I am writing this as we drive from Ajijic, Mexico to Mazatlan, Mexico. Ajijic is a beautiful village situated on a mountain lake less than one hour south of Guadalajara, the second largest city in Mexico. The village and the surrounding area are believed to be the largest ex-patriot Canadian community in the world. Yes, more people go to Florida but they do not move there and stay all year. They do here. If you wish to have lots of American friends, do not despair because there are lots of them here as well.
Retiring outside of Canada is a common dream and here in Ajijic I meet many people that are living that dream. They do not appear nor sound crazy. Of course the common refrain is ‘we hate the snow” so here they are in short sleeves and no parkas. The Mexican people are on the whole less wealthy in monetary terms than the new arrivals but certainly very rich in family and culture. Life is as slow paced as you want or as hectic as you seek. So much is always happening with festivals, carnivals or special events every week it seems. Laughter, music and more music are everywhere and always. So moving south sounds nice but is it easy to do and is the dream fulfilled?
Tax advice is definitely needed. Upon becoming a non-resident, which is more than simply leaving Canada, all assets are considered sold even if you continue to own them. The triggering of capital gains is an important consideration and needs to be managed carefully. You become a non-resident when you break your ties and intend not to return. That date is a bit fluid and again careful attention needs to be paid to this. Upon leaving you need to file a terminal tax return and a special declaration. Tax rules governing real estate you leave behind and rent out will surprise most and should be understood sooner rather than later.
Just like retiring within Canada, you need cash flow to sustain you but incomes and taxes may be different. A non-resident experiences fixed rates of tax withholding on retirement incomes and some investments but not others. Different rules apply depending on the country you have moved to and the particular sources of income.
While in Canada, you may have owned a home. Ownership in other countries may have few similarities to your Canadian experience, so consider renting for a few years to fully understand the local situation. In Mexico, properties to rent are still plentiful and reasonable on a Canadian budget. Buying also quickly ties you to a specific locale and many people we encounter have moved more than once before settling in. This is made much easier when renting.
Understand the local currency and how YOUR expenses will be affected. If you are a vegetarian and shop only at the local fruit market maybe the local currency should be a major holding. If you get your groceries at the Walmart, be prepared for more relevance to the US dollar. While on this trip the peso has moved in my favour by 10%, so for a short while, local items will be 10% cheaper for me. Tough luck eh! Your financial planner can help you work through the currency issues.
Your investments accounts will need some attention. Many brokerage companies and most mutual fund companies will not deal with non-resident investment accounts. Most advisors in Canada could continue to give you advice on registered accounts like your RRSP and RRIF but many are not allowed to by their companies. Registered assets are presumably no problem but many companies are limiting this business as well. You may be looking for a new advisor both in Canada and in your new country. I am here in Ajijic visiting clients that have a need for a continuing relationship with a Canadian financial planner and investment advisor after having made the move to Mexico and their options are limited.
Has their dream been fulfilled? We lunched with clients yesterday. There was a soft warm rain beating on the windows and little birds chirping and fluttering on the floor at our feet. Today we are only half way to the beach and it is sunny and already over 30 degrees. Tomorrow, I will float in the Pacific for hours. My phone reports 14 at home with a low of 3 tonight. 27 degrees warmer is always a dream.
Financial Planning– A review and analysis of a person’s current financial and personal circumstances, present and future financial needs, priorities and objectives, the risks associated with his or her current circumstances, future needs, objectives and priorities which can but need not include the establishment of strategies to address and mitigate these matters whether or not a formal financial plan is prepared. -Per the Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives