Early Retirement Extreme Forums

The high cost of medical insurance, after a recent revision going up 40% in 1 year , has sparked a renewed interest in geographic arbitrage, i.e. becoming an expat. The recent trouble in Puerto Rico presents opportunities and challenges. I am very interested if someone on this forum has moved to PR for geographic arbitrage, or has more insight.

Granted, if you are a local in PR, your house was destroyed by the hurricane and you still have no power, life sucks. The scarcity of jobs is causing an exodus from PR to the US. But if you are not looking for a job and just want to rent a property, an exodus of job seekers may actually be a plus. Kind of like living in Spain as an expat is great partially due to the 25% jobless rate among young people.

I see as pros/opportunities:
-no residency/visa issues for US citizens
-cheaper cost of living
-cheaper health care
-US dollar is the currency
-tropical island but large enough to have access to reasonable amenities
-not subject to (un)affordable care act
-not subject to US federal income tax
-not subject to capital gains taxes/dividends under certain conditions
-more political stability due US territory status?

Cons
-Spanish
-higher crime rate, possibly worsening due to rising unemployment
-PR has uncertain financial future
-possible change in taxation due to financial mess
-isolation (need airplane ride to visit friends/family)
-may have to get out of Dodge fast with future hurricanes
-slooow repairs after the hurricane
-other?

It seems to me that renting a place to live and keeping your finances/investments outside of PR should offer adequate protection in case of a changing status in taxation etc. The savings on my over $23,000 per year ACA compliant medical insurance policy premium alone could pay for my living expenses. Any savings on capital gains, dividends and income are just extra benefits. Caveat: I have never actually visited PR, so I don't have direct personal experience.

Looks like a unique opportunity, but maybe I am missing something. Thoughts?

I think the cons carry a much higher weight than any positives. Do you really want to place yourself in an area that receives hurricanes regularly in times without climate uncertainty? I'm not very familiar with Puerto Rico and don't care enough to look it up, but consider sea level rise and fresh water availability as well.

Not to mention the issues with electricity and security. It's doable, but seems like more of a hassle than anything.

Climate change is definitely a concern. It is why I would not buy real estate in Puerto Rico, or on any island for that matter. Experiencing a category 5 hurricane a couple of times every year would make this a difficult to impossible scenario. I have not heard of a drinking water issue, but heavy storms can obviously impact this as well. On the flip side, if I can live on the savings in my medical insurance premium, I have effectively eliminated my entire cost of living. That alone looks so appealing that it merits further evaluation.

I have never met anyone who wanted to move TO PR. I have known many fine folks from there. I don't have much to add to your list that is PR specific, but, as long as you are looking, consider other US territories.

Guam
US Virgin Islands
Samoa

Something to consider is that we draw a far higher proportion of our armed forces form our territories than their population would suggest. By that, I mean the proportion of the population that are military vets will be very high. Like what you find around military bases level of vets in a population.

IIRC Guam has the highest veteran per capita rate, yet the nearest VA hospital is over a thousand miles away.

Process that for a minute. I think it sums up the situation nicely. Moving to the middle of nowhere is awesome if you are the kind of person who can be awesome without support. I'm a big fan of that plan. But it can be a real unpleasant shock to people who prefer to be a specialized part of a whole system.

And, for the record, planes are not the only way to get to or from an island.

I am an expat in Latin America. If you are going to be one, consider Ecuador. It has the most friendly visa program.

If you are already FI, go to any Lat Am country and just stay there for for as long as your tourist visa allows to see if you generally like it or not, then weigh pros and cons. It's a small step, a bit scary but small.

Riggerjack wrote: ↑

Thu Dec 07, 2017 3:14 pm

I have never met anyone who wanted to move TO PR.

Peter Schiff moved his family and his asset management company to PR.

https://www.youtube.com/watch?v=Ss2cQqr5abI

The Ritz Carlton has built an entire home-resort for wealthy expats. The main draw being the tax benefits. BTW I am not considering the Ritz.

I've visited PR twice, once on vacation and once for business. I enjoyed the experience thoroughly, and look forward to going back. However, it's nowhere near as cheap COL as other islands in the area due to US cabotage laws.

slimicy wrote: ↑

Thu Dec 07, 2017 6:12 pm

it's nowhere near as cheap COL as other islands in the area due to US cabotage laws.

The Jones Act unfortunately raises prices in PR. The exemption from federal income taxes, preferential treatment of capital gains and dividends, and the exemption of the ACA more than makes up for any price difference in goods and services between PR and other places in the Caribbean. That is what makes PR so appealing. In other countries, you are subject to federal tax laws, but you are exempted from the ACA. At least, that is my understanding.