Does anyone have experience traveling long term (but not settling) overseas as a retiree?

In My Humble Opinion
1

I’m an employee of the U.S. government planning to retire from my desk job in about a year, at which point my wife and I will resume traveling. (We spent 2008 backpacking around Europe and half of 2009 doing the same in Central America, and they were the best years of our lives.) We’ll live on my pension, our savings, and what we earn from freelance editing (the field we’re both in) and later on Social Security benefits as well.

Our plan is to not maintain a fixed residence anywhere but to stay in various countries for as long as tourist visas allow (renting apartments for a month or so, Couchsurfing, and staying in hostels and other cheap lodgings). We’d like to do that for as many years as we can—until we long for a permanent home or, more likely, until our aging parents need us to be physically closer to them.

The problem is figuring out where in the United States we should establish residency before we go—that is, what state/locality we should have the government consider our permanent domicile for tax and benefit purposes until the distant day when we settle down again somewhere in the United States or abroad. (For those not familiar with it, U.S. tax law does not recognize homelessness; the last place you resided in a more or less permanent fashion—as indicated by owning a home, signing a rental contract, registering a vehicle, voting, etc.—counts as your permanent domicile until you establish a new one somewhere else, through those same means. You must pay the state and local income taxes of that place, as well as U.S. federal income taxes, regardless of where you are while earning your income.)

All of the literature I find about retiring overseas focuses on settling down in one country as an expatriate; all of the literature about long-term travel (such as round-the-world trips) assumes that you’ll return to your country before too long. I’m not finding much information that applies to my case, so I’m hoping that someone who has been in a similar situation can offer some advice.

What should I be thinking about in determining how and where to establish my place of domicile before I leave the country for years: tax laws, ability to maintain a working address for credit cards and mail handling, recognition of same-sex marriage? (We are two women, considered legally married by the federal government but not by the state where we live now, Virginia.) Anything else? Know any good sources of information that apply to my situation?

Many thanks!

2

If you are not actually going to live there, I’d think that the only thing that matters is low taxes.

They have post office boxes and mail-forwarding services everywhere.

With regard to your other concerns: when you decide to settle down is the time to pick a congenial place to live. If you are away for several years, the right place at that time may be different from where you would choose now.

3

I’m not sure the info you need is that different than in a case of someone who lives overseas in one location.

My parents lived overseas for most of 15 years.
A couple of things I can think of -
Will you still own any property that you might want to claim as your homestead, for lower property taxes.
Will you have a vehicle still licensed in some state?
Is there a location that you want to be able to still vote in? Absentee ballots are based on your residency.
Taxes - Income and property taxes.
Benefits after you return -

If none of those are that important, you might want to pick a location that makes it easy for someone to watch your mail, maybe a friend or family’s house.

4

I’m not aware that you’ll need to pay state income tax. As for Federal income tax on earned income earned outside the country you’ll want the “Physical Presence” test. It has two peculiarities you’ll need to know:

  1. The exclusion is pro-rated. If you’re inside the U.S. for 20% of a year, you can only exclude 80% of your foreign earned income. Or, for example, if you earn $1500 during each of 12 months, with 4 months inside U.S., you’d pay tax on $8500 – the $4500 earned in U.S. plus 1/3 of the foreign earned income. (This seems bizarre but if incorrect, IRS cheated me for a few years.)
  2. Time spent over international waters is considered “present in the U.S.” for the Physical Presence Test. :smack: I don’t know if they’d check this, but I sent detailed itineraries to IRS when I was doing this.