One of the many decisions older adults must make is where to live during retirement. A small but growing number of adventurous retirees choose to settle down overseas, at least on a part-time basis, to enjoy new experiences, pleasant weather, and the possibility of a lower cost of living.
Another motivator is if you have family roots abroad. For instance, if you were born abroad or if your parents come from outside of the U.S., you may decide to explore the “home country” during retirement. There are important considerations when retiring abroad in a country where you have family roots, and Mexico is no exception.
- Mexican-Americans often decide to return home to retire in Mexico to reunite with family and to enjoy the lower cost of living, warm climate, and natural beauty.
- If you are eligible for social security income you can continue receiving your benefits while living in Mexico but Medicare will not provide coverage abroad.
- Retirees will still need to navigate the process of purchasing property, paying taxes, and understanding visa rules to make living in Mexico a breeze.
Social Security Benefits
As long as you are eligible for U.S. Social Security payments, you can receive them while living in Mexico, whether you are a citizen of the U.S. or Mexico. Special rules may apply if you are not a U.S. citizen or if you receive benefits as a dependent or survivor of a worker. Use the Social Security Administration’s Payments Abroad Screening Tool for details pertaining to your specific situation.
According to the Social Security Administration, you can opt to have your benefits mailed to you in Mexico, or deposited directly into a bank account or other financial institution of your choice in Mexico or the U.S. or in any country that participates in the Social Security Administration’s International Direct Deposit program.
In many cases, the direct deposit option makes the most sense: You won’t have to worry about delayed, lost, or stolen checks, plus you’ll get your money a couple of weeks faster than if you wait for checks to come in the mail. Once your benefits are deposited, you’ll be able to access them using an ATM card in Mexico.
If you need help with anything Social Security-related, the U.S. Embassy Mission Mexico has three Federal Benefits Unit locations. They are the U.S. Embassy in Mexico City, the U.S. Consulate General in Guadalajara, and the U.S. Consulate General in Ciudad Juárez. It’s an appointment-only system so to schedule an appointment or to obtain more information, use the online form on the Embassy’s website. You’ll need to include your name, address in Mexico, phone number(s), email address, Social Security number, and a brief message stating the reason for your inquiry. Responses typically take up to three business days and the office is closed on holidays and the last working day of each month.
Note that Medicare does not cover health services you receive outside the U.S. Medicare benefits are available if you return to the U.S., but you will end up paying a 10% higher premium for each 12-month period you could have been enrolled but were not.
Land Ownership Laws
Foreigners can own property in the interior of Mexico, including tourist areas like Guadalajara, Cuernavaca, and even Mexico City, but are technically forbidden from holding title to any property in the “Restricted Zone” established under the Mexican Constitution, which extends 100 kilometers (62 miles) from any international border and 50 kilometers (32 miles) from any coastline at high tide.
Note that foreigners and Mexican nationals alike are prohibited from owning property in the Federal Zone, which is any beachfront property within 20 meters (65 feet) of the mean high tide line. Similar “littoral rights” exist in the United States. While you can buy beachfront property, you only own as far as the median high-water mark; beyond that is the government’s property.
Even though foreigners are technically banned from buying in the Restricted Zone, it is possible to use a bank trust (called a fideicomiso) to purchase in these areas. In this situation, a bank acts as a trustee by holding the trust deed for the buyer, who is the beneficiary of the trust. The fideicomiso is authorized by the Mexican government through the Ministry of Foreign Affairs, and while the bank is the legal owner, the beneficiary retains the legal rights of ownership and can rent, sell, and bequeath the fideicomiso or property at will.
Another option for ownership is Mexican corporations, which can be 100% foreign-owned and can hold title within the Restricted Zone. So you and your spouse could form a corporation, which in turn could purchase the property without the need of a bank trust. All real estate transactions in Mexico require the services of a notary public (notario publico), a government-appointed lawyer who processes and certifies all real estate transactions.
Citizenship and Visa Options
With few exceptions, if you are born in Mexican territory you are automatically considered a Mexican national at birth. If you were born in Mexico to American citizen parent(s), you will have dual citizenship (Mexican and American) at birth. Likewise, if you are born in the U.S. to at least one Mexican parent, you will have dual citizenship.
If you enter Mexico on your Mexican passport, you can stay in the country indefinitely. If you use your U.S. passport, you can stay for up to 180 days as a tourist. Beyond that, you have a couple of options. The Temporary Resident Visa is valid for up to four years, and you’ll need to prove you have sufficient income or investments to support yourself (currently about $1,950 a month).
If you plan on staying for long periods of time or want to seek permanent residency, you can apply for the Permanent Resident Visa. To be eligible, you must have a monthly income of about $3,250 or an average monthly bank/investment account balance over 12 months of about $130,000. You’ll also have to satisfy one or more of the following requirements: family connections, income/investments, points score, or political asylum.
U.S. citizens traveling or living abroad are encouraged to enroll in the Department of State’s Smart Traveler Enrollment Program (STEP), which provides security updates and makes it easier for the nearest U.S. embassy or consulate to contact you and/or your family in case of an emergency.
Residents (regardless of nationality) are subject to Mexican income tax on income earned worldwide; non-residents are taxed only on Mexican-sourced income. Because the U.S. and Mexico have a Double Taxation Agreement, you won’t be taxed twice on the same income. Taxpayers generally pay taxes in both countries but have offsetting tax credits that essentially limit taxes to one country. Mexico does not have an estate or inheritance tax. Tax laws are complicated and change frequently, so it is recommended that you work with a qualified tax accountant to make sure you have the most favorable tax outcome possible.
The Bottom Line
While it’s important to do your homework so you know what to expect regarding things like Social Security benefits, buying property and visas, it’s important to consider the emotional and logistical impact of retiring abroad. A move to another country can challenge your comfort zone in every way as you get used to a new language, culture, foods, customs, and everyday living.
While many people embrace these changes as inherent in moving abroad, others may find overseas living works out better on a part-time basis, say, six months in the U.S. and the rest of the year abroad. If you have a choice when it comes to living outside of the U.S., give careful consideration to your own situation, comfort level, friends, family, and healthcare needs before making any decisions.