For many Americans, wanderlust can spark a desire to retire abroad. Could that be you?
Data show that the number of Americans retiring abroad has tripled over the last 30 years, with the U.S. Department of State reporting 7.5 billion dollars in Social Security benefits paid internationally each year.
But what if you want to retire overseas and leave a financial legacy without unduly burdening your heirs?
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Thankfully, some countries offer tax-friendly environments for US retirees, allowing them to maximize their retirement income while preserving assets for heirs.
Interested? Read on.
'Tax friendly' countries for U.S. retirees
Several countries offer no inheritance tax (taxes paid by beneficiaries on an inheritance).
To whittle that list down, we utilized a study by International Living which ranked the top ten best countries to retire in 2025 based on the Annual Global Retirement Index. The index looked at factors like healthcare, cost of living, and home prices.
Kiplinger started at the top of the list, selected the top three countries with no inheritance tax, and ranked those based on potential taxes on retirement income. Here they are.
3. Costa Rica
Costa Rica taxes
This Central American paradise takes third on the list with no inheritance tax. Its booming housing market, easy application for a retiree visa, and longer life expectancy than the U.S. can make your golden years….well, more golden.
However, there are some ways you may have to pay more taxes on your income:
Foreign-earned income: Taxable if you are a resident, in addition to U.S. taxes owed
U.S. retirement benefits: Taxable if you are a resident, in addition to U.S. taxes owed
While retirement and foreign-earned income are often tax-exempt, if you meet the Costa Rica residency requirements, that status could change. Consult with a tax or legal professional for your specific situation.
2. Portugal
Retirement in Portugal
Tourists from the United States recently overtook France as the third largest group of foreign tourists in Portugal. The European destination has one of the lowest crime rates in the world, plus a U.S.-Portugal Tax Treaty which helps its residents avoid double taxation.
So you may not pay more taxes on your income:
Foreign-earned income: Taxable if you are a resident, but may reduce U.S. taxes owed
U.S. retirement benefits: Taxable if you are a resident, but may reduce U.S. taxes owed
Portuguese property inheritances are only tax-exempt for spouses, children, grandchildren, parents, or grandparents. However, you may want to work with an international lawyer to understand Portugal’s rules on compulsory succession (which heirs are required to inherit) as the law can be a bit complicated and you probably don't want any surprises.
1. Panama
Inheritance tax in Panama
The best country to retire for tax reasons is Panama, and it’s no wonder why. In addition to no taxes on inheritances, retirees can get tons of discounts with the retirement visa and experience few hurricanes relative to its warm climate.
And you probably won’t be paying more tax on your income:
Foreign-earned income: Only U.S. taxes owed
U.S. retirement benefits: Only U.S. taxes owed
Like with the rest of the countries on this list, you can’t be covered by Medicare outside the U.S. However, Panama’s private health insurance can be comparatively low compared to some parts of the U.S., with plans as low as $393 per month.
Related: Three Tax Reasons to Retire in Panama
International Tax
International tax laws to consider as a U.S. expat
Keep in mind the above is not an exhaustive list of countries with no inheritance tax, and your heirs’ financial position could be affected by:
- Additional transfer taxes
- Estate taxes (also sometimes referred to as “death taxes”)
- Double taxation (in countries that don’t have a tax treaty)
Also, countries that are “taxable as a resident” may mean you still have to pay taxes if you’re a resident or citizen.
Consult an international legal or tax professional to ensure you know which status is most appropriate for you.
Read More
-
I'm want to give my 3 grandkids $5K each for Christmas.You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us?A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm Retired and Want to Give My 3 Grandkids $5,000 Each for Christmas, But Their Parents Don't Want Them to Spend It All.
You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
I'm a Financial Planner: If You're Not Doing Roth Conversions, You Need to Read This
Roth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us? A Retirement Psychologist Makes the Case
A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Adviser: This Is How You Can Adapt to Social Security UncertaintyRather than letting the unknowns make you anxious, focus on building a flexible income strategy that can adapt to possible future Social Security changes.
-
My First $1 Million: Retired In-House Corporate Lawyer, 74, MidwestEver wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
I'm a Financial Planner for Millionaires: Here's How to Give Your Kids Cash Gifts Without Triggering IRS PaperworkMost people can gift large sums without paying tax or filing a return, especially by structuring gifts across two tax years or splitting gifts with a spouse.
-
'Boomer Candy' Investments Might Seem Sweet, But They Can Have a Sour AftertasteProducts such as index annuities, structured notes and buffered ETFs might seem appealing, but sometimes they can rob you of flexibility and trap your capital.
-
Quick Question: Are You Planning for a 20-Year Retirement or a 30-Year Retirement?You probably should be planning for a much longer retirement than you are. To avoid running out of retirement savings, you really need to make a plan.
