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View Full Version : Increasing retirement age and the effect of the double tax decree on US expats



Bruce Z
11-18-2013, 02:54 PM
First I have to apologize this is a bit complicated, but there's no way around it. Let's start off with the good news. If you are of "retirement age" and you come to Bonaire from the US and become a resident here, your pension and IRA withdrawals will only be subject to the minimal health insurance premium, about $150/year. (I am going to use round numbers because all of these things change each year with inflation.) You will pay no 30.4% income tax/other social insurance premiums on retirement income as long as you are taxed in the US. And you will qualify for free health care.

If you retired here before retirement age, then your Bonaire tax on your pensions will be a maximum of about $8,000. That's because the 30.4% rate is made up of both income tax and social insurance premiums. For individuals who are pre-retirement age, the 30.4% on the first $30,000 of income is made up of 3.6% income tax and 26.8% premiums, so on approximately the first $30,000 of income only 3.6% can be eliminated by the double tax decree as it only eliminates the double income tax. Over $30,000 there is no Bonaire tax on your US retirement income.

After retirement age the income tax rate on the first $30,000 is 29.9% and the medical premium is only 0.5%. So if you retire here at age 55 you'll pay $8,000 on the first $30,000 of retirement income, but if you retire here at "retirement age" you just pay $150.

The retirement age is what is changing to 65 over the next few years, as 60 was determined to be too low. The same process happened in the US for social security, pushing payment start dates up from 65 to 67 over a period of time. For local people, this means a later retirement, but for US expat-pension earners, it affects the tax you will pay to Bonaire if you move here earlier than the official retirement age for your year of birth. So here's how it will work:

If you were born before 1953, the social insurance taxes stop at age 60, so in 2012. If you were born in 1953, the retirement age increases to 62 and your social premiums stop in 2015. Born in 1954, age 63, stops in 2017. 1955 age 64 stops in 2019 and 1956 or later, age 65 is the retirement age. So for example if you were born in 1954 and you move here at age 60 with your US pension in 2014, you will pay up to $8,000/year for 2014, 2015 and 2016 and then your tax will drop to $150 in 2017.

Just another factor to consider if you're planning to retire here. Let me know if you have questions, either here on Bonaire Talk (if the question is of a general nature) or email me at bruce.zavon@zavontax.com if it is a personal tax issue.

kob
11-18-2013, 03:03 PM
You will pay no 30.4% income tax/other social insurance premiums on retirement income as long as you are taxed in the US. And you will qualify for free health care.

Thank you, Bruce. This is excellent news for me personally, as I was born in 1952. However, I am certain to be paying you a visit in 2014, as I will be living and working in the US for half the year and then moving to Bonaire with little earned income on island for the second half of 2014. Likely a situation you have dealt with before.

Thanks again for an excellent and helpful post.