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Ralphs. Fresh for everyone. ♪ Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now, while building a plan for financial freedom in 10 years or less. Today we continue part two of our three-part series in celebration of tax season, called "The Case for Your Moving Outside of the United States." I want to give you a very strong case for you to consider picking up your household and moving outside of the United States.

And although there may be many reasons for you to personally consider that idea, things that you might choose to go after, or things you might choose to say, "No, I'm happy where I am," my primary case revolves around taxes. My primary case revolves around expense. Now you should consider the personal lifestyle, the cost of living, any personal techniques, any things that you would like better from another government to be under their jurisdiction instead of the U.S.

government jurisdiction. But I'm going to focus on taxes. As I mentioned yesterday, I often get frustrated with tax planning, because if you're going to follow the law, as I do and as I teach, and yet do good tax planning, it requires you to develop a portfolio, a tool belt, with hundreds of little adjustments in your actions and behaviors, with a massive level of education for you to understand the moving parts of an incredibly complex tax code, and how each of your individual decisions and behaviors and actions will impact that overall plan.

It is maddening how complex it is. And I've dedicated hundreds of hours of my life to trying to learn and understand and figure out how to teach it. And yet all these little techniques work, but none of them are that one big idea that could save you a lot of money.

But the question is this. How much money could you save if you simply walked away from the whole system? For example, question, did you do your homework on yesterday's show? If you live in a state that charges you state income taxes, did you sit down with your state income tax return and calculate the actual numbers, the dollars that you are sending to your state government this year?

And then did you calculate the cost of those dollars and the opportunity cost of those dollars if you did something else with them from now through your retirement age and from now through your date of death? Did you do your homework? Now, do you see how elegantly simple it is if you wanted to eliminate that number, to simply move yourself out from under the jurisdiction of one state under the jurisdiction of another state?

We often don't think about these simple solutions. Many years ago, I had an epiphany and I felt so stupid when it happened. I'll tell you the story because the same thing has happened for me with tax planning. Many years ago, I always aspired to be an early riser. And when I was young, I found it very difficult to be an early riser.

I wanted to be one of those guys that was up at 5 o'clock in the morning, 4 o'clock in the morning, had hours of productivity early in the morning. And yet I struggled to do it. I tried all the tricks. I would put my alarm clock in the other room.

I got nasty alarm clocks that jangled bells like crazy. But I would get up out of bed. I would walk to the other side of the room. I would turn it off and I would get right back in bed. And I struggled for years to try to figure out.

I thought, "What's wrong with me? What's wrong with my discipline? What's wrong with my motivation? I'm a disciplined guy. Why can't I get out of bed?" And one time, James Altucher, who is a popular author and I think podcaster now and guy who ran a New York hedge fund.

Anyway, he's an author, James Altucher. One time, he was doing a Twitter, "Ask Me Anything." And I was an adult. I think I was a graduated from college by then. Maybe I was in college. But I was an adult. I was a sentient human being. And I just reached out to him because he talked a lot about the value of getting up early, getting up at four in the morning and getting all kinds of work done in the morning so that by nine o'clock in the morning, you're done.

And I wrote to him and I said, "How do you become an early riser?" And his answer to me was, "Go to bed early." And I sat there and I stared at that tweet back to me and I thought, "Are you kidding me? Here I have been trying for years to be an early riser.

And yet, as stupid as this may sound, I never thought of going to bed early. Now, by habit, I was never a late to bed person. I would generally go to bed at 10 o'clock or so. But I never thought of going to bed at eight o'clock. And he said, "The reason I get up at four o'clock in the morning is because I go to bed at eight o'clock at night." And it's so blindingly obvious that you look at it and you say, "How was I so stupid as to miss that?" Why didn't I think of going to bed at eight o'clock at night?

Well, obviously, because of the lifestyle. I never did want to go to bed at eight o'clock at night. But the point was, if you want to get up early, you've got to go to bed early. And for years, I'd been trying all these techniques to shortcut my sleep instead of just simply recognizing that I need the sleep.

And so I should just go to bed early. Now, I've had other epiphanies like that in financial planning. I was a competent credentialed financial planner when I came across Jacob Lund Fisker's book, Early Retirement Extreme, and it exposed me to the idea of extreme savings. No one had ever taught me that I could save more than 10 or 20% of my income.

I was always taught to go for that. No one ever taught me that I could save 90% of my income. And when I sat down with a calculator and I ran the math, I felt like an idiot. Why didn't I think of that? Now, let's bring that now to taxes.

For years, I did tax planning. For years, I came to the perspective and I thought, what are all the different things that we can do? And I've got dozens of books on tax planning in my library. I've read them. I've studied them. I've absorbed them. I know the techniques.

I teach them. But it wasn't until years after doing that where I sat down and I realized, wait a second. If you want to remove taxes, just go somewhere where they don't have so many taxes. Just leave. If you want out of the high US income taxes, just leave.

If you want out of the high Canadian taxes, just leave. If you want out of the high French taxes, just leave. It's the obvious simple solution that for some reason very few of us have considered. So if there is one idea around taxes, and there's not, there are some big ones.

This is at least one of the big ones. You can leave. If you want out of the high US taxes, you can leave. Now leaving the United States could take multiple forms. So the first form that it can take is just simply you're leaving. And then the second form that it could take is you're leaving and then subsequently renouncing your US citizenship.

And both of these can save you major, major cash. Now I recognize that the vast majority of my listening audience that's composed of US Americans is not interested in either leaving the United States or in leaving and renouncing their US citizenship. I understand that there are many people in the world who would gladly come and trade places with many US citizens for the opportunities to live in the United States.

But I will cover this so that you can understand the cost of your staying. So at least if you choose to stay in the United States, you understand what that is costing you. And then if you choose to stay, perhaps you'll be happier with your choice. Or if you choose to leave, you'll be happy with your choice.

And for all I know, perhaps I'm solving all of the problems with the United States right here. Because after all, with a society that's increasingly divisive and angry at each other, perhaps by showing people how they could leave, the people who want to leave will leave and the people who want to stay will stay and then we'll be at peace and harmony and love in the world and I will solve all those problems today.

We'll see. You judge that. Now, a quick comment on US citizens versus the many other citizens who listen to this show. There are a couple of wrinkles that are unique about the US system of citizenship and taxation versus other countries of the world. There are four major systems of income taxation that exist in the world.

They are, of course, citizenship-based taxation, which means that if you are a citizen of the country, you pay taxes based upon that citizenship. There are two countries in the world to my knowledge that currently have this system, the United States of America and Eritrea. There are countries in the world that have in the past had a citizenship-based taxation and they have all gotten rid of those systems in favor of system number two, which is a residency-based taxation.

The majority of the large jurisdictions of the world outside of the United States are residency-based taxation systems. So Canada, Australia, Mexico, Germany, France, UK, et cetera. If you are a resident of those places, then you pay taxes based upon your residency and you pay taxes on your worldwide income.

US citizens, no matter where they live in the world, pay taxes on their worldwide income and Eritrean citizens as well. I don't know if I have any Eritrean listeners, so we'll just focus on US citizens. So the first one is citizenship-based taxation. Second is residency-based taxation. Third is what's called territorial taxation, which in my opinion, if there is an argument for income taxation, if there is one, the best argument, the most just and moral argument is in favor of territorial taxation.

So territorial tax countries tax income that is earned within their borders. They don't tax income that is earned outside of their borders. The reason that is more just and more equitable and more moral is that at least now the governments are saying, "Listen, we're only going to tax the income that's earned here and because of that, we're going to compete and we're going to try to convince you to bring your business here." So the best prominent examples of that would be places like Panama, Panama City, or Hong Kong and Singapore, all of these being territorial tax jurisdictions where they only tax income that is earned in Panama or the only tax income that is earned in Hong Kong through Hong Kong companies or in Singapore, etc.

I think that's the best system. If there is an argument for income taxation, it should be that one. And then the fourth system of taxation is of course the countries in the world that don't have any income taxes, the places where they just don't have income taxes. But those are the four systems.

Now in some ways, the advantage for the discussion of US citizens versus other citizens, the advantage goes to non-US citizens. The majority of my listening audience that is not US American comes from Canada, Germany, the UK, Australia. So with those countries, if you are a citizen of one of those countries, if you simply leave Canada, the UK, Australia, Germany, and you move to another country of the world, if you follow the procedures for your country's residency rules, you can simply keep your passport, keep your citizenship, but move to another place and cut off your taxation ties to your country of origin.

US citizens cannot do that because the US government follows them all around the world no matter where they live. Now the distinction here is if you're going to leave and stop being a resident of Canada or Australia, you have to move somewhere else and be a resident of another place.

And that move has to be a legitimate bona fide move where you sever your connections with your home country and create new ties to a new location. And in some ways, there's a small advantage here for US citizens because based upon the qualifications, what I'm about to get into called the foreign earned income exclusion, US citizens don't have to set up a new connection with a new place.

One of the laws in the United States is that US citizens can just simply have basically a bright line test where based upon the number of days that they spend outside of the country, they can avoid the income taxation on their first about $100,000 of income without having to go and set up a home in a new place.

So US citizen can get on an airplane and can spend a year traveling all around the world with no permanent home, moving around the world as a nomad with no home, living in hotels, living in campgrounds, living in rented houses, whatever. And although they have no fixed permanent home, they can avoid the US income taxation on some of their income without setting up a new residence.

That same Canadian citizen and Canadian resident who does that, who spends a year outside of Canada still owes taxes to Canada if they have not set up a new foreign residence, a new legitimate bona fide foreign residence. So on that case, if you're going to be a nomad, a digital nomad, something else, there is an advantage to US citizens.

So keep that in mind. The rest of this show is focused on US citizenship. So what if you leave the United States? Well, again, a powerful tax saving strategy that you should consider is simply leaving the United States. In fact, a powerful strategy for many problems that you should consider is simply leaving the United States.

This is commonly talked about in the US culture, but not commonly done. And the reason is because the United States was supposed to be that great city shining on a hill. The United States was supposed to be that great country that was going to succeed forever. For centuries, it was the beacon of the world.

If you wanted opportunity, go to the United States. If you wanted freedom, go to the United States. If you wanted a good life, go to the United States. The United States opened its arms wide and welcomed millions of immigrants from all around the world. And so when you have a place in the United States where it has welcomed millions of immigrants from all around the world, it's created this, basically this ultimate success pinnacle.

And US Americans, we have this very strong attitude that we're the best in the world and we just assume it to be the world. Now, assume it to be true. Now in some cases it's true, in many cases it's not. But there has not, we don't have this same cultural press to go somewhere else.

If you ask the average American where they might want to go where it's better, it's hard for them to think of something else. Americans think that basically everyone wants to come to the United States, which is obviously not true, it's absolutely not true. And so we don't usually think of leaving.

We talk a lot about leaving, we thread a lot about leaving. Whenever there's a new election, the losers say, "Well, if this happens, I'm going to move to Canada, I'm going to move to this other place, etc." But almost none of them actually do. It's all nonsense, it's all lies, they don't do it.

But the problem is, leaving the United States is indeed a powerful strategy and you should consider it. In my most recent course called "How to Survive and Thrive During the Coming Economic Crisis," the original title of that course was going to be something like "How to Bug Out of the Coming Economic Crisis." And the basic point was that one of the best ways for you to survive an economic crisis if you are a U.S.

American is to leave the United States of America and go somewhere where there isn't an economic crisis. But I realized that I had a lot more to say and that's not the good first strategy, and so I expanded the entire course outline and made it much, much bigger, which is why it ended up in.

But a great way for you to survive and thrive during an economic crisis is to leave where the economic crisis is and go somewhere else. So if there's a crisis in the United States, leave and go where things are better. Now the cool thing is you don't have to wait for a crisis to do that.

If you leave the United States, you can qualify for what is called the Foreign Earned Income Exclusion, which will eliminate your U.S. federal income taxes on about the first $100,000 of your income under the current numbers. The reason I say about the first $100,000 is because the specific amount that is exempt from U.S.

federal taxation is based upon, it's an inflation-driven number and it changes every year. Right now it's about $100,000, should be going up. Now how do you qualify for this exclusion? How long do you have to leave for? The first answer is you have to just simply leave, basically, for 330 days of any 365-day period.

And the reason I'm using words like basically and simply, etc., there are a number of complex rules. I'm focusing in this podcast on simply giving you just the big picture and everything I'm saying here is true, but there are a few little nitpick points that sometimes you need to be careful of.

And I'm not going to answer all your questions on this particular thing. I'm going to give you the big idea here as my goal. So if you will leave the United States and be outside of the United States for at least 330 days out of any 365-day period, it doesn't have to be a calendar year, just any 365-day period, then basically you will qualify for an exemption on any federal income taxes for the first $100,000 of your foreign earned income.

Now the other way that you can do this is if you can go and be a bona fide resident abroad where you are actually living abroad, you have a residency abroad, and you can make sure that you stay outside of the United States enough so that you don't trigger the substantial presence test in the United States, then you can also use this particular income exclusion to remove federal income tax from the first $100,000 of your income.

In order to qualify for the bona fide resident abroad, you have to be a bona fide resident abroad. You have to actually have a residency outside of the United States. And then in order for you not to trigger the substantial presence test, at the very least, you need to make sure that you don't trigger that test by being in the United States under the terms of it, which is either 183 days during the three-day period that includes the current year and the two years immediately prior before that, where the days become one-third for last year and one-sixth for two years ago.

You can look up the substantial presence test if you want to dig into the details. But basically, you could safely every year spend about 120 days in the United States without triggering the substantial presence test. Now if you can qualify for the foreign earned income exclusion, what would be the benefit to you by leaving?

Remember, you qualify by leaving. And either you leave for 330 days of the year or you leave for the vast majority of the year and you're in the United States for up to about 120 days per year. What's the benefit? Well, let's use an example. Let's use the biggest best example that I can.

Let's say that you are a single individual living and working in New York City. Is there a more American town? Probably, but New Yorkers like to think that they're the best. So we got the best of the best and the best of the Americans is a very heady, ego-filled place.

So you live and work in New York City. I love you, New York. Thanks New York for your patience with my inflammatory comments. You live and work in New York City. You earn $100,000 as a graphic designer. Well, if you are this particular resident living and working in New York City earning $100,000 as a single person as a graphic designer, you get a grand total of after tax income of $67,961 of your money to take home.

Your $100,000 that you earned turns into $67,961. Now let me break that down just to make sure that you fully understand it. The first tax that you will pay is your employment taxes, your FICA taxes. And if you are an individual employee, you will pay 7.65% of your wages to the FICA administration, to your Medicare, Medicaid, and Social Security taxes.

So that'll take $7,650 out of your paycheck and send it off to those so-called trust funds. Now the second thing you would pay is you will pay federal income taxes to the tune of $15,410. Single individual, no 401(k) contributions, et cetera, just $100,000 of income. Single individual, that puts you at $15,410 of federal income taxes.

State income taxes to the state of New York would be $5,538. And your local income taxes to the city of New York would be $3,441. So your total income after taxes is $67,961 and you've paid $32,000 to the various government entities involved. Could be higher if you're paying self-employment tax because then your FICA tax would be, instead of $76,050, it would be $15,300 on the same $100,000 of income.

But we'll just keep it simple and go with an employee. So how would that impact your wages, your savings? Let's assume for a moment that I could, because I'm about to teach you how to legally eliminate every dollar of that tax burden. I'm about to teach you how you can legally eliminate every dollar of that tax burden.

What could that be worth? What would it be worth to you to have $32,000 per year of savings because you didn't pay it in taxes? Well, assume that you are our enterprising 25-year-old living in New York City. Assume that I could save you $32,000 per year. How much would that fill your retirement account if instead of sending that off in taxes, you filled up your retirement accounts with that money?

Well, if we put in $32,000 per year of savings, we do this from age 25 to age 65 for a total of 40 years. You start with nothing. You earn 8% per year on your investment. At the end of 40 years, your investment accounts would have $8,952,993.29 in them.

Let's round up by 50 grand and call it $9 million. Your residency in New York City and your residency in the United States is going to cost you $9 million in your retirement accounts if you save the money instead of spend it in taxes. That's what your residency is costing you.

Now, you could make the argument to me that you might get some of that back in a Social Security payment. That's true. You could make the argument to me that you could get some of it back in your Medicare coverage if that exists. That's true. But for now, I just want to keep this clean and simple.

I want to point out that you could make that argument and you could adjust the numbers as you want. I want to make a good case here. So $100,000 earner, single individual, it's going to cost you $9 million in your retirement account to live in New York City where you are.

Now what would this be worth to you if you continued investing? What if instead of living and working in New York City and then spending it all, what if you kept it invested and you saved others of your money for your retirement or you kept working and you just kept all this money invested?

So at 65, you stop working and then you keep that same $8,952,000 invested. Well, let's start with that for our present value. Let's not put any more contributions to the account. Let's change our time frame to be 30 years instead of 40 years from age 65 to 95 and now your future value on that account would be $90,899.58.

So under this consideration, if you are a 25-year-old individual, if you could live outside of the United States and you could save all of that money and invest it at 8% per year instead of sending it off to the US government, the New York State government, New York City government, and the various social security administration, etc., you could potentially leave behind for your heirs $90 million.

Your presence in the United States and in New York City will cost your heirs $90 million. Do you see why this is a big deal? Now how do you do this? How do you legally eliminate every dime of that tax burden? Well, there are a few steps. Step number one, you should move from New York City to a state that does not impose state income taxes.

And what I would recommend is that you choose either the state of Florida, the state of Texas, or the state of South Dakota because these three states allow what is called "nomad residency status." They allow you to become a legal resident of the state even though you do not live in the state physically for the majority of the time because you are a nomad.

By moving from New York City to Florida or to Texas or to South Dakota, you could eliminate your state and your local income taxes. That could be of massive savings to you. It would save you $5,538 in New York State taxes. It will save you $3,441 in New York City local taxes.

Now don't misunderstand me. You cannot just simply move on paper and stay in New York City. That doesn't work. It's illegal and it would break the laws of New York residency. You would still owe New York tax. But you can legitimately move and change your state of residence from New York to Florida or to Texas or to South Dakota and yet not have to spend all of your time in Florida, Texas, or South Dakota.

So you establish a mail drop in those states. You establish that you use that mail drop for your driver's license, that you would use that mail drop for filing your taxes, you would use that mail drop for registering your IRAs, your 401ks, etc. As you become a resident of one of those states, you are now subject to the laws of those states.

You can vote in Florida, Texas, South Dakota. You get access, for example, we've talked a lot about asset protection and the benefits of Florida and Texas. You can now come in under those laws and get the benefits of the asset protection laws in those states, etc. So that will eliminate your New York State taxes and your New York City local taxes.

Step two, you physically leave the United States. There are two ways that you do this. The first way, the simple way, is you physically leave the United States and you stay out of the United States for at least 330 days per year. By staying outside of the United States at least 330 days per year, even if you don't establish a foreign residence, you can qualify for the foreign earned income exclusion.

Notice I made you a graphic designer. You can do that work from anywhere in the world. That's the reason why you have to leave and you need a source of income. That's one of the points, obviously. But with the plan of just simply planning to leave the United States for at least 330 days per year, you can travel constantly, moving around the world, and you can move around the world in such a way that you don't become a tax resident of another foreign jurisdiction.

For example, US citizens enjoy liberal visa policies to travel between Canada and Mexico. In each country, if you come in as a tourist, you can basically, with almost no restriction, qualify for a 180 day tourist visa to allow yourself to be in Canada and in Mexico as a tourist during that period of time.

As a tourist, as long as you don't meet the rules of tax residency in either country, for example, in Mexico, you don't want to own property in Mexico. Canada has some unique rules, but you want to make sure that you're never there more than 180 days, you're a tourist in either place.

You could do something, if you're that young, single 25 year old, you could do something as crazy as living in an RV, and you spend your summers in Canada, you spend your winters in Mexico, traveling back and forth across the United States in the interim, making sure that you're not in the United States for more than the 35 days per year.

And in that situation, you will owe no taxes to Canada, no taxes to Mexico, and no taxes on your first $100,000 of income to the United States. Now, if you want to spend more time than 35 days per year in the United States, and many people would not want to, by the way, you don't have to live in an RV, you don't have to go to Canada, Mexico, you can spend your time traveling the world, go spend three months in Paris, go spend three months in London, go spend three months in Kuala Lumpur, go spend three months in Singapore, go spend three months in Sao Paulo, wherever you want to go, and the point reason of saying three months is that generally as a US citizen, you can get easy travel visas to those places, stay there for up to about 90 days, and you will almost never trigger any kind of tax residency just simply for being in a place 90 days.

Most places you have, if you're there a majority of the year, then you trigger tax residency and tax obligations to that foreign jurisdiction, but you're not going to trigger that if you're just there for a few months. And so you could do this and you could follow the endless winter all around the world, snowboard 12 months a year, or you can follow endless summer all around the world and sit on the beach 12 months per year.

Many people do this. Now, your next option is you could go and become a bona fide resident in another country and set up a foreign residency for yourself, and then you could come back and visit the United States as long as you're not there for more than a few months per year.

Again, about 120 days per year would probably be safe so you don't trigger the substantial presence test, but the substantial presence test would allow you to be there for longer at times if you needed to, as long as you stayed away for less time in the following years. So how would you do that and not incur a lot of taxes to another foreign jurisdiction?

Well, you either become a, you have to become a resident of a lower income tax country. So there are many countries around the world that will tax you, but they'll tax you at a much more reasonable rate than the United States or than Canada, etc. So instead of having a 40% tax bracket, highest tax bracket, they may have a 10% highest tax bracket.

If the United States government just simply taxed income at 10%, I would completely stop wasting any time on tax planning. I'd pay the 10% and I'd go on about my life. It's where you get into 40% that it becomes worth it to waste all these hours and all this effort doing tax planning.

So there are many, there are countries in the world that don't impose more than 10 or 15% on income taxes. So you could just go and live there. Or you can go and choose a country that has a system of territorial taxation. Again, a territorial tax system is one where they only tax you on your income that is generated in that country.

Examples of these countries would be close to the United States, Panama, Costa Rica, Nicaragua, down in South America, Paraguay, in Asia, Hong Kong, Macau, Malaysia, Singapore, etc. You can live in any of those jurisdictions. And as long as you don't earn money in those jurisdictions, you won't pay any taxes in those jurisdictions.

You can live in Panama City. And if all of your income is sourced from the United States, you can live in Panama City and you won't owe the Panamanian government any money. Or you could choose to a country that doesn't impose any kind of income taxation. Good example here would be the Bahamas or the Cayman Islands or the British Virgin Islands or Bermuda or the UAE and there are a bunch of other Gulf states that don't have any income taxation because they run their governments based on the oil revenue.

Or in Europe, Andorra or Monaco, etc. So you can become a resident of one of those countries. But by becoming either a bona fide resident of another place or just staying outside of the United States for at least 330 days per year, you can eliminate all of the federal income taxes on your earned income up to about the first $100,000.

That will save you $15,410 in federal income taxes. So I've just shown you how to legally eliminate $15,410 in federal income taxes. I've showed you how to legally eliminate $5,538 in New York State taxes. I've shown you how to legally eliminate $3,441 in New York City local taxes. And now the final piece of the puzzle is eliminating your employment taxes, your Medicare, Medicaid and Social Security taxes.

Because you'll be paying these either as an employee of a US corporation or as a self-employed person. So if you are an employee of a US business, you'll be paying 7.65% as the employee and your employer will be spending 7.65% as the employer. And if you are self-employed, you'll be paying the full 15.3% in self-employment taxes.

Now it may not be crucial to you to eliminate these taxes. And the idea here is you might actually gain something from those in the future in theory. For example, you might pay these employment taxes and you get in the future Medicare coverage or you get some kind of Social Security income in the future.

That's up to you. So you might not regret paying those. At least you can make an argument that as frustrating as those taxes are, in theory you might get some of that back. Whereas you will get nothing back from your federal income taxes, from your state income taxes, etc.

So at least you can qualify for Social Security disability if you become disabled. Or at least you can get Medicare or Medicaid if you get low income, etc. That's up to you. Now I personally think these taxes are a total waste. And my guess is that young people, our enterprising 25-year-old, is probably going to get something out of the system eventually.

But it'll be one of the worst returns on investment imaginable. I always think of W.C. Fields famously said, "I spent half my money on gambling, alcohol, and wild women. The other half I wasted." So I look at it like this and say, at least if you stop spending money on employment taxes and instead you gamble it all away or you drink it all away or you blow it all on licentious and concupiscent behavior, then you could hit the jackpot maybe if you're gambling.

Or you might have some memories of good times to look back on. That's probably more useful than putting all your money into the employment tax system and having a $1,567 a month check from Social Security that comes in starting at the age of 77 that with the future inflated dollars might put gas in your car every month.

But that's up to you. Now if you want to eliminate your employment taxes, here's what you need. You need to become an American living abroad who is working for a foreign corporation that comes from a jurisdiction that is not subject to its own Social Security system. So you could do that by becoming a graphic designer working for a large company outside of the United States where you would not be required to put money into that country's social tax system or you could do this by becoming basically a self-employed graphic designer who does business through your own foreign corporation which you work for while living abroad, thus allowing you to eliminate your employment taxes.

Because Americans who live outside of the United States who work for a foreign corporation do not have to pay into the employment tax system. Savings here? Well $7,650 in employment taxes if you are an employee and $15,300 in taxes if you are self-employed. That could be a substantial savings for you.

This savings in taxes is accomplished by your simply leaving the United States and putting these plans in place. Now the system is not perfect. Notice I've only talked about $100,000. I haven't talked about a million dollars because everything from $100,000 and up will still be taxed according to the standard federal income tax system.

There are a few additional things that you could do. For example, there's a foreign housing deduction which gives you a little bit of additional tax advantage money as well. You can get foreign tax credits that equalize your taxes but you're still going to be paying on the higher numbers.

The point is that this will, for many people, at the $100,000-ish level, this can save you a huge amount of money and massively turbocharge your wealth building. You can legally eliminate about $25,000 or $30,000 of income from the tax system and that's a massive benefit. Now the benefit here for US citizens is you can still maintain basically all of your other tax planning.

There are a few things that would have to change but you can still participate in retirement accounts. You still gain access to your child tax credits. There's still everything else works. You just get this additional exclusion. So this is different than the system for Canadian residents or Australian residents, et cetera.

But you can still keep everything. The reason why I said move to Florida or Texas or South Dakota is you'll still run everything through the United States. You can keep all your US credit cards. You can keep all your US accounts. You can keep all your US-based rental properties.

You'll still be paying taxes on those because those are not earned income. The foreign earned income exclusion will not affect that. It only covers your earned income. So you'll still be paying investment taxes, et cetera. But you can keep everything in the United States but eliminate this tax, your federal income taxes on your earned income while you are abroad if you qualify for it and potentially on your employment taxes.

That could be really, really helpful to you. And that literally could put $90 million in your beneficiaries' pockets for yourself. So consider seriously leaving the United States, qualifying for those systems that I just described for you so that you can save money. Now what about completely eliminating your US tax obligations legally by renouncing your US citizenship?

You can do that. If you formally renounce your US citizenship, you can legally eliminate all of your US tax obligations which means that you're not limited to those criteria I just laid out. You're not limited to only getting the foreign earned income exclusion because the foreign earned income exclusion only covers your earned income and it only covers the first $100,000-ish of earned income.

So what do you do if you make $5 million per year? Or what if most of your income is investment income, interest income, dividend income, capital gains income? All of that is still taxed by the US government. No matter where in the world you earn it, all of it is taxed by the US government if you are a US citizen.

I find that revolting. I find that policy obscene. It's the most, people overuse this phrase, but it's the most un-American thing possible. You have a country that is based upon liberty and yet now the US government is going to follow you around the world and say, "No matter where in the world you earn your money, no matter what you do to make it, no matter if you've been in our country in decades, we're going to tax you." And, by the way, we snoop in all the world's emails, we snoop in all the world's phone calls, we make the entire world's banking system report to us and tell us everything that happens to your account because we're the big bad bully of the United States of America.

I find it obscene. Best public example, if you want to understand how this works, it would be the example of the former mayor of London, Boris Johnson. Back in 2005, Boris Johnson famously sold his house in London, I think for about 1.2 million pounds. And he realized a very nice capital gain on that sale of that property.

But unfortunately, Boris Johnson was born in the United States. And being born in the United States, he was thus automatically a US citizen. He lived in the United States for the first five years of his life and then he left the United States. And so since he was a US citizen, he owed capital gains income to the United States for the sale of his residence.

I don't know if he was single or married, whatever, but in the United States, you can only exclude the first $500,000 of your gain from the sale of your residence, of your personal residence from capital gain. So he would have still owed tax on a couple million dollars of profit to the US government.

Well, Boris Johnson famously said he's not going to pay it, that the US government taxed us, issued him a tax demand. He says it's outrageous, he's not going to pay it, he hadn't been to the US in years. He only left the United States when he was five years old.

And then finally, eventually, he very quietly paid it. And his representatives in the US government says the issue is settled. And I believe he went on to finally formally renounce his US citizenship, although I'm not sure about that. But the point was, here was this guy who hadn't been in the United States since he was five years old.

He didn't ask to be a US citizen, he didn't ask to be born there. He was born there, lived there since he was five years old. And at that point in time, he owed money to the US for the rest of his life until or unless he formally renounced his citizenship.

You judge for yourself. I find that really obscene and just, it's wrong. But that's the law. So if you are in a situation where you look at the future and you think you will be earning significant amounts of money, you should seriously consider renouncing US citizenship. This came up recently on a Q&A call.

I was speaking with a listener who had lived in the Cayman Islands, he and his wife and their children had lived in the Cayman Islands for, I think if memory is right, something like seven years. He worked in the financial sector, he was finally going to make some decent money, I think it was like a half a million dollars a year or something like that.

They went back to the United States, but he lived in the Cayman Islands. And so they had no plans to leave the Cayman Islands. So what's the point of his paying $100,000 a year in taxes to the US government when he's not getting any of the benefits of it?

He can live in the Cayman Islands, the Cayman Islands doesn't tax income. The Cayman Islands is a completely income tax-free place. He has a good job, making half a million dollars a year. Why not save and invest the $100,000 per year for himself and for his family? The best example, the highest profile example that I know of would be John Templeton, the famous investor Sir John Templeton, who famously after he came into the United States in the wake of the...

He was a US citizen, born and raised in the US. In the Great Depression, he started to make a lot of money by investing in a bunch of companies during the Great Depression. Went on to become a very productive, profitable, and wealthy mutual fund manager, rode the mutual fund craze.

And then in about the 60s, he moved from the United States to the Bahamas and became a citizen of the British Commonwealth, living in the Bahamas. And he renounced his US citizenship. Well, as he renounced his US citizenship, that saved him, because Bahamas doesn't impose income taxation, at least tens and hundreds of millions of dollars, if not billions of dollars of otherwise imposed income taxes that he was able to use to fund his foundation for his charitable work.

That's a much better use of tens of millions of dollars to fund his private foundation for, in his case, religious causes and charitable causes, than to send it off to a government. So there are many considerations. Now, if you're going to do that, you of course would need a plan.

You need to become a citizen of a new jurisdiction, and there are a number of ways to do that, but it can be done, and it's worth it. The point is, if you're going to have a big tax bill, you should seriously consider renouncing. Are there benefits? One more point on that.

If you think you're going to have a big tax bill, you should be aware that under current law in the United States, if you have a net worth of more than $2 million, then you will start to pay exit taxes when you renounce, and the cost of renunciation has increased substantially as well.

So as you start to get to that $2 million net worth figure, if you have internationalized your life, or you're open to internationalizing your life, or if you're looking at the future and you're seeing a big windfall in your future, you should seriously consider if in your case it's worth it to you to become a citizen of a foreign jurisdiction and to renounce your citizenship.

And although it seems like $2 million is a little bit low to give up citizenship, if you were pretty confident that it was going to be a big benefit, you might even want to save on those exit taxes. Now, are there benefits to being a US citizen? Obviously, yes, certainly.

The most obvious one is the right to live and work in the United States. That can be wonderful. From an income perspective, that can be life-changing, especially if you are a low-wage or relatively low-skilled worker. For vast numbers of low-wage, low-skilled workers, the United States is the best place in the world to go.

That's not quite the same for high-skilled workers, but for low-skilled workers, there are huge opportunities in the United States. And for some reason, anyway, the US immigration system, it's a tremendous opportunity. It's life-changing. If you are born and raised in El Salvador and you don't have any major significant skills, you can go to the United States and you can get rich.

The US economy is an absolute powerhouse, and any person of good work ethic, basic physical ability, no major handicaps, and decent cognitive ability, any person can go to the United States and fairly easily make a six-figure income in the United States, even in the weirdest of businesses. So for people who are born and raised and come from jurisdictions where there aren't significant financial opportunities, the US economy, with its abundance of economic opportunity, is incredible.

In addition, the United States can be one of the cheapest places in the world to live well. Everything is easy in the United States. Everything is abundant in the United States. I go around the world and I'm just amazed at how easy things are in the United States. You can basically house yourself in modest conditions, very inexpensively, in the vast majority of places in the United States.

You can fill your house with beautiful furniture that's thrown away on the side of the road. You can basically get everything you need from the trash pile. It's incredible. There's such an overflow of cheap goods and stuff being thrown away constantly that you can basically live from the trash pile in the United States.

You can't do that in other places. So the United States is one of the cheapest places in the world to live well, and if you don't have a lot of money, there's no place, if I didn't have a lot of money, there's no place that I would want to be other than the United States.

More than that, the United States has incredible diversity of geography and physical benefits. You can't get into every climate in the United States, but you can sure get into many of the big ones. It's hard to find the climate that you can't find in the United States. You want hot and dry?

Got it. You want cold and wet? You got it. You want tropics, subtropics at least? You got it. So in the United States, with this massive diversity of geography, you can find a comfortable place to live for just about anybody. And then the United States has stable and robust financial systems.

You have a stable rule of law, pretty much, and it's pretty decent. In fact, the United States is one of the world's biggest tax havens for non-US persons. I've worked through a bunch of ideas for how non-US persons can position and keep massive portions of their financial lives in the United States in a very efficient, tax-efficient, tax-free way, and enjoy the stability and productivity of the economic system.

And even just for an individual lifestyle, with all the difficulties of the United States, for all of the hoopla and the nonsense about discrimination and blah, blah, blah, it's hard to find a better place in the world. If you think you're being discriminated against for being a woman, better in the United States than almost anywhere else.

If you think you're discriminated against because you're black, it's better in the United States than almost anywhere else. If you think you're discriminated against because you're white, it's better in the United States than almost anywhere else. If you think you're discriminated against because you engage in homosexual activity, it's better in the United States than almost anywhere else.

And I'm not making those claims from some kind of unstudied American superiority complex. I've considered it and I've studied it, and here's why. I'm not saying there aren't other good jurisdictions as well. But when you have a country as massive and as diverse as the United States, you can find every single flavor of lifestyle that you want within the one national governmental jurisdiction.

And that's simply not possible in other places, in many other places. You can find the most diverse communities in the United States, and that is not the same in other places. Now that diversity, that kind of melting pot approach brings massive problems, but it also brings massive benefits to you if you're trying to find a little corner of the world to be comfortable in and to be with people who are like you.

And then of course, the civil rights protections. The United States has such good civil rights protections. I mean, in my opinion, the first, second, fourth, fifth, sixth, ninth, and tenth amendments of the Bill of Rights are probably the most important preservers of liberty. And I'm not denying that there aren't other important considerations, but with those amendments, first, second, fourth, fifth, sixth, ninth, and tenth, with those amendments in place, you have the basic foundation that you need to maintain liberty if people would actually just simply exercise those amendments vigorously and loudly.

And you add in some of the other useful ones. You add in jury nullification. You add in homeschooling laws. All this stuff. You've got such a foundation for liberty that if US Americans stopped being just weak and flaccid and impotent people who are just steeped in comfort and not willing to actually stand up and exercise their rights, it could be a massive transformation.

If the United States falls, it's not the fault of the Bill of Rights. It's the fault of the people. So the point is, there are many good reasons for leaving, sorry, for living in the United States. And my only thing to you is consider it. You should very carefully consider leaving the United States.

Should you actually leave? Obviously it's up to you. In my opinion, there's too much of a march towards tyranny in the United States for me to be comfortable not having a plan B. There's too much oppression of liberty. There's too much restriction on speech. There's too much heavy taxation.

There's too many licensing laws. There's too much of all that stuff. And there's so many political movements right now that are utterly dangerous. The pressure right now for increasing legal strictures by the pro-vaccine groups, the people lobbying for hate speech laws, the heavy pressure of financial discrimination where the banks and government are teaming up to push undesirables out of business.

Operation Chokepoint, you have the heavy-handed courts that are stripping parents of their parental rights in favor of the sexual revolutionaries, etc. It just goes on and on. So there's too much of a trend towards tyranny for my opinion not to have a plan B. But the point is you can live well in the United States.

You can pay an extremely low tax rate in the United States if you're careful and you apply all the hundreds of other techniques that we discuss here on the show. There are enough loopholes and options for you to take advantage of. And life is cheap in the United States.

So if you don't make a lot of money, I can't think of a better place to be. I can't think of a better place to go to earn a lot of money and live on cheap than in the United States. The problem is if you do make a lot of money, it's a really tough place to be.

There used to be in the United States this general respect for wealth and this respect for people who followed the laws and became wealthy. But that's been replaced by either this weird juxtaposition of an absolute hatred for success where millionaires and billionaires are vilified and you've got the townspeople massing with their pitchforks and torches saying, "Well, you didn't earn that.

It's not yours. You don't get to keep that. What's yours is ours and you owe the common people some good." So this vilification. And then on the other hand, instead of lionizing people who got there practically and legally, there's this lionization of people who are successful and rich and flashy no matter if they flouted the law or not.

That's not the American tradition. Both of those are wrong. You follow the law, follow the rules, but you respect people who build wealth. And I think it still exists to some degree. It's hard to sort out what the rhetoric and what actually goes from rhetoric to more, but it's hard.

It's hard. The best example I can think of would be the recent debacle in New York City with the relocation of the Amazon headquarters. And it's probably, in my opinion, the perfect picture of both of those problems. On the one hand, you have this horribly corrupt system of crony capitalism where individual jurisdictions give certain tax breaks to certain favored businesses without giving them to all.

So you can't go to New York City and open a business and get various tax breaks if you bring economic prosperity to the system. No, only Amazon can do that. And Amazon will have the mayor of New York and the governor of New York and the senators from New York and the congresspeople of New York and the local people.

They'll have them falling all over themselves, creating certain plans, whining and dining them all over town because they're the big ones. They're the ones who can move big business. That's utterly corrupt. It's wrong. It's crony capitalism at its ultimate expression. You should not allow your government to give certain tax breaks to a big stadium that comes into town and some billionaire says, "Well, listen, if you'll give me this tax break, I'll bring my stadium here." So that's wrong.

On the other hand, once the deal was done, Amazon announces it. Then everything rises up and then Amazon have ultimately said, "You know what? We're out of here because we don't see this getting better." Why? Well, it wasn't because, in my assessment, I'm not a New Yorker, but from my reading, what I could find, I couldn't find an outcry of people crying against crony capitalism.

I couldn't find people saying, "No, we shouldn't give a special tax break to Amazon. Rather what we should do is we should get rid of all of these stupid taxes and open our city up for business so that other businesses would want to come here." Rather what I found was the outcry from the left where you had this discussion of, "Oh, Amazon is too rich and they don't pay any federal income taxes.

Why are we doing this and why are we helping the rich people out, etc." So then the rich people come in and say, "That's it. We can't see a productive relationship coming in the next decades. Maybe we could work this deal out, but there's too many problems." So the whole thing pulls out.

So you've got this collapse on both sides is, I guess, my observation. That same thing is happening with wealth in the United States. Ill-gotten wealth is being lionized, but then that's skewed by people saying because it was ill-gotten, then that means all wealth is wrong. No, that's not the case.

So you can still do it in the United States. But danger zone, danger flags, watch it carefully. Don't make plans that 30 years from now you're still there because we'll see what happens. I don't think anything matters this year. I don't think anything matters five years from now, maybe a decade from now, but watch it.

And the point is for you and your situation, forgive me for, it was too much perhaps, but the point is for you, you should count the cost. The cost of taxation is so heavy that you should consider very carefully if it's worth it for you to pay. What could that $32,000 of savings be worth to you if you didn't pay it in taxes?

Again, 25 to 65, that's $9 million. $9 million if you pay that tax versus if you invest it. If you keep it invested, that's $90 million. If you earn $100,000 in the United States of America as a single individual living in New York City with those high taxes, now again, I'm using a strong example here, it would be less if you moved to Florida, it'd be less if you opened a 401k, it'd be less if you had a business, et cetera.

But if you were a $100,000 incomer and are living in New York City, that decision could cost you $90 million versus if you took your same graphic design skills and you moved to the Bahamas and you lived in the Bahamas and you eliminated that $30,000, $32,000 of annual taxes.

Now, obviously, you have to actually have an international income. You have to have the ability to pick up and go, which many people don't, but you can do that. It's easier today than it's ever been. There are more options today than it's ever been. You don't have to become an online guru.

You don't have to become a YouTube star. There are so many careers that can be adjusted. Yesterday, I was advertising my career and income course to you at the end of the show and I said, "Why not focus your job search on a no income tax state?" If you're going to search for a job, which you should, if you're going to get a better job, why not just simply prioritize a no income tax state instead of a high income tax state in your job search?

Well, the same thing applies to you today. If you're going to get a job, get a better job, get a higher paying job, why not focus your job search on an income tax free jurisdiction outside of the United States? If you want to be an accountant or a financial professional, there are bazillions of accountants and financial professionals working in the Cayman Islands.

Why not you? You don't have to be an online superstar. Just be an accountant. Get your CPA and instead of working for the big five in New York City, go work for the big five in the Cayman Islands. Now, you will have additional costs. Housing in the Cayman Islands is extremely expensive.

Buying stuff in the Bahamas is crazy expensive because of all of the taxes that are added to the purchase of things. So you should, as we discussed yesterday, look at the total cost. It may be better for you to simply be an accountant in Miami, living inexpensively in Miami because things are inexpensive and although you're paying some federal income taxes, you can obviate those with your 401k contributions and with your sideline business deductions, etc.

So don't think this is the only way to do it. It's not, but you should calculate it. Calculate your personal returns from leaving. Pull out your tax returns. Look at your federal, state, local tax returns. Look at your employment tax information. How much are you paying this year in Social Security, Medicare, and Medicaid costs and then calculate that cost from now to retirement and now to your death.

What would that cost if you could eliminate it? Could that benefit you? Could you set up a lifestyle that wouldn't subject you to some other high tax jurisdiction such that it would be better for you, for your family, for your children, for your goals? Don't feel bad for an instant about forcing competition.

Don't feel bad about forcing competition on the United States by leaving. The United States thrived for the first couple centuries of its existence and it actively competed with the world. And today that competition you're seeing it make an effect in states. States are being forced to compete with one another because individual citizens are moving.

Now increasingly the US government is also being forced to compete with other governments. Notice the pressure that came in 2017 in the Tax Cut and Jobs Act with the cut in corporate income tax rates. That was because so many companies are doing corporate inversions, moving their tax headquarters elsewhere, moving from the United States elsewhere.

So increasingly the US government is being forced to compete with other governments and that's a good thing. Competition is a good thing. It is completely moral and non-coercive of you to simply walk away because somebody else gives you a better deal, keeps things honest and robust. And it's time for the United States to face a little competition so that some of the rot can be excised out and you can help that process by leaving.

The competition is a good thing. Now if for you staying put in Maine is the best thing, stay there. But if for you moving from Maine to Kuala Lumpur is a better thing, don't feel bad about it. It'll bring a little pressure on your Maine government and on your US government and it'll be far more effective pressure than your annual vote.

Now at the very least have a plan B. Consider this. When people talk about government debt and when people say, "Oh, government debt's a problem," what do they usually say? They usually say, "Well, our children will have to pay it." Now the question is, is that true? Is it true that your children will have to pay for what your government is doing today financially?

Is that true? My answer is maybe. I personally don't think our children will pay it. That's my opinion. I personally think that government debt will never be paid off. Rather, it will be defaulted on in a long string of defaults. Our children aren't going to pay it. They're eventually going to choose to stiff the old people who allowed it to happen and the debt will be defaulted on.

But what if I'm wrong? What if I'm wrong? What if our children do actually have to pay it? Well, why should your children have to pay it? They didn't take it out. They didn't do it. They're not the ones who voted in the politicians that voted out all the money to get elected.

Why should your children have to pay it? They don't owe the money. They didn't borrow it. They don't owe it. And in fact, you and I probably didn't borrow it, so we don't owe it either. People always tell me that I should be happy to live in a country that allows people to vote.

Then they follow up when there's a vote happens and they use the not my president hashtag. Well, if you're going to play the not my president game, I'll play the not my debt game. I've never once voted directly for an increase in government spending. Maybe I'm responsible for voting for a politician who subsequently voted for an increase, but hey, they said they would cut spending when I voted for them.

I've never once voted for an increase in taxation. My opinion, the best thing that could happen to the US government is for tax revenues to fall by 80% and then have to actually get serious and do something to cut the size of government. Point is, I never agreed to the debt.

I never voted for the deficit. I am not morally responsible for it and neither are my children. So in what universe should I be responsible for the mess? You never agreed to the debt. You probably didn't vote for the deficit. So in what universe should you be responsible for the mess?

I will accept full responsibility for my actions and my decisions and for the actions and decisions of those for whom I am responsible for, meaning of course my wife and my children, maybe my employees, but I'm not going to have my children spend a lifetime in slavery because of the greedy larceny of my parents' generation.

So at the very least, if you don't leave the United States, and I'm not saying you should, you should have a plan B to get out in the future if you want to. Because someday, if I'm wrong and people actually try to pay that mess back instead of just simply repudiate it and default on it, if I'm wrong, you might need to.

Because there's no way for you to become financially free in 10 years or less. There's no way for your children to become financially free in 10 years or less. If you're paying 60, 70, 80% of your income out on taxes. It's absurd. It's impossible. So in closing, I simply say this.

Recognize that I have just given you a few of some magic keys that have the opportunity to revolutionize your life here in this show. If you take those keys, those breadcrumbs I laid out for you, you investigate the necessary details, you can use those keys to massively increase your wealth.

Massively. That may be the very key that you need to become financially independent in 10 years or less. Let's say that you're that diligent $100,000 income earner living in New York City, working in the financial industry or something like that, and you're diligently saving 30% of your income for retirement.

Well, at a 30% savings rate, it takes you almost 30 years to become financially independent. Let's say that you keep that same $100,000 income, graphic designer, I forgot what the example I used, same $100,000 as a graphic designer, and yet you move outside of the United States and you free up an additional 30% of your income.

Now you're saving 70% of your income, living well in some corner of the world where you can live exceedingly well on $3,000 a month, which by the way, there's many corners of the world you can do that. We just dropped your time to retirement to under a decade with a 70% savings rate, with what I taught you in this episode.

So take those keys, investigate the details to your situation, and increase your wealth. Now in addition, if you'd like more of this kind of thing, I would just take a moment, I want to plug for you my latest course. The course is called How to Survive and Thrive During the Coming Economic Crisis.

I created it, this is in some ways almost a tiny excerpt of that course, but that course is detailed and comprehensive, and it will give you all of the tools that you need to survive and thrive during the coming economic crisis. If you want to stay where you are, I'll give you the tools to survive and thrive during the coming economic crisis.

If you want to leave, I'll give you the tools to survive and thrive during the coming economic crisis, and I'll teach you how to think it through in a rational, thoughtful way as well. So if this course, if this is helpful for you, then recognize there are a lot more details on how to do this, how to expand these ideas, etc.

Come on by RadicalPersonalFinance.com/store, look for the course called How to Survive and Thrive During the Coming Economic Crisis, and buy it. Check it out. Lots of good stuff in there for you. Haven't yet had any complaints on the course. A bunch of students really liking it, people are still working their way through, but so far the feedback has been very positive in my emails and comments, etc.

So I invite you to come by RadicalPersonalFinance.com/store and buy How to Survive and Thrive During the Coming Economic Crisis.