The Caribbean Island of Puerto Rico (officially called “The Commonwealth of Puerto Rico”) is one of the best retirement destinations for US citizens today. This is partly because it is itself a territory of the United States, which comes with many unique advantages.
Besides Puerto Rico’s obvious allure as a beautiful and laid-back tropical island, there are many practical benefits for prospective retirees to consider. First and foremost, Puerto Rico is the only ‘offshore’ tax haven that is a part of US soil.
This is because it has maintained enough autonomy over the years to be able to pass some attractive tax and corporate legislature. As a result, many wealthy US citizens (especially retirees) are relocating to the island to take advantage of its low taxes and friendly corporate environment, not to mention its great lifestyle benefits.
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The cost of living in Puerto Rico is not as exceptionally affordable as some of the other well-known retirement destinations like Panama. However, compared to mainland US, the costs are lower.
The most significant price difference is in rent, which is an average of about 50% lower than the mainland. It is possible to live comfortably in Puerto Rico for around $2,000 a month.
However, there are still many ways that you can keep it affordable if that is what you are looking for as it is generally cheaper for grocery, healthcare, education and daily expenses. Prices generally tend to go if you visit higher-end ex-pat establishments, cafes, restaurants which is easy to do.
There are many good reasons to consider Puerto Rico as your retirement destination, especially if you are a US citizen.
Puerto Rico offers unique tax advantages for US citizens, as well as for other nations. In fact, Puerto Rico has become popular as a new tax haven destination for Americans and is the only tax haven that is officially part of US soil. The two principle pieces of tax legislature which make Puerto Rico attractive as a tax haven are Act 20 (Export Services Act) and Act 22 (Individual Investors Act).
The US is one of the only nations in the world which taxes its citizens on all their worldwide income, irrespective of where they live; however, this is where Puerto Rico offers a unique advantage. Because Puerto Rico is technically part of the US, income sourced in Puerto Rico is excluded from additional US federal tax. This fact, along with their friendly tax treatments and regulations, lead to substantial tax reductions for many.
Act 22 is especially attractive for prospective retirees. Under this act, qualifying Puerto Rico residents are exempted from all taxes on dividends, capital gains, and interest. To qualify for these exemptions, you must actually reside and spend more than 183 days a year in Puerto Rico.
Under Act 20, individuals and/or businesses who export services from the Island can qualify for a corporate tax rate of only 3% or less. The corporate entity can have only one employee, who can be the business owner themself, so it is necessary to form an actual corporate entity to qualify.
Being a tropical Caribbean island, it is no surprise that a major benefit of retiring in Puerto Rico is its great climate and beautiful landscapes. San Juan and other coastal areas experience warm weather throughout the year. For those who prefer something a bit cooler, mountain paradises like Cayey in Puerto Rico’s center provide a great escape from the heat.
Puerto Rico is located in the North East Caribbean Sea, only 1000 miles South East of Miami, Florida. It is officially a territory of the United States of America. Thus, it is an ideal and nearby retirement location for US citizens.
If you are wondering, “how do I retire in Puerto Rico?”, you should know that it is incredibly easy and convenient for US citizens to choose Puerto Rico as their retirement home. As Puerto Rico is already a part of the United States, retirees will technically not even have to relocate to a new country. This means no hassles with visas, residency, currency exchanges, cultural adjustments, and so on. US citizens can move freely to Puerto Rico. It doesn’t take much more than getting on the next available flight out!
As was mentioned, it is on average more than 50% cheaper to rent a house or apartment in Puerto Rico than the mainland US. This is significant, especially when one factors in the lifestyle benefits and availability of top-quality housing and locations. The difference is also significant for buying real estate and housing in Puerto Rico, which is usually also available for half the price of what you would pay on the mainland.
That being said, it is important to be aware that Puerto Rico is susceptible to devastating hurricanes. The most recent (and by far the most catastrophic) was Hurricane Maria in 2017. You should do your research about how at-risk each location is to heavy storms and hurricanes and be willing to take the risk of this looming reality. Also, some areas do not have the same level of infrastructure and services as you would find in the US.
US retirees who already have Medicare will be happy to know that it is valid in Puerto Rico just like anywhere else in the US. Private medical insurance is also a good option because it is much more affordable in Puerto Rico. There are some top-quality hospitals and health services in Puerto Rico, with wide reaching infrastructure and access no matter where you choose to live. However, the major cities are where you’ll find the best healthcare services, with rural areas sometimes being a bit below the average.
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Due to the damaging effects of Hurricane Maria, many houses in Puerto Rico were (and still are) damaged, and those places which were worst affected became less attractive options. However, there are still many great places to choose from to retire in Puerto Rico.
Here are 6 great destinations in Puerto Rico which continue to tick all the right boxes:
San Juan is the capital of Puerto Rico and the largest city. Located on the northeast coast, San Juan it has a population of almost 320,000 according to a 2019 Census, which is a decline from almost 400,000 in 2010 (partly on account of decreasing population numbers after Hurricane Maria). San Juan is perfect for retirees looking for all the comforts and good quality services of a big city. Furthermore, San Juan is on the opposite side of the island to where Hurricane Maria landed, so it suffered far less damage, and life is more or less back to normal here.
The cost of living in San Juan is higher than the smaller rural areas, and the bustling city life might not be for everyone. A great alternative to living in San Juan itself is Dorado, a small and charming coastal town only 25 miles west of the capital. Dorado has several luxury gated communities, along with some more affordable options. It is so close to San Juan that it has all the amenities you would expect of a major city.
Ponce is Puerto Rico’s second largest city and is located on the southern coast of the island. Ponce has become a popular destination for retirees, travelers, and expats alike. One of its major draws is its many cultural attractions and festivals which are held throughout the year. Ponce is known for its excellent health services which is a big draw for retirees wanting to settle there long-term.
Bucana Barrio is a small municipality located in Ponce, with a population of only 3000. It deserves to be mentioned separately on this list, as it is one of the best retirement locations in Puerto Rico. This is due to its quiet and rural atmosphere, its high level of safety, and low cost of living. Housing is also very affordable. It is therefore ideal for retirees wanting a low-cost retirement away from the noisy and crowded cities. As it is located near to Ponce, there is plenty of access to amenities and top health services in Dorado.
The West Coast of Puerto Rico has much to offer and is a popular holiday destination for Puerto Rico locals and foreign tourists alike. It offers a relaxed island lifestyle, some of the best surf spots on the island, along with vast and beautiful beaches. There are a few great towns to choose from on this stretch of coastline. Three of the most popular are Rincon, Aguada, and Aguadilla.
Cayey, nicknamed “The City of Fog”, is the best option for retirees who prefer a cool mountain paradise, as opposed to the warmer coastal areas. It is situated at an altitude of 1,500 feet in the central mountainous region of the island. Temperatures are comfortable, generally ranging from 70 to 88 degrees in the summer and 57 to 72 degrees in the winter. Cayey is perfect for nature lovers and outdoor enthusiasts, and it lies near to the lush 6,000-acre Carite Forest Reserve.
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*Note for U.S. citizens: US citizens are limited in their tax reduction possibilities due to FATCA and CFC laws. Opening an offshore company can increase privacy and asset protection, but you can not eliminate your taxes without giving up your citizenship. If you are a US citizen you are obligated to pay taxes on all worldwide income. Read more here about FATCA and CFC laws.
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