit with a unique status, the “double taxation” penalty for American citizens living abroad does not apply to those who live in Puerto Rico. (Under current law, American citizens must file U.S. taxes no matter where in the world they live. Many expats have to file both in the U.S. and in the countries where they live. By agreement with the U.S., most countries deduct U.S. taxes paid from any taxes owed by expats. But many expats, particularly those with higher incomes, still must pay taxes to both countries.)
For the Easy Adjustment
Never forget that Puerto Rico is a United States territory. Although Spanish remains the first language, English is widely spoken. You don’t need a residency permit to live there. The U.S. dollar is the currency. The electric plugs are the same. And as a U.S. territory, your Medicare card is as good in Puerto Rico is it is on the U.S. mainland.
Many familiar brand names are on display there, too, for better or worse. Puerto Rico has more Walmart and Walgreens stores per square mile than anywhere else on Earth. A Google Maps search plots 19 Starbucks cafés in the San Juan area.
For a Lower Cost of Living
Puerto Rico’s economy is struggling with nearly $70 billion of debt. A financial rescue bill signed by President Obama on June 29, 2016, has put the island's finances under a federal oversight board and has allowed some debt restructuring. A long, hard recession and inflation have been among its many problems and many professionals have left the island for better-paying jobs elsewhere. Yet Puerto Ricans still enjoy a lower cost of living than mainland Americans.
The cost of living is more than 11% lower than the aggregate for the U.S., according to 2016 figures compiled by Numbeo.com. (Compare San Juan with a city where you live.)
A breakdown of everyday costs shows big price differences within those bottom-line numbers. Real estate prices are relatively high, and beachfront property particularly so, but property taxes are comparatively low.
Grocery prices are high, since most food has to be shipped to the island. But a gym membership in the business district in San Juan costs $45 a month, according to a breakdown on Expatisan.com.
Best of all, home rental prices are lower even in the best neighborhoods. A furnished, 900-square-foot rental in an expensive neighborhood of San Juan averages $1,674, according to Expatisan. In a “normal” neighborhood, the average price for the same size furnished apartment is $933 (figures from August 2016).
For the Climate
Did we mention that Puerto Rico is a tropical paradise? This could have been the top item on the list, but it’s a bit obvious.
Warm weather is a constant year-round, with little seasonal variation. Temperatures in San Juan and its other coastal areas average in the mid-80s to 90 or so in the daytime, cooling to the mid-50s to about 70 degrees overnight.
If that’s too hot for you, the island’s hilly center provides a cooler climate, along with a more rural atmosphere. Temperatures can even plunge into the 40s during the mid-winter nights.
Because It’s Closer Than You Think
Wherever you are in the U.S., Puerto Rico is quicker and easier to get to than most other places that can compete as retirement destinations. A non-stop flight from Miami to San Juan takes under three hours. The flight from New York is about four hours.
The Bottom Line
Puerto Rico has many of the advantages – along with the economic challenges – of its neighbors in Latin America and the Caribbean. This most recently includes the Zika virus, which is in many parts of the Caribbean and most recently has spread to sections of Florida.
All the same, Puerto Rico's unique status as an American territory can make it particularly attractive to Americans looking for an affordable place to retire. It also makes the transition to a new home easy.