Plenty of Americans live in Mexico or Central America because of the good weather, the exoticism, and the low cost of living. Indeed, some say monthly costs for retirees are 30 percent less in Mexico than north of the border.
That’s what has built up communities of foreigners in places like Merida, San Miguel de Allende, Lake Chapala and Rosarito in Mexico, Antigua in Guatemala, the Bay Islands in Honduras and multiple spots in Costa Rica and Panama.
But small changes in U.S. tax laws or in banking fees can throw foreigners for a loop, especially if they are on low fixed incomes or married to foreigners. If you haven’t seen it, look at this story this week by my colleague Bill Douglas about Americans who have renounced their citizenship because of the 2010 Foreign Account Tax Compliance Act. The law requires foreign banks to report to the IRS each year on U.S. citizens who hold more than $50,000.
The gripe is mainly among foreigners married to Americans who don’t want the IRS rooting through their bank accounts abroad.
Such issues will certainly grow in coming decades as more Americans move South of the Border to stretch limited retirement dollars. Already one million Americans live all or part of the year in Mexico. That’s more than the population of states like North Dakota, Rhode Island, Delaware, Vermont and Wyoming. Throw in the Americans in Central America and it’s an even more sizable population.
I got an email over the weekend from another American living on a low fixed income in Jalisco state, and who is quite displeased with a new banking fee for withdrawing money at an ATM from his U.S. bank account. Here is a portion of what he wrote:
“Bank of America has begun a new charge of 3% for money withdrawn in Mexico. It is called the 'foreign currency transaction' fee. My SS check is deposited directly into an account in the U.S. and, for the past ten years, I've withdrawn weekly expense money in pesos with no such charge. Our check is very modest and this newly contrived fee will cost us about $ 30 dollars per month. I'm sure we are not the only expats who find this new fee a hardship and I would like to hear the opinions and or solutions from your readers.”
For readers who don’t want to post using Facebook, send me your responses and I’ll put together in a separate blog post.