Retirement in Spain
Retiring in Spain: How to do it right
Increasingly, British expats are finding themselves considering retirement in Spain. To date, over a million of them have moved to have their pensions pay out in other countries, notably Spain. Now that the United Kingdom has separated itself from the EU, visa requirements have changed and become more cumbersome. Regardless, many Britons continue to find themselves destined to spend their golden years in Europe.
VISA REQUIREMENTS FOR RETIREMENT IN SPAIN
From now own, Brits must goes through the same process as any non-citizen of the European Union. It’s permitted to remain in-country without a visa for 90 days within a 180 day period. To extend your stay, you’ll need to obtain a visa related to the conditions under which you’ve entered the country. So a Briton planning to retire as an expat in Spain, for example, must apply for and receive a residence visa. Two of the most common are good examples of a retirement visa: Golden visa and the Non-lucrative visa.
These new applications draw more attention to the state of an applicant’s finances. In particular, an applicant for a Non-lucrative visa will need to prove recurring income of a minimum of €27.115.20 (€33,894 for a couple). Those seeking a Golden visa need prove less income, but must demonstrate half a million euro of capital for property.
The non-lucrative visa enables non-EU citizens to retire as pensioners in Spain, but there is a catch. Such a person is not allowed to work or receive any income outside of retirement funds, investments, or the like. Remote work is permissible if the company in question does not reside in Spain. This visa requires a passport which is valid for a year, as well as a medical recommendation declaring the applicant not contagious and disease-free
In case you don’t plan on actually becoming a resident, a Schengen visa becomes useful. This visa gives you the ability to regularly visit Spain, although the same rule about 90 days every 180 days applies. British citizens can bypass this visa, but must comply by the same rules. Upon entry to and exit from the country, the passport will be stamped.
The Schengen visa functions within the Schengen area, the name for countries which participate in a free-movement program.
RENT OR BUY FOR RETIREMENT IN SPAIN
The question of renting or buying for retirement in Spain is an important one and a complicated one. On one hand, rental agreements are more flexible. There will be situations in which someone is forced to return to their home country unexpectedly. Typical legitimate excuses include health and/or family issues.
Even if you are planning on being a homeowner eventually, renting in the beginning might be sensible. Doing so gives the renter time to figure out the state of the local property market. Equipped with such knowledge, it becomes more clear whether the current location is the right one.
On the other hand, buying your property outright entails more security and freedom to do what you wish with your living space. There’s also increased risk. If the market craters, you may not be able to sell off your home to your satisfaction. It’s up to you to decide how important it is to have a place to return to in Spain.
While planning out the retirement of your dreams, you’ll need a solid understanding of your finances. In particular, you’ll want to focus on pensions (personal and state) and and benefits.
For UK Pensions, a claim form should be sent to you four months before you reach the age for the state pension. If it ends up being three months before that time and the form still hasn’t been sent, you should reach out to the International Pension Centre. Those that have worked in the UK and abroad have to send an international claim form to this organization. They can be contacted by phone or mail. You’ll require the account number for any international bank accounts, as well as the bank ID codes.
As of April 2021, the Basic State Pension is listed as £179.58 per single person after at least 30 year’s worth of National Insurance contributions. A claim for this pension plan can be filed no matter where the state pensioner lives after they’ve qualified. The payout can be issued to a UK bank or to a foreign account in the correct currency, although bank fees and transfer charges may apply. Options are available for payment every four weeks or every 13 weeks. Despite that, if the State Pension comes out to less than £5 per week, the payment will occur once yearly in December. Workers who have work history beyond the UK may be eligible for a state pension from more than one country.
Early retirees, and anyone who has yet to begin drawing a pension may be entitled to shift their pension pot to another country. To make this happen, you can transfer the funds to a Qualifying Recognised Overseas Pension Scheme (QROPS). This scheme can base itself in the country where the pensioner ends up living, or it can function in an offshore capacity.
QROPS provides more flexibility. After a UK citizen spends five years as a resident elsewhere, they are considered outside of the UK’s tax jurisdiction. QROPS income can potentially enjoy favorable tax obligations depending on the new country. It’s suggested that professional consultation is sought prior to making a final decision.
In Spain, lump sums taken out of a pension are regarded as taxable income. That means that it might be beneficial to let the money remain in an investment portfolio. You could also take the lump sum and achieve tax resident status in Spain before actually leaving the UK. Retirement in Spain is best accomplished by the proper management of resources.
US SOCIAL SECURITY BENEFITS
If you’re an American considering retired abroad, you should check to see if you’re entitled to Social Security or different federal benefits after you leave the country. Places to help get answers on the matter include the Social Security Administration’s Office of International Operations and the consular offices at the closest American embassy.
GETTING THE BEST OUT OF YOUR RETIREMENT IN SPAIN
It’s a good idea to have some understanding of how you intend to spend your days in Spain before you’ve retired. It won’t be the same as going on a long holiday. Even if you’ve already evaluated the area in person, it’s not the same as spending all of your time there. You might not have experienced the in-season life in the location you’ve settled on. Do you already know how the weather will impact your life?
The climate depending on the area is much better than in other countries as the climate is Mediterranean and is much better for life. You can check the temperatures in Spain, here.
Retirement in Spain is common for expats, who can be found throughout the country. They’re in clubs throughout the nation: cricket clubs, men’s and women’s clubs, etc. Getting involved in clubs is an excellent method of meeting like-minded people, although there are always bars, eateries, and gyms, for example. Long-term residents abound at all these locations.
Sufficient healthcare is a necessity. This is increasingly true for most retirement-age people. In Spain, the state’s health institute decrees that all people, no matter their nationality, have the right to healthcare. The National Health Service (NHS) services Spanish nationals, particularly those working in Spain and contributing to Spain’s social health program. Foreigns who retired from this system, or from another compatible one within the EU, are also covered.
Oftentimes, there’s an ambulatorio – a health centre – found in every neighbourhood, featuring a GP and a paediatrician. In order to see the doctor, an appointment is required. In cases that call for a specialist, you’ll need a referral from the general practitioner. Moving to Spain can be a godsend for anyone who’s struggled to maintain eligibility for health programs.
PRIVATE HEALTH INSURANCE
If you intend to live as a permanent resident in Spain, and if you won’t be traveling for over three months at a time, it might behoove you to participate in private healthcare. There are local health insurance policies that are often considered favorable as opposed to an international policy. If need be, a separate travel policy can be adapted to foreign travel.
Local health policies usually cover hospital care, consulting fees, and possibly emergency dental care and treatment for cancer. Additional options might be available, such as physiotherapy, psychiatric care, more comprehensive dental care, and pharmaceuticals, to name a few. A good local plan can cover you for three months.
As your age increases, policies generally increase in price – especially over the age of 60. A health insurance broker would be equipped to help select the choice that works the best for your situation.
Assuming you have no real reason to remain in the United States, there’s nothing wrong with entertaining the notion of retiring abroad. If you’ve ever dreamed of living in a new environment, now’s your chance. The country of Spain boasts a great climate and wonderfully diverse geography. Retirement in Spain can result in a novel and truly enjoyable experience.
If that strikes your fancy, you should educate yourself more about what’s needed to retire in Spain. A financial advisor could help figure out costs and residency mandates.
AVERAGE COST TO RETIRE IN SPAIN
Current estimates suggest that a comfortable retirement costs an average of $25,000 a year. That comes down to just over two grand a month. For thriftier spenders, $20,000 a year is also doable. Living farther away from city centers and living as a minimalist always helps cut down on costs. One aspect of Spanish society retirees will enjoy is the low property tax rate. Property in Spain is valued and perceived differently than in other countries.
In some cases, it’s required to fill out a Spanish income tax return if you want to live in Spain. More often than not, it’s only called for if you’ve been residing in Spain for over six months with an income or at least $24,000, or if you receive rental income above $1,100 or income from savings or capital income in excess of $1,700. Even if most of this income originates from the US, the income tax still comes into play.
It should be known that Spain’s sales tax can get pretty high. The Impuesto sobre el Valor Añadido (IVA) is the Spanish equivalent to the Value Added Tax (VAT). You’ll most likely see this tax added into the prices on tags. In addition to all this, US citizens will need to file a US tax return. Luckily, the US and Spain participate in a treaty that prevents double taxation. This agreement makes retirement in Spain more possible for many.
The cost of housing revolves around the location of the real estate in particular. A one-bedroom is a sizable city such as Madrid will run you an average of $900 a month. If you travel far enough outside of the city, however, that price can shrink down to $450. A considerable number of retiree expats find themselves settling down in cities like Madrid, Valencia, Alicante, and Barcelona. That means that they’re subjecting themselves to higher costs of living. Others reside in less expensive regions like the Spanish-controlled Canary Islands, where the cost of living is more reasonable.
Ultimately, Spain is only one of many countries for aspiring expat retirees to consider when planning out their retirement. The quality of life reaches the European standard and the costs are relatively agreeable. It’s up to the individual to decide where they can get everything they need and want for the rest of their lives. Retirement in Spain is something of a staple in some parts of the world, but the best way to forecast how you’ll feel about a living situation is to actually go there.