If You Had a Baby in 2020, You Can Get $1,100 of Stimulus Money

If you’re the proud new parent of a 2020 baby, here’s some good news to get you through those sleepless nights: Your 2020 bundle of joy qualifies you for a sweet bundle of stimulus cash — $1,100 to be exact.

Why Do New Parents Get an Extra $1,100?

The first stimulus check gave parents an extra $500 for each child age 16 and younger on top of the $1,200 for most adults. The second stimulus check provided families with $600 for each adult and dependent child 16 or younger. So between the two checks, parents generally got $1,100 per kid.

Both checks were an advance on a 2020 tax credit that were processed using 2018 or 2019 returns. But the IRS won’t know about any of the babies welcomed into the world in 2020 until you file a tax return.

When you file your 2020 taxes, you can receive the $1,100 as a Rebate Recovery Credit. That just means you’ll get the extra money as a tax refund. That’s on top of the $2,000 child tax credit parents who are single filers with incomes under $200,000 or joint filers with incomes under $400,000 qualify for.

What Are the Income Limits?

For both stimulus checks, the income limits to receive the full stimulus payments were:

  • $75,000 for single filers
  • $112,500 for heads of households
  • $150,000 for married couples filing a joint return

Checks phased out at 5 cents on the dollar for every dollar of income above these thresholds. For a more detailed explanation of how the phaseout works for child credits, check out Question 7 of our child stimulus credit FAQ.

Do I Get $1,100 if I Adopted in 2020?

You should qualify for an $1,100 stimulus payment for your family’s new addition as long as the child you adopted was 16 or younger at the end of 2020. The same rules apply: File your tax return to get the money as a refund.

What if I’m Not Married to My Child’s Other Parent?

The parent who’s claiming the child as a dependent for tax purposes receives the money.

I Didn’t Get the Money for My 2019 Baby. What Gives?

A lot of parents were frustrated to discover that their stimulus checks didn’t include the child credits — particularly in the first round, when many payments were processed using 2018 returns. If the IRS used your 2018 tax information, you wouldn’t have received a payment for a child born in 2019.

The solution is the same, though: File a tax return. If you file taxes online and provide your direct deposit information, you can expect to get that $1,100 of stimulus money within about three weeks.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]

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How to Retire in Barbados: Costs, Visas and More

How to Retire in Barbados: Costs, Visas and More – SmartAsset

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An island in the West Indies, Barbados is a jewel of the Caribbean. Its turquoise waters and golden beaches are a perfect match to many people’s idealized days in the sun that they hope is waiting at the end of their working life. While this commonwealth country, where English is the official language, does have good reason to boast, you may wonder whether it’s right for you to retire in Barbados. Before contacting your financial planner to see if your finances are in order for the move, here are a few matters to consider first.

Cost of Living and Housing

Barbados’s cost of living tends to run a little higher than the U.S.’s on average, according to Numbeo, a cost-of-living database. At 12.24% above the U.S.’s average, without taking into account rent, the difference is not as significant as some other percentages found between the two.

For example, although Barbados has a higher cost of living, it has a much lower rent average. In comparison to the U.S., Barbados’s rent is generally 48.53% lower. You’ll find that renting is the cheaper way of living in Barbados, with a single-bedroom apartment in a city center at about $654.55. However, purchasing is a different story. At about $3,087.21 per square meter to buy an apartment in the same setting, it’s in the same price range as the U.S. There, it’s around $3,533.12 per square meter.

So, if you’re looking to stretch your retirement funds further, it makes more sense to pursue renting Barbados rather than purchasing a property.

Retire in Barbados – Visas and Residence Permit

For those who want to retire in Barbados, the process is relatively simple. Individuals over 60 with sufficient funds to support themselves can apply for immigrant status. After living in the country for five years, those people can then apply for permanent residence. You’ll have application and approval fees, in this case, $300 and $1,200, respectively.

Another option open to retirees is a special entry permit (SEP). This permit is offered to retired property owners and allows them to visit the island and leave as they please. The main requirements include owning Barbados real estate valued at $150,000 or higher and health insurance coverage. The latter’s value depends on the person’s age; below 50 has to have $350,000, and over 50 has to have $500,000 worth of coverage.

There are flat fees to cover for the SEP. It’s $5,000 for those below 50 and above 60 with $3,500 for those in between 50 and 60. Once you hit 60, this permit is indefinite, but you must renew it until then.

Retire in Barbados – Healthcare

Barbados enjoys a high standard of living and, thus, its people’s health is overall quite good. Its healthcare system is even viewed as among the best in the Caribbean. However, if you’re not a Bajan (as citizens of Barbados are sometimes called), you are not included under the island’s universal healthcare system. Therefore, if you’re an expat looking to retire in Barbados, you should ensure that you have private health insurance. Otherwise, numerous travelers and potential residents seek out the U.S. for treatment instead.

This outsourcing is also partially due to the difficulty in accessing professional care, such as rehab services. Otherwise, you’ll generally find four types of institutions: hospitals, both private and public; polyclinics; alternative healthcare clinics; and somewhat specialized hospitals, such as the five geriatric hospitals on the island.

Retire in Barbados – Taxes

After you spend 182 days of one year in Barbados, you are considered a resident. So, it’s important to know the tax distinctions between resident and non-resident status. Residents must pay taxes on their worldwide income, or the income they earn both inside and outside Barbados. In contrast, non-residents only pay taxes on income earned in Barbados.

For residents, they must file their income taxes on a minimum threshold of BBD50,000, or approximately $24,786. Incomes up to and including BBD50,000 incurs a 12.5% tax rate, while going over that amount leads to 28.5%. Residents are ensured a basic personal allowance of BBD25,000 ($12,500) and BBD40,000 ($20,000) for pensioners older than 60.

Non-residents receive the same tax rates. However, it’s important to note that even if you live outside the country, you must file taxes with the U.S. as an expat as well. Barbados and the U.S. have a tax treaty that can offer benefits and help ease the burden. There are also opportunities for U.S. expats through the foreign earned income exclusion and foreign tax credits to avoid double taxation on their Barbados earned income.

Retire in Barbados – Safety

While U.S. expats are not specific targets of crime in Barbados, they are still susceptible to crimes of opportunity and violence. Theft, such as burglary and gun violence, among other crimes, exist in Barbados. So, it is essential to remain vigilant, to avoid walking alone, particularly at night, and to know who you’re with at all times.

In particular, the U.S. Department of State advises against traveling through specific areas on the island to avoid these dangerous interactions. Areas to avoid include Crab Hill, Nelson and Wellington Streets and general nighttime party cruises.

Be cautious about which activities you enjoy, such as water sports or tourist events. This advisement comes more from a practical, safety concern than a pointed targeting of tourists, though. So, keep your wits about you.

The Takeaway

Barbados is the island of dreams for some retirees. Thanks to the prominent U.S. community as well as an English-speaking citizenry, there’s less of a culture shock to shake you up. There is also the gorgeous weather, a location out of most hurricanes’ paths and the relative ease in becoming a resident. However, before you start to plan out your future on this island, it’s best to speak with a trusted financial advisor. Such a person can lay out the commonwealth’s tax and healthcare systems and help you determine whether the high purchasing price of property is in line with your long-term goals.

Tips for Achieving Your Retirement Goals

  • Finding the most suitable financial advisor for your needs doesn’t have to be complicated. SmartAsset’s free tool matches you with local financial advisors in as little as five minutes. If you’re ready to be matched with your financial advisor, who will help you achieve your financial goals, get started now.
  • Barbados may not have a high cost of living compared to the U.S., but the difference could still affect your finances. To see  if your finances will support this, try our retirement calculator. Just put in a few details about where you want to retire, when you want to retire and the value of your current savings.

Photo credit: ©iStock.com/Fyletto, ©iStock.com/isitsharp, ©iStock.com/zstockphotos

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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Indexed Universal Life (IUL) vs. 401(k)

Indexed Universal Life (IUL) vs. 401(k) – SmartAsset

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When creating your personal retirement plan, there are a variety of tools you can use to fund your long-term savings goals. An employer-sponsored 401(k) is one of them while indexed universal life insurance (IUL) is another. A 401(k) allows you to invest money on a tax-deferred basis while also enjoying a tax deduction for contributions. Indexed universal life insurance allows you to secure a death benefit for your loved ones while accumulating cash value that you can borrow against. Understanding the differences and similarities between IUL vs. 401(k) matters for effective retirement planning. Working with a financial advisor can also make a substantial difference in the amount of money you’ll have when you retire.

What Is Indexed Universal Life Insurance?

Indexed universal life insurance is a type of permanent life insurance coverage. When you buy a policy, you’re covered for the rest of your natural life as long as your premiums are paid. When you pass away, the policy pays out a death benefit to your beneficiaries.

During your lifetime, an IUL insurance policy can accumulate cash value. Part of the premiums you pay are allocated to a cash-value account. That account tracks the performance of an underlying stock index, such as the Nasdaq or S&P 500 Composite Price Index. As the index moves up or down, the insurance company credits the cash value portion of your policy each year with interest.

IUL is different from fixed universal life insurance or variable universal life insurance. With fixed universal life insurance your rate of return is guaranteed, making it the least risky of the three. With variable universal life insurance, your cash value account is invested in mutual funds and other securities so you’re exposed to more risk. An indexed universal life insurance policy fits in the middle of the risk spectrum.

Cash value that accumulates inside an IUL insurance policy grows tax-deferred. You can borrow against this cash value if necessary, though any loans left unpaid at the time you pass away are deducted from the death benefit.

What Is a 401(k)?

A 401(k) is a type of qualified retirement plan that allows you to set money aside for retirement on a tax-advantaged basis. Contributions are deducted from your paychecks via a salary deferral. Your employer can also offer a matching contribution. The IRS limits the amount you can and your employer can contribute each year.

With a traditional 401(k), contributions are made using pre-tax dollars. Any money you contribute is automatically deducted from your taxable income from the year. When you begin taking money out of your 401(k) in retirement, you’ll pay ordinary income tax on withdrawals. Any withdrawals made before age 59.5 may be subject to a 10% early withdrawal penalty as well as income tax.

Traditional 401(k) plans allow you to invest in a variety of securities, including mutual funds and exchange-traded funds. Target-date funds are also a popular option. These funds automatically adjust your asset allocation based on your target retirement date.

There’s no death benefit component with a 401(k). This is money you save during your working years that you can tap into in retirement. Unless you’re still working with the same employer, you’re required to begin taking minimum distributions from a 401(k) beginning at age 72. Failing to do so can trigger a tax penalty equivalent to 50% of the amount you were required to withdraw.

IUL vs. 401(k): Which Is Better for Retirement Savings?

Indexed universal life insurance and 401(k) plans can both be used as investment tools for retirement. But there are some important differences to note. With IUL, returns are tied to the performance of an underlying index. If the index performs well, then your policy earns a higher interest rate. If the index underperforms, on the other hand, your returns may shrink. Your insurance company can also cap the rate of return credited to your account each year, regardless of how well the underlying index does. For instance, you may have a cap rate of 3% or 4% annually.

In a 401(k) plan, you have the option to invest in index mutual funds or ETFs but you’re not locked in to just those investments. You can also choose actively managed funds, target-date funds and other securities, based on your time frame for investing, goals and risk tolerance. Your rate of return is still tied to how well those investments perform but there’s no cap. So, if you invest in an index fund that goes up by 20%, you’ll see that reflected in your 401(k) balance.

A 401(k) also affords the advantage of an employer matching contribution. This is essentially free money you can use to grow retirement wealth. With an indexed universal life insurance policy, you’re responsible for paying all of the premium costs.

Another big difference between the two centers on tax treatment and withdrawals. With an indexed universal life insurance policy, you can borrow against the cash value at any time. You’ll pay no capital gains tax on loans and no penalties unless you surrender the policy completely or fail to repay what you borrow. Death benefits pass to your beneficiaries tax-free.

With a 401(k), you generally can’t tap into this money penalty-free before the age of 59.5, even in the case of a hardship withdrawal. You may be able to avoid a tax penalty if you’re withdrawing money for qualified medical expenses but you’d still owe income tax on the distribution. You could take out a 401(k) loan instead but that also has tax implications. If you separate from your employer with an outstanding loan balance and fail to repay the loan in full, the entire amount can be treated as a taxable distribution.

Qualified distributions in retirement are taxable at your regular income tax rate. And if you pass away with a balance in your 401(k), the beneficiary who inherits the money will have to pay taxes on it. Talking with a tax professional or your financial advisor can help you come up with a plan for managing tax liability efficiently both prior to retirement and after.

The Bottom Line

Indexed universal life insurance and a 401(k) plan can both help you build wealth for retirement but they aren’t necessarily interchangeable. If you have a 401(k) at work, this may be the first place to start when creating a retirement savings plan. You can then decide if IUL or another type of life insurance is needed to supplement your workplace savings as well as the money you’re investing an IRA or brokerage account.

Tips for Investing

  • When using a 401(k) to invest for retirement, pay close attention to fees. This includes the fees charged by the plan itself as well as the fees associated with individual investments. If a mutual fund has a higher expense ratio, for instance, consider whether that cost is justified by a consistently higher rate of return.
  • Consider talking with a financial advisor about how to maximize your 401(k) plan at work and whether indexed universal life insurance is something you need. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to get personalized recommendations for professionals in your local area in just minutes. If you’re ready, get started now.

Photo credit: ©iStock.com/yongyuan, ©iStock.com/kupicoo, ©iStock.com/Piotrekswat

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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How to Retire in Turkey: Costs, Visas and More

How to Retire in Turkey: Costs, Visas and More – SmartAsset

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Turkey is filled to the brim with beautiful architecture, art and a melange of cultures that reaches back thousands of years. It’s home to artifacts from communities like the Hittites, Ancient Greeks, early Christians and Mongols, which fill this nation of some 82 million, with a rich sense of history. Lying as it does at a crossroads of Europe and Asia, visitors can see a unique blend of Western and Eastern influences. Its Mediterranean and Black Sea beaches are renowned for their beauty. Istanbul’s Grand Bazaar extends across 58 covered streets hosting some 1,200 shops. If you’re considering retiring in Turkey, here’s an overview of some basic information you’ll need. A financial advisor can offer valuable guidance as you consider retiring abroad.

Cost of Living and Housing

It’s much less expensive to live in Turkey than it is to live in the U.S. Without accounting for rent, Turkey’s cost of living is 53.56% lower than in the U.S. on average, according to Numbeo, a cost-of-living database.

U.S. rent prices are 556.13% higher when stacked against those in Turkey, on average. To rent a one-bedroom apartment in a city center will run you around $215.26 in Turkey, whereas a comparable setup in the U.S. would run about $1,340.16. If you wanted to pursue purchasing an apartment in Turkey, you would find that the price per square foot in a city center is averaged out to $83.07. In comparison, the same square footage in a similar city location in the U.S. would cost about $328.96.

To further illustrate the contrast, we can compare Istanbul, Turkey’s most populated city, to the U.S.’s New York City. To maintain the same standard of life, you would need around $8,203.10 in New York, which contrasts starkly to the approximately $1,960.45 necessary in Istanbul, assuming you rent in both.

So, if you’re looking for a country to retire in with both affordable renting prices and lower property costs to make the most out of your savings, Turkey may be a solid option.

Retire in Turkey – Visas and Residence Permit

Turkey doesn’t have a visa specifically for retirement, so you have to apply for a residence permit instead. This requirement applies to anyone who intends to remain in the country more than three months. You’ll first have to apply for a short-term residence permit, and you must do so within a month of your arrival in Turkey. There is an online application you fill out at the Turkish Ministry of Interior’s website. Once you finish, it will prompt you to make an appointment with the nearest DGMM office to continue the process and pay the fee your visa requires.

A short-term residence permit is issued on a two-year basis. After you’ve lived in Turkey uninterrupted for eight years under your short-term visa, you can apply for a long-term residence permit. These extend indefinitely.

No matter what residence permit you are applying for, you will likely need to show proof that you possess adequate assets. This can shift whether or not you have dependents, but a single person is generally required to have the equivalent to a month’s worth of Turkish minimum wage. As of early 2021, that would be around $400.

Retire in Turkey – Healthcare

The World Health Organization ranking of national healthcare systems puts Turkey’s at 70th out of 191. The central government body responsible for healthcare and related policies is the Ministry of Health (MoH). There is also a private sector and university-based care; however, the MoH is the main body responsible for providing healthcare. You can expect the quality of healthcare in Turkey to vary between regions. Although it’s cheaper than some of its European neighbors, access is limited in more rural areas. You’re more likely to have high-quality care in major urban locations like Istanbul – as well as the ability to communicate with your healthcare providers in English. This increase in quality is why most expats choose to go to private medical facilities over public ones.

All residents under 65 must have either public or private health insurance. Expats who have resided in Turkey for over a year under their residence permit can apply to have public health insurance through the state-run Sosyal Güvenlik Kurumu (SGK). Expats usually choose to supplement this with private insurance (or just choose private) to cover additional fees at private facilities.

As Turkey has grown as a country and political entity, it has experienced a great deal of reform around its healthcare system. It likely will continue to experience further changes in the future.

Retire in Turkey – Taxes

Like many countries, residents and non-residents are subject to different taxes in Turkey. Residents pay taxes on their worldwide income, whereas non-residents only have to pay taxes on Turkish-sourced income. The country uses a progressive tax scale, ranging from 15% to 35%, depending on your income bracket.

Turkey does possess a tax treaty with the U.S., which can provide some relief. You will only have to pay into one country’s Social Security program as a result, which in Turkey is a 14% flat tax for employees. Otherwise, there are also tax exemptions that may allow you to pay less on your U.S. income taxes. One example is the foreign earned income exclusion, which lets you exclude the first (approximately) $100,000 for foreign earned income if you can prove your Turkish residency.

Retire in Turkey – Safety

Each expat’s experience is unique. Some may travel through Turkey and find they encounter little to no issues on a security level. That’s not to say you shouldn’t be cautious. The U.S. Department of State’s travel advisory warns travelers either visiting or moving through Turkey to be wary of both terrorism and arbitrary detentions. The advisory heavily suggests that you avoid the Sirnak and Hakkari provinces, which are in the southeastern part of the country, as well as any area within six miles of the Syrian border to avoid terrorist activity. The State Department’s most recent report on human rights practices in Turkey bears a close reading, especially sections 1 and 6.

Although you should speak with locals and enjoy the culture, you should also be wary of your surroundings and keep an eye on political developments. It is also advised that you don’t engage with political topics online either since that can still be a red flag.

The Takeaway

Turkey is still in the process of significant political change, making settling down difficult for the average retiree. That, along with terrorism concerns, may encourage you to look at other countries instead. However, Turkey has a strong sense of identity with a warm populace who wants to share their cultural. That sense of belonging, along with the country’s beautiful features and its low living costs, may make the challenges worth it to you.

Tips on Retiring

  • Finding the right financial advisor who can help address your needs doesn’t have to be hard. SmartAsset’s free tool matches you up with local financial advisors in as little as five minutes. If you’re ready to be meet with advisors in your area that will help you achieve your financial goals, get started now.
  • Planning your retirement comes with its challenges, especially if you intend to move abroad. While Turkey may have low living costs, there still may be other financial burdens you have to address. To get an idea of what to expect, stop by our retirement calculator.

Photo credit: ©iStock.com/hadynyah, ©iStock.com/Nikada, ©iStock.com/TEZCAN

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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How My 401k Loan Cost Me $1 Million Dollars

401k loan

401k loan

Today, I have a great guest post from a reader, Ashley Patrick. She asked if she could share her story with my audience, and I, of course, had to say yes! This is her personal story about how her 401k loan cost her a ton of money and why you shouldn’t take be borrowing from your 401k.

You’ve been thinking about getting a 401k loan.

Everyone says it’s a great loan because you are paying yourself back!

It sounds like a great low risk loan at a great interest rate for an unsecured loan.

But you know the saying “if it sounds too good to be true, it probably is”.

So you’re thinking, what’s the catch?

I take out a loan without having to do a withdrawal and I pay myself back. I’m paying myself back at a low interest rate right, so what’s wrong with that?

Well, I’m about to tell you how our 401k loan cost us $1,000,000 dollars.

You see, there are a lot of reasons to not take out a 401k loan and they all happened to ME!

Related content:

How My 401k Loan Cost Me $1,000,000

Let me start at the beginning….

My husband and I bought our dream house when we were just 28 & 29 years old. This was our second house and honestly, more house than we really should have bought. But you know, it had a huge 40×60 shop and we loved the house and property. So there we were buying a $450,000 house with a 18 month old.

This house was gorgeous on 10 acres of woods with floor to ceiling windows throughout the entire house.

So there we were with a $2200 a month house payment, an 18 month old in daycare, and both of us working full-time. Within 2 months of us buying this house we found out I was pregnant again! We had been trying for sometime so it wasn’t a surprise but there was a major issue with our new dream home.

The layout didn’t work for a family of 3. It was a small 2 bedroom with an in-law suite that didn’t connect to the main house.

There was a solution though. We could enclose a portion of the covered patio to include another bedroom and play area and connect the two living spaces.

The problem was this was going to cost $25,000. We certainly didn’t have that much in savings and the mortgage was already as high as it could go.

So what were we to do? We have numerous people that were “financially savvy” tell my husband that we should do a 401k loan. We would be paying ourselves back so, we weren’t “really borrowing” any money. It was our money and are just using it now and will pay it back later.

Our first issue with the loan

This seemed like a perfect solution to our problem. So we took out a $25,000 401k loan in the summer of 2013. I checked the 401k account shortly after the loan and realized they took the money out of the 401k. I was very upset about this and thought there must have been some mistake.

Come to find out, they actually take the money out of your 401k. So, it’s not earning any compound interest. I thought that the 401k was just the collateral. I didn’t realize they actually take the money out of it.

So, nothing else seemed like a good option so we just kept the loan. Construction was finished just in time for the arrival of our 2nd child. The layout is much better and much more functional for our family.

Everything seemed fine and the payments came out automatically from my husband’s paycheck.

Then issue #2 with 401k loans

Then came the second issue with the 401k loan…..

In January 2014, my husband was laid off from his job. So there we were with a newborn and a 2 yr old in an expensive house and my husband, the breadwinner, lost his job of 7 years. You know the one he never thought he would lose, so why not buy the expensive house? Ya, that one, gone.  

I cried about it but figured out how long our savings and severance package would last and knew we would be okay for several months.

Well, then we get a letter stating we have 60 days to payback the 401k loan, which at this point was over $20,000. We had made payments for less than a year out of the 5 year loan.

My husband didn’t have job yet and we didn’t have that much in savings. I certainly wasn’t going to use what was in savings to pay that loan either. I may have needed that to feed my children in a few months.

So, we ignored it because we couldn’t get another loan to pay it at this point.

Luckily, I married up and everyone loves my husband. So, he was able to find another job rather quickly.

We were thankful he had another job and didn’t think about the 401k loan again.

Then came issue #3

That was until a year later in January of 2015. Here came issue number three with 401k loans.

We got a nice tax form in the mail from his 401k provider. Since we didn’t/couldn’t pay back the loan in the 60 days, the balance counted as income. You know, since it actually came out of the 401k.

Then I did our taxes and found out we owed several thousand dollars to the IRS. We went from getting a couple thousand back to owing around $6500. So it cost us around $10,000 just in taxes. It even bumped us up a tax bracket and cost us more for taxes on our actual income as well.

I ended up putting what we owed on a 0% for 18 months credit card and chalked it up to a big lesson learned. I will never take out a 401k loan again.

The silver lining

In reality, my husband losing his job has been a major blessing in our lives. He is much happier at his new job. This also started my journey to financial coaching.

You see, when I put the taxes on the credit card, I didn’t have a plan to pay that off either. When I started getting the bills for it, I realized I had no idea how we would pay it off before interest accrued.

That led me to find Dave Ramsey. Not only did we have it paid off in a couple months, but we paid off all of our $45,000 debt (except the mortgage) in 17 months!

The true cost of 401k loans

Just recently I did the math and realized what our 401k loan really cost us.

It cost us $25,000 from our 401k and roughly about $10,000 in taxes. So that’s already $35,000 from the initial loan.

We were really young for that $25,000 to earn compound interest. If we had left it where it should have been, we would have had a lot more money come retirement age.

The general rule of thumb for compound interest is that the amount invested will double every 7 years given a 10% rate of return. And yes, you can earn an average of 10% rate of return after fees.

We were 28 and 29 years old when we took that loan out. If we say we would retire or start withdrawing between 65-70 years old, then that $25,000 cost us around $1 million dollars at retirement age.

Now yes, I could try to make up for the difference and try to put more in retirement but I’ve already lost a lot of time and compound interest. Even if we had $25,000 to put in retirement today to make up for it, I’ve already missed a doubling. 

But that won’t happen to me, so why shouldn’t I take out a 401k loan?

Life changes and now I am not working full-time and have an extra kid. So, thinking that you will pay it back later doesn’t always happen as fast as you think it will.  

Something always comes up and is more important at that time. So learn from my mistakes and don’t take out a 401k loan.

Actually, start saving as much as you can as young as you can. 

You may even be thinking that you aren’t quitting your job and will pay it all back, so no big deal, right? Actually you are still losing a ton of compound interest even if you pay the entire thing back.

The typical loan duration is 5 years. That’s almost a doubling of interest by the time it’s paid back in full. So, it may not be as dramatic as my example but you are still taking a major loss at retirement age.

The thing is, you have to figure in the compound interest. You can’t only look at the interest rate you are paying. You are losing interest you could be gaining at a much much higher rate than what you are paying on the loan.

Lessons Learned from my 401k loan

Some lessons I learned from taking out this 401k are:

  • Don’t miss out on compound interest
  • It’s not a loan, it’s a withdrawal
  • If you want to change jobs or lose your job, it has to be paid back in 60-90 days depending on your employer
  • If you can’t or don’t pay it back, it counts as income on your taxes

So if you are considering a 401k loan, find another way to pay for what you need. Cash is always best. If you can’t pay cash right now, wait and save as much as you can. This will at least limit the amount of debt you take on.

Determine if what you want is a need or a want. If it’s a want, then wait. A 401k loan should be used as an absolute need and last resort.

It keeps you tied to a job for the duration of the loan which is usually 5 years. This could limit your opportunities and put you in an even bigger hardship if you lose your job.

I hope you will learn from my mistakes and make an informed decision about these types of loans. Don’t be like me and make an ill-informed decision.

Ashley Patrick is a Ramsey Solutions Financial Master Coach and owner of Budgets Made Easy. She helps people budget and save money so they can pay off their debt.

What do you think of 401k loans? Have you ever taken one out?

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Source: makingsenseofcents.com

How to Retire in South Africa: Costs, Visas and More

How to Retire in South Africa – SmartAsset

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Home to both lively landscapes and a highly diverse and fascinating culture, South Africa stands out as a place of opportunity for many potential retirees. Bask in a glowing sun while out on the golf course or relax in the shade on a beach. If you are a foodie or oenophile, you can enjoy this country’s culinary treats and excellent wines. Between all the things to do and see, this southernmost African nation, where English is widely spoken, can sound like a dream. So, if you’re considering how to retire in South Africa here are a few areas to look into first. A financial advisor can help you determine if your U.S.-based assets will cover expenses in the Rainbow Nation.

Cost of Living and Housing

A common draw for U.S. expats when selecting a country to settle down in is a low cost of living, and South Africa tends to suit that criteria. Generally, its cost of living is 41.77% lower than that in the U.S., with rent 60.88% lower on average as well.

According to Numbeo, one of the largest cost-of-living databases, these averages stay relatively consistent across the country’s most important cities. Whether you examine one of its three capital cities, Pretoria, Bloemfontein and Cape Town, or its most populated urban location, Johannesburg, both the average cost of living and rent remain low.

For example, Johannesburg’s cost to rent a one-bedroom apartment in a city center averages around $470.22, and the price to purchase an apartment, by foot, in the same location is $92.53. According to World Population Review, Johannesburg’s 2021 population sits around 5,926,668. A comparable city is the U.S.’s New York City with 8,622,357. The cost of living in comparison to New York is less than half at 54.59%. For example, the average single bedroom in New York City is $3,269.65 for rent and $1,515.09 per square foot to purchase.

So, if your ideal retirement location has lower-cost housing, regardless of whether you want to rent or buy property, South Africa may be a suitable location.

Retire in South Africa – Visas and Residence Permit

While South African does have a visa that foreign nationals can apply for in the hopes of retiring there, there is no set age range for such a visa. Anyone of any age can apply for the retired persons’ visa as long as they meet other requirements.

It’s important to note that none of these rules concern working in South Africa. Generally, to retire in a foreign country and obtain a retirement visa, work is barred from the applicant. They have to have a sustainable pension to support them instead. However, while you still must prove a set amount of assets or funds, you are free to work.

Retirees tend to take two routes when retiring in South Africa: a retired permit or an independent financial person permit. The main difference between the two is that the retired permit allows for a temporary residency basis. A retired visa for a temporary residence is valid for up to four years and asks for a minimum income per month or year to be proven. Similarly, a retired permit application for permanent status asks for an increased minimum monthly income. Still, it lasts forever as long as the holder visits South Africa once every three years.

Lastly, the independent permit requires a minimum net worth of about $800,000 at time of writing and fee of about $8,000 at time of writing, but it has the same lifespan as the retired permit.

Retire in South Africa – Healthcare

The majority of South Africa’s hospitals are public, which tend to be overcrowded and under-resourced. They often have issues you would expect from an overburdened staff, including a need for updated equipment.

Expats are more likely to find excellent healthcare through the country’s private hospitals and practitioners, which can mostly be found in major urban areas. There, you’ll find several well-established, nationwide hospital chains that offer a high standard of care. You also won’t run into the issue of non-English speaking staff at these hospitals. However, their services are expensive. While South Africa’s Bill of Rights demands healthcare for all, it is based on a sliding scale. Typically, expats are put into a category that forces them to pay for healthcare out of pocket, so it’s a better idea to have private health insurance.

Retire in South Africa – Taxes

South Africa experiences extreme income inequality. The Gini coefficient, the standard index to measure inequality, of the country is 0.58 – one of, if not the, highest among any nation. South Africa, as a result of this and historical instability, is only just beginning to recover. However, because of this wealth disparity, personal income tax and most forms of revenue are only collected from a small percentage of the population.

South Africa’s personal income tax rates for residents are progressive and range from 18% to 45%, depending on your income bracket. Non-residents are only subject to taxes on income made from South African sources. The country defines a resident as someone present in the country for more than 91 days during the current and preceding five years.

It’s important to keep in mind that the U.S. requires all of its citizens to file taxes regardless of where they currently are in the world.

Retire in South Africa – Safety

The U.S. Department of State warns its citizens that South Africa is a location that experiences crime and civil unrest. More than the petty theft you may find in a travel advisory, South Africa experiences violent crimes, such as rape and mugging, which generally only occur at a higher frequency in central urban locations after dark. It’s also possible to find a demonstration or protest that has devolved into violence, disturbing the area and its traffic in the process.

On a lower level, some crimes, such as scams, also call for caution. It’s essential to be careful with your money, where you walk (especially at night) and keep your wits about you when interacting with things such as ATMs. Some are tampered with to obtain your cards and information.

The Takeaway

South Africa offers many potential benefits to the average retiree. It’s a naturally beautiful country that hosts a number of exciting sights and events to keep anyone entertained. Not only that, it’s a low-cost option in comparison to many countries and doesn’t put as many regulations in place for its retired foreign-born residents. There are legitimate safety concerns for the average tourist and a healthcare system that needs fine-tuning. Depending on your preferences for your retirement, the benefits may outweigh the difficulties or vice versa.

Tips for Achieving Your Retirement Goals

  • Finding the right financial advisor who can help you towards your goals shouldn’t be hard. SmartAsset’s free tool pairs you with financial advisors in your area in as little as five minutes. If you’re ready to be matched with your local advisor, get started now.
  • Retiring can come with all sorts of unexpected costs and obstacles. This is true even when you’re looking at a low cost of living country like South Africa. To prepare yourself, stop by our retirement calculator. All you have to do is input a few details about where you want to retire, when you want to retire and the value of your savings.

Photo credit: ©iStock.com/Byelikova_Oksana, ©iStock.com/ManoAfrica, ©iStock.com/Picture_Perfect

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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22 Last-Minute Valentine’s Day Gifts for 2021

Still scrambling for that perfect Valentine’s Day gift?

Wondering how you’re going to get your special someone something truly special — without spending a lot of money in the process?

Even if you’ve only got $5 in your pocket, you can still make this Valentine’s Day memorable.

22 Last-Minute Valentine’s Day Gift Ideas Under $5

We’ve already got you covered with at-home date ideas — for whether you are together in-person or far apart. Here are 50 last-minute gifts that all cost less than $5.

1. Playlist

Remember mixtapes? Bring that sentiment to the 21st century by making your special someone a Spotify playlist. You don’t even need Spotify Premium; just get the free version of Spotify for your desktop, build the perfect list and share it with your valentine.

2. Lloyd Dobler Serenade

This one works best if your Valentine is a fan of classic ’80s movies.

Take the iconic image of Say Anything’s Lloyd Dobler holding a boombox over his head as you model and get ready to tell your valentine that “In your eyes… I am complete.”

Use an actual boombox if you can get your hands on one, or pull out your iPhone and crank up the volume.

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3. Bulk Candy

Maybe your special someone likes jelly beans or chocolate-covered almonds. The bulk candy aisle offers plenty of choices for putting together a $5 gift that tastes better — and is much more personalized — than a cheap box of waxy Valentine’s candy.

If you’re giving bulk candy, presentation matters. Put it in an attractive bag or box, tie it up with a ribbon and make your gift as special as the recipient.

4. Handmade Card

A handmade card can often be one of the best and most treasured Valentine’s Day presents.

Anyone can go to the grocery store and get a 99-cent card with a pre-printed message. Only you can make a one-of-a-kind card with your own heartfelt statement of love.

5. Art

Do you have painting or sketching skills? Make your special someone a piece of original art. It’s hard to go wrong with a flattering portrait or a sketch of the place where the two of you shared your first kiss.

Your cost investment depends on how many art supplies you currently have around, but a hobby store often sells affordable individual sheets of art paper. Even an ink drawing on a piece of good paper can look beautiful.

6. Poem

Write your valentine a love poem. It worked for Shakespeare, and it could work for you. Choose one of the classic poetry formats, such as the sonnet or the villanelle, or create your own.

An elderly couple show affection to one another as the husband serenades his wife.
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7. Song

Take your poem one step further by setting it to music. How many people get a song written just for them? Perform it for your special someone on Valentine’s Day, and you’ll learn that the best gifts don’t have to cost a thing.

8. Band Performance

Got a friend who can play bass and a buddy who knows the drums? Teach them the song you just wrote, or ask if they’ll be willing to help you cover a song that has a special meaning for you and your valentine. Then give your valentine a never-to-be-forgotten concert.

9. Request a Song

Sometimes the simplest gifts are the best. If your local radio station takes requests, request your special song. Text your valentine when it’s time for your song to play, or listen to it together.

10. Old Shirt Turned into a Pillow

Take an old T-shirt and turn it into a pillow. This Instructables guide will help you get started. You’ll need to get something to stuff the pillow with, which you can generally get at a craft store or even Target or Walmart for under $5.

11. Old Stuffed Animal

Nothing says “I’m in this for the long term” like “This was my old stuffed bear, and I hope you’ll love it as much as I do.”

Giving the gift of an old stuffed animal shows your special someone that you love and trust them enough to share one of your most treasured possessions.

12. Book 

Have a favorite book that you think your valentine will also love? Take it off your bookshelf, write an inscription and turn it into a gift. It’s just as intimate as giving a stuffed animal, and you can talk about the book together afterwards.

Don’t want to give away your only copy of your favorite read? Find it in a used bookstore. You can often get used books for under $5, and they make excellent presents.

If your special someone owns a Kindle, a Nook or another e-reader, there are gobs of books available for under $5. Look for the 99-cent listings so you can give multiple books and make your gift look extra-special. You can also look for deals from Bookbub.

A woman decorates heart shaped cookies for Valentine's Day.
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13. Homemade Cookies

While everyone else is getting expensive bouquets delivered to their valentines, why not give your date a plate of delicious homemade cookies? You can also take these cookies with you for a picnicking or stargazing adventure.

14. Love Thoughts in a Jar

All you’ll need for this one is a jar and a few pieces of paper. Tear or cut the paper into strips and write something special on each strip. Then, fold the strips in half and put them into the jar.

When your valentine wants a little extra love, all he or she has to do is take a strip out of the jar and read one of your messages.

15. Book of Memories

Buy an inexpensive sketchbook or notebook. Then, fill each page with a memory — the place you first met, the first time you held hands, the concert the two of you attended last spring. Draw, write, glue in ticket stubs — do whatever you want to make this book a true book of memories. Chances are it will be an unforgettable gift.

16. Coupon Book

The coupon book is another classic gift that has almost become cliché. The secret to making it work is to put together coupons that your valentine actually wants.

Does your valentine like picking the movie you watch together? Does your valentine like not having to do the dishes? Choosing the right coupons is what makes this gift special.

17. Massage Night

Get some massage oil, put some towels over freshly washed sheets and give your special someone the massage he or she has always wanted. Look for resources online, like these massage tips from Canyon Ranch resort, that will show you how to give a safe, proper massage.

18. Shared Journal

Get an inexpensive notebook, write a journal entry and give it to your Valentine with the instructions to read what’s inside, write a new journal entry and give the notebook back.

Keep this pattern going until the notebook is full. A shared journal is a lovely way to write about hopes, dreams and plans for the future.

19. Love Letters

Have you read the book “The Wednesday Letters”? It’s the story of a man who writes his wife a new love letter each Wednesday.

Why not make this Valentine’s Day the start of a Wednesday letter tradition of your own? Give the gift of a love letter, and tell your valentine that it is the first of many to come.

20. Clean All The Things

Want a gift that your valentine will really love? Try a perfectly cleaned home.

Find an excuse for your special someone to be out of the house or apartment on Valentine’s Day morning and then scrub, wash, sweep and fold. Top it off with a few flowers in a vase or a plate of homemade cookies on the table.

21. The 36 Questions

If you read the Modern Love column in The New York Times, you might have seen the piece about The 36 Questions That Lead to Love.

These questions, which include “What would constitute a ‘perfect’ day for you?” and “When did you last cry in front of another person?” are designed to build intimacy and bring people closer together.

Spend an evening asking your valentine those questions — and answering them yourself — and it becomes an evening you’re unlikely to forget.

22. One Rose or Grocery Store Flowers

If you can’t afford a bouquet of roses, see if your local flower shop is selling single roses. A single red rose often says more than a whole dozen.

Even the most humble of grocery store bouquets can become beautiful with a little help. Take the flowers out of the plastic, trim them and put them into a vase. Or, if you don’t have a vase on hand, get a glass jar out of the recycling bin, rinse it out and put the flowers in.

Nicole Dieker is a contributor to The Penny Hoarder.

Source: thepennyhoarder.com

How to Retire in Finland: Costs, Visas and More

How to Retire in Finland: Costs, Visas and More – SmartAsset

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For those considering how to retire in Finland, you have one of Europe’s finest countries waiting to be explored. As of 2020, Finland topped Gallup’s World Happiness Report for the third consecutive year and that ranking comes with good reason. Known as the Land of a Thousand Lakes, this country has natural beauty that stands out among the rest. Finland boasts a strong economy and healthcare system for its residents, some three-quarters of whom can speak English.

A financial advisor can help you achieve your goal of retiring abroad.  

Cost of Living and Housing

While the cost of living in Finland is 8.36% higher than in the U.S., not all expenses are higher than in the U.S., according to Numbeo. The website also shows that the rent in Finland is significantly lower on average, 32.02%, than in the U.S.

A one-bedroom city center apartment’s rent in a highly populated city such as Helsinki can run about $1,171.77 month. Alternatively, the same-sized apartment can cost around $927.86 outside that central hub. The further you look outside urban areas for rental properties, the less expensive you’ll find them to be. When compared to costs of living in a city like New York City, rent may cost upwards of $2,650.00 inside the city center and $2,375.00 outside the city center.

If you are looking to retire in Finland or spend years there, it might be best to consider buying your own home. Interest rates on housing loans in Finland have been on a steady decline for years. Helsinki, the nation’s capital, has (at time of writing) the lowest mortgage interest rate in the eurozone.

Retire in Finland — Visas and Residence Permit

One of the main things to know about retiring abroad is getting a residence permit. The process is fairly straightforward. However, it has to be done on a personal basis; no one can apply for another person.

There are two types of residence permit categories: Temporary Residence Permits and Permanent (Extended) Residence Permits. You can get Permanent Residence after living in Finland with a permanent residence permit for four or more years. You should seek out an application for the permit from the Finnish embassy located in your country or the embassy of a Schengen country representing Finland. Also, you can apply using the Enter Finland online service to help book an appointment and begin the application process.

You will have to go through a background check to obtain your permit. You’ll also have to prove specific requirements down the line to become a Finnish citizen, such as fluency in the national language.

Retire in Finland — Healthcare 

The Finnish healthcare system focuses on preventing illnesses, in part through effective health and nutrition-focused education.  Before an expat can utilize Finnish healthcare benefits, however, they have to register for the National Health Insurance (NHI). You can only do this after four months of living or working in Finland. Once you register, you’ll receive a Kela card, which can be brought to pharmacies and clinics to help you get instant reimbursement for any payments. However, the amount paid back is decided on a case-by-case basis, which can underline the importance of private health insurance for some.

Each municipality is responsible for the healthcare of those living within its boundaries. Thus, doctors are responsible for a specific number of patients and create longer-lasting treatment relationships. Patients’ needs are addressed more quickly, and they work with a practitioner they know. Public hospitals can mean wait times, however, so some supplement with private healthcare as well.

Retire in Finland — Taxes 

A person’s liability to pay for Finnish tax is dependent on their residence status. After someone has stayed in Finland for six months or has a permanent home in the country, they’re deemed a resident. Finnish residents pay progressive income tax rates based on their total assessable income and the municipality they live in. These taxes are applied to their worldwide income, or money they make both inside and outside the country. Conversely, a non-resident is only taxed on income earned from sources in Finland and pays a flat 35% tax rate. Depending on the circumstances, a non-resident can apply to pay progressive tax rates instead.

Finland is a rare country that pursues double taxation treaties with foreign countries, providing some relief to people seeking dual citizenship.

Retire in Finland — Safety 

Finland is one of the safest countries, if not the safest, to travel in. The country even has one of the world’s, “most effective and trusted police forces,” according to the U.S Department of State. As with any country, you should be aware of the possibility of petty crimes such as pickpocketing, which tends to increase during the tourist season. However, other certain low-level crimes such as bicycle theft and car burglaries have been trending downwards since the early 2000s.

If anything should concern a newcomer, it’s Finland’s winter rather than its crime rates. The country experiences extreme levels of cold. In Helsinki during February, the average temperature ranges from 19 degrees F to 28 degrees F. So, travelers and visitors should prepare for the weather with appropriate clothing and research how to handle any snow or ice ahead of time.

The Takeaway

Finland is often seen as one of the best countries to retire in, especially for anyone who wants a safe, comfortable location to retire in. Those who love being surrounded by pristine nature will feel most at home here. However, harsh winters and a high cost of living can keep the more frugal retiree at bay. Your personal situation will decide if this haven of education and the midnight sun is the right place to spend your golden years.

Tips on Affording Retirement

  • Moving abroad takes more than financial stability. A financial advisor can work with you to break down all the necessary preparations, such as what to expect with tax implications. However, finding the right financial advisor for you doesn’t have to be hard. SmartAsset’s free tool only takes five minutes to match you with financial advisors in your area. If you’re ready to work with an advisor who will help you accomplish your financial goals, get started now.
  • Depending on the individual, one’s Social Security benefit’s value may be enough to cover these expenses. Using this Social Security calculator, you can estimate your benefit amount.

Photo credit: ©iStock.com/basiczto, ©iStock.com/Sasha_Suzi, ©iStock.com/ssiltane

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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How to Retire in Poland: Costs, Visas and More

How to Retire in Poland: Costs, Visas and More – SmartAsset

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For those exploring a retirement abroad, Poland has plenty to offer the budget-savvy retiree. Poland is a relatively low-cost retirement destination when compared with some of its European nation neighbors, even in its capital, Warsaw. You’ll find that the country sits at centuries-old crossroads between Western and Eastern Europe, blending the best of their architectures, foods and cultures.

If you want to retire in Poland, speak to a financial advisor to help you reach your retirement goals and needs. 

Cost of Living and Housing

The cost-of-living database Numbeo says that consumer prices in Poland are roughly 41.53% more affordable than in the U.S., when you exclude rent. If you factor in rent, the cost of living in the eastern European country is 55.60% lower than in the U.S. This makes Poland an attractive destination for American retirees who are looking to cut spending and live off a pension comfortably.

For a specific comparison, let’s take a look at the Eastern European capital Warsaw, Poland’s most populous city. Rent in this capital is significantly lower than in New York City — 74.76% less. If you rent a one-bedroom apartment in Warsaw’s city center, you will pay approximately $772.02 each month. But if you rent a one-bedroom in New York City’s center, it will cost you roughly four times more — $3,269.65.

If you want to compare the cost of living in Warsaw with other big U.S. cities, consumer prices, including rent, are 53.38% lower than in Los Angeles, 47.57% lower than in Chicago, 32.81% lower than in Houston, and 31.73% lower than in Phoenix.

And if you are interested in comparing the cost of living in Warsaw with popular U.S. retirement cities, consumer prices, including rent, are 34.57% lower than in Orlando, 41.04% lower than in Tampa, 44.72% lower than in Charleston and 48.19% lower than Miami.

Poland has a lot to offer, especially if you’re looking for a cost-effective place to retire.

Retire in Poland: Visas and Residence Permit

U.S. citizens are allowed visa-free entry into Poland for up to 90 days. But to become a legal resident in the Eastern European country, you will have to contact a Polish consulate in the U.S. to apply for a temporary or flat residence permit. You may have to show proof of sufficient funds to support your stay, so make sure that all of your documentation is in order.

When your residency permit has been approved, you’ll receive a residency card that will help you find housing and pay your taxes. The first residence permit’s lifespan is only up to three years, but it can be renewed for longer periods.

Once you’ve lived in Poland for about five years, you will have the opportunity to pursue a permanent residence. This comes with two conditions: stable income and a property you either rent or own that you live in. Your permanent residence card then has to be renewed every 10 years.

Keep in mind that you will have to pay some base processing fees for your permit application, and they depend on the type. So, prepare to pay upwards of $120 for yours.

Retire in Poland: Healthcare

Article 68 in Poland’s constitution guarantees free medical care and hospital stay for all of its citizens. The eastern European country’s health service is financed through a national health fund, and American retirees could join that fund to get emergency care and coverage for pre-existing conditions.

Many Polish citizens use private insurance to supplement their public health care coverage. While Poland’s public facilities have more treatment options than their private health center counterparts, private insurance allows covered individuals to sometimes get medical appointments and treatments faster.

Expats will have to obtain a personal identification number (PESEL) before they can apply for public health insurance. And they should also consider looking into private medical insurance to get the most comprehensive coverage for their health needs.

Retire in Poland: Taxes

Like many European countries, Poland has different income tax regulations based on your residency status. Those who are naturalized are taxed on their worldwide income, whereas non-residents are only taxed on income earned from solely Polish sources. So, if your employer is not a Polish resident, you are not subject to the income tax.

However, you can expect to pay a flat-rate tax for approximately 20% of your revenue during the first 183 days of the tax year in Poland. After you have resided in the country longer than six months, you will be subject to the same progressive tax rates as a resident, ranging between 18% and 32%.

Note that even when you’ve paid your taxes accordingly to your residence status in Poland, you will still have to file a U.S. tax return.

Retire in Poland: Safety

The U.S. Department of State says that Poland has a low crime level. This implies that both citizens and foreign nationals can live and travel in the Eastern European country with relative safety. General precautions are advised, as in other countries, to avoid crimes that as infrequent as they may be could target tourists and other expats. You should also note that crime in Poland is still significantly lower than in the U.S., and the public healthcare system can be a valuable safety net for unexpected travel injuries and other physical accidents.

Bottom Line

Poland is one of Europe’s most affordable retirement destinations, and it keeps up with neighboring nations in healthcare and culture. Expats will find the Eastern European country both safe and comfortable, easy to travel in and one in which they can enjoy a slower pace of life while remaining very connected with nature.

Tips to Help You Afford Retirement

  • If you have the option to move abroad for retirement, a financial advisor can help you understand all the moving parts of relocation, including the tax implications. SmartAsset’s free tool matches you with local financial advisors in your area within 5 minutes. If you’re ready to speak with an advisor that will help you hit your financial goals, get started now.
  • You could comfortably retire in Poland, even in its capital, with the average Social Security income of $1,500 per month. For some, the value of your Social Security benefit can cover your cost of living depending on the area you settle in. Use SmartAsset’s Social Security calculator to estimate your benefit amount.
  • Whether you want to retire comfortably abroad or in the U.S., both an IRA or a 401(k) plan will offer you tax benefits, and help you grow your retirement savings with compound interest.

Photo credit: ©iStock.com/Marcus Lindstrom, ©iStock.com/udmurd_PL, ©iStock.com/PIKSEL

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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