European Stars and Stripes (Newspaper) - October 13, 1990, Darmstadt, Hesse                                Retirees in Mexico 400,000 social Security checks Are mailed each month to americans living abroad. Taxes can be a problem retiring abroad by Mary Rowland new York times More and More americans Are retiring abroad. They Are convinced they can achieve a higher Standard of living on their retirement income than in the United states. Quot in certain countries like Poland a social Security Check goes a Long Way Quot said Dale r. Detlefs manager of the social Security division for William m. Mercer inc., a new York based benefits consulting firm. Almost 400,000 social Security checks Are mailed each month to americans living abroad up from about 310,000 in 1980, Detlefs said. Still More americans retire abroad and have their social Security checks deposited in their United states Bank. According to Detlefs half the expatriate retirees live in four countries Mexico Canada Italy and the Philippines. But retiring abroad is no easy matter. One problem is taxes. Quot there s no income tax Benefit to retiring abroad because As a . Citizen you pay income tax on your worldwide income to the .,&Quot said William h. Mears jr., senior vice president at Brown Brothers Harriman Trust a Wall Street Bank. Even if you give up american citizenship you must pay Federal income tax on your retirement benefits because you earned your income in the United states he said. But if you retire abroad you could avoid state tax he said. Many expatriate retirees say they keep a Low profile because they feel the internal Revenue service scrutinizes them. The irs does not look askance at americans abroad said Henry Holmes an irs spokesman but the Agency has Quot conducted surveys that suggest people abroad have a slightly higher incidence of not reporting  you should also research foreign taxes. Quot depending on the Laws of the foreign country it might give credit for the . Tax you pay Quot said Steven m. Kates director of expatriate services for new Jersey clients at Ernst amp Young the big accounting firm Quot but there would still be residual foreign  get a copy from the irs of the tax treaty Between the United states and the country where you plan to live advised Violet Woodhouse a Costa Mesa calif., financial planner. Some countries like Costa Rica try to lure retirees by making United states pensions exempt from local taxes she said. _ and Mears said several places a like the grand Cayman islands the Bahamas and Guernsey in Britain a have no local taxes. In some places you May be Able to escape tax on your pension if you take it As a Lump sum and Roll it into an individual retirement account Kates said. The foreign government May View the Money in your Ira As capital rather than income even if you use the Money for living expenses and you May be shielded from foreign taxes. Estate taxes present Hornier problems. You will be responsible for inheritance taxes in the foreign country where you live and for american estate taxes. Most countries do not follow the English common Law system As the United states does Mears said. For example the Napoleonic code in France he said Quot severely limits your flexibility in How you can dispose of your assets Quot because it mandates that you leave a portion of your estate to your children. A if it s a second spouse and there Are children from the first marriage i could foresee a very complicated and difficult situation Quot he said. Woodhouse warned that you should also be careful if you buy property. In some countries foreigners Are not allowed to buy Homes that Cost less than a certain Price set by the government and they Are restricted in the parts of the country where they can own property. Before you buy Check to see if you May pass the property on to your heirs another concern is medical care. Medicare benefits do not apply to americans who live outside the United states Detlefs said. And the Quality of health care in certain countries May not be up to american standards. Medicare is broken into part a which is Hospital coverage and part a which covers doctor Bills and other expenses. Part b is elective and costs $28.60 per month for retirees. But that constitutes a government subsidy because it is Only about 25 percen of the real Cost of the Premium Detlefs said. But he added Many americans planning to retire overseas do not pay the part b premiums. If you do not pay for it when you Are 65, and later want to buy it if you move Back to the United states there is a 10 percent surcharge for each year you delayed coverage. So if you wait until age 70, you will pay a additional 50 percent. If you enrol later than age 65, you must also wait several months for coverage. If your employer provides Retiree health care you might run into snags because most employer sponsored programs Are coordinated with medicare without medicare employers costs would Rise Detlefs said and Quot the employee might say a Why should our costs go up jus because you decided to live abroad a Quot employers typically do one of three things he said they refuse to cover a Retiree who moves abroad they pick Utthi entire Tab or they pick up Only the part of the Tab that would not be covered by medicare if the Retiree were eligible. Most european countries have National health insurance plans which Means medical treatment does not Cost anything Detlefs said. But Many have added residency requirements of six months to one year am some place limits on what is covered. Page 16 the stars and stripes saturday october 13,1990