Famous American artists and novelists including Ernest Hemingway, Josephine Baker, Gertrude Stein, and Richard Wright made it fashionable to leave the U.S. and settle overseas for a more cosmopolitan lifestyle. But contrary to many stereotypes, moving overseas isn’t just for the jet-set crowd. While most of the estimated 9 million Americans who live overseas earn more than the median US income, few earn over $1 million.1 The US government does not maintain a count of US citizens living overseas; the Department of State figure is an estimate of those who register at consulates and embassies. Albeit small, this expat community has doubled in the past two decades,2 and is projected to keep growing because of:
Easier access to foreign residency. It’s not just senior executives and creative types heading abroad, as researchers now estimate that 37% of jobs can be performed from home, anywhere in the world.3 And Gen Z employees are the most interested in working remotely in a foreign nation.4 Recognizing this opportunity, more than 50 countries including Portugal, Germany, and Costa Rica have introduced digital nomad visas which allow visitors to stay in country and work remotely for a year or more.5 Some countries, like Albania, which has lost residents every year since 2001 as young people leave to pursue better professional opportunities, hope new residents will reverse brain drains. And as more countries like Greece and Croatia face demographic headwinds in the form of aging populations and low fertility, they too are making it easier for younger people to emigrate.
Quality of life considerations. A 2023 survey of 12,000 expats from 171 nationalities ranked the U.S. 44th for quality of life, as comprised by categories such as leisure, transit, healthcare, and safety (see Figure 1).7 Respondents derided the cost and availability of US transit and didn’t feel safe traveling by foot or bicycle. Violence undercut the US’s safety ranking: it has the 32nd highest rate of gun violence death in the world; eight times higher than Canada and 100 times higher than the U.K.8
When interviewing 15 Fidelity employees who had previously lived abroad, many described similar quality of life considerations as motivations for leaving the U.S. One expat decided to raise her children in Poland. When living there, she says, she “didn’t have to worry about drugs in the school system or gun crime. Of course, there was theft. But it was a safer environment which is very important with kids.” Another expat couple decamped to Portugal which offered them a decidedly more laid-back lifestyle without the U.S.’s “hustle culture” mentality. And with more countries including Belgium, Iceland, Spain, and Portugal trialing or adopting a 4-day work week, the gulf in quality of life with the U.S. could further expand.
Lower cost of living abroad. In the U.S., the cost of housing, healthcare, higher education, and childcare have all grown faster than inflation or average hourly wages since 2000.9 It’s no wonder Americans have sought cheaper lives abroad. The expat who lived in Poland continues to travel there every year and takes advantage of the dental care because it costs a fraction of what she’d pay stateside, especially for quality, complex care. Another expat who maintains a home in France plans to retire overseas because he says it’s vastly more affordable to live there thanks to cheaper housing, utilities, food, and property taxes, not to mention wine. He’s not an outlier; the number of beneficiaries drawing social security abroad jumped 150% between 2007 and 2022 to 760,000.10 The top countries where they’re receiving their checks? Canada, followed by Japan.11
Decreasing American pride. Only 39% of Americans say they are “extremely proud” to be American—a far cry from the 70% of the early 2000s.12 Researchers have found that weak American identity correlates to stronger aspirations to live abroad.13 And patriotism has suffered even more among young adults, only 18% of whom are “extremely proud” to be American.14 This diminishing pride among young Americans could be shaping educational choices, too. The number of American students choosing to study abroad more than doubled from 2000 to 2019 before the pandemic interrupted the trend.15 And in 2019, 50,000 American students pursued full degrees abroad, where affordable programs offer comparable prestige to US universities.16
Managing Finances When Living Overseas Requires Creative Workarounds
While immigration, remote work, and long-distance communication have gotten easier, the financial issues facing American expats have gotten more difficult. Notably, Americans overseas face:
Challenges opening bank accounts in their new home countries. The 2010 Foreign Account Tax Compliance Act requires non-U.S. financial institutions to report the assets of U.S. citizens to the Treasury Department. It’s a burden for financial institutions, which is why many sidestep the law by disallowing U.S. citizens as customers. One prominent researcher who has lived in Europe for more than 20 years says she can now only get a current account, not a savings or investment account, at a local financial institution. Other expats similarly rely on only a checking/current account or load up on cash when they’re stateside. U.S. citizens must also report all assets of more than $10,000 across all foreign accounts to the Treasury. Some expats file the required paperwork while others diligently keep their total balance under the limit and pull out any excess to avoid the paperwork hassle.
Obstacles to managing domestic accounts. Since many expats are prohibited from opening investment accounts overseas, they try to invest in the U.S., instead. But that’s no easy feat. U.S. brokerage accounts require a physical address in the U.S. Some expats sidestep this by using parents’, siblings’, friends’, and even rental property addresses on their accounts—after all most account communication is digital, anyway. Even maintaining bank or credit card accounts while overseas is tricky, as customers need somewhere for new debit and credit cards to be mailed and financial institutions generally won’t send them overseas. Designating beneficiaries that live outside the U.S. can be thorny, too. One expat thought it would be easier to close all his U.S. accounts before leaving for four years, only to find upon his return that he had trouble renting a house because his recent credit history was thin.
The burden of filing multiple tax returns. Many countries maintain tax treaties with the U.S., meaning overseas Americans do not need to pay duplicate taxes on income to the U.S and the country in which they reside. However, U.S. citizens must still file annual income tax returns whether they owe taxes or not. According to American Citizens Abroad, a nonprofit that advocates for easing the tax burden for overseas Americans, a third of them don’t file taxes, risking future noncompliance penalties. Most who do file hire professionals in the U.S. to decipher the complex foreign tax rules, and this can cost them over $1000 a year on top of any costs to file taxes in their home country. One of our interviewees who chose to file taxes on his own still had to pay $150 in postage fees to send his 3-page tax return from Kazakhstan to the IRS.
Why It Matters
Despite a decades-long drop in domestic moves, one-third of Americans aspire to live abroad to explore, retire, work, or leave an undesirable situation in the U.S.17 And more Americans than ever have passports (see Figure 2).18 More often than not, Americans with overseas aspirations are young, college-educated, and employed. A desire to live abroad reinforces several sociocultural trends that FCAT Research has identified over the last few years, namely:
A new path through adulthood. As young adults delay or cast aside traditional milestones like marriage and children, they can pursue more varied and nonlinear journeys through life. That may involve a meandering career path, including a sabbatical or two and time spent abroad. In fact, young Americans aged 18 to 25 have the greatest aspirations to live abroad, as do U.S. citizens with recent immigrant heritage (who tend to be younger).19 Young Americans are redefining their life ambitions, swapping longer-term financial goals like retirement and home buying for shorter-term goals including concerts, luxuries, and time abroad. This could change investing time horizons and interrupt periods of accumulation, as well as necessitate planning tools that can accommodate more flexible life goals.
The end of retirement as we know it. The time Americans will spend in their “Third Act”—after age 65—has risen from 13 years in 1960 to 17 years for men and almost 20 for women.20 This longer Third Act is changing the nature of retirement, from a leisure state after a long career to a period of episodic work and more active lifestyles. But many have not saved enough: According to Fidelity, the median Boomer only has $61k in their 401(k) at a time when healthcare costs alone can exceed $150k in retirement.21 Retiring overseas can relieve some of that burden, but those investors will need to plan that move to address things like timing overseas property investments, estimating living expenses in various locations, as well as ironing out the administrative details of managing both their overseas and U.S. accounts.
The future income mosaic. With a rise in freelancer and gig platforms, people have more opportunities to earn an income independent from an employer. Not everyone has what it takes to be a solopreneur, but almost anyone can open an app and start a side gig. And according to Upwork, 56% of hiring managers increased their use of freelancers from 2021 to 2022 and 66% planned to do so over the next two years.22 But even for career employees, some companies like Airbnb are offering greater flexibility by allowing people to work from anywhere in the world for up to 90 days a year—not enough to become an expat, but enough to dabble with the idea of becoming a digital nomad.
analysis of IRS data. The US government does not maintain a count of US citizens living overseas; the Department of State figure is an estimate of those who register at consulates and embassies.
2 Schachter, Jason. Estimation of Emigration from the United States Using International Data Sources. 2006.
3 “How Many Jobs Can Be Done at Home?” BFI University of Chicago.
4 Dolezal, Sarah. “Young Employees Look Abroad for Remote Work.” SHRM, 17 Apr. 2023.
5 41 Countries with Digital Nomad Visas - the Ultimate List. 2 Feb. 2022, Nomadgirl.co.
6 Andi Hoxhaj. “Albania’s Brain Drain: Why so Many Young People Are Leaving and How to Get Them to Stay.” The Conversation, 28 June 2023.
7 Expat Insider 2023. InterNations.
9 Perry, Mark. “Chart of the Day…. Or Century?” American Enterprise Institute - AEI, 19 Jan. 2022.
12 Inc, Gallup. “Extreme Pride in Being American Remains near Record Low.” Gallup.com, 29 June 2023.
13 Marrow, Helen B., and Amanda Klekowski von Koppenfels. “Modeling American Migration Aspirations: How Capital, Race, and National Identity Shape Americans’ Ideas about Living Abroad.” International Migration Review, vol. 54, no. 1, 28 Nov. 2018, pp. 83–119.
14 Habeshian, Sareen. Poll: Youth Sour on America. Axios.
15 “Open Doors.” IIE - the Power of International Education.
17 Marrow, Helen B., and Amanda Klekowski von Koppenfels. “Modeling American Migration Aspirations: How Capital, Race, and National Identity Shape Americans’ Ideas about Living Abroad.” International Migration Review, vol. 54, no. 1, 28 Nov. 2018, pp. 83–119.
18 Zagorsky, Jay L. “Passport Bottleneck Is Holding up International Travel by Americans Eager to See the World as COVID-19 Eases.” The Conversation, 9 May 2023.
19 Marrow, Helen B., and Amanda Klekowski von Koppenfels. “Modeling American Migration Aspirations: How Capital, Race, and National Identity Shape Americans’ Ideas about Living Abroad.” International Migration Review, vol. 54, no. 1, 28 Nov. 2018, pp. 83–119.
21 https://www.cnbc.com/2023/06/03/fidelity-how-much-americans-have-in-their-401ks-at-every-age.html and https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
22 Future Workforce Report 2022. Upwork.