Retire in Puerto Rico: Why You Need To Move

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.

Key Takeaways

• Puerto Rico offers a cost-effective retirement option with tropical beauty and U.S. territory benefits
• Retirees can enjoy diverse landscapes, vibrant culture, and potential tax advantages
• Careful consideration of individual needs and potential challenges is crucial before deciding to retire in Puerto Rico

Understanding the Appeal of Puerto Rico

Natural Beauty and Climate

Puerto Rico boasts 270 miles of picturesque coastline, featuring pristine beaches and crystal-clear waters. The island's average temperature ranges from 70°F to 80°F, providing a comfortable environment throughout the year.

The tropical climate supports lush vegetation and diverse ecosystems. Rainforests, mountains, and coral reefs offer numerous opportunities for outdoor activities and exploration.

Puerto Rico experiences a rainy season from April to November. While humidity can be high, coastal breezes often provide relief. The consistent warm weather allows residents to enjoy outdoor pursuits year-round.

Cultural Richness and Festivities

Puerto Rican culture is a vibrant mix of Spanish, African, and indigenous influences. This fusion is evident in the island's music, dance, and culinary traditions.

Festivals play a significant role in Puerto Rican life. Three Kings' Day, celebrated on January 6, is a major holiday featuring parades and gift-giving. The Fiesta de la Calle San Sebastián, held in Old San Juan, showcases local music, arts, and cuisine.

Puerto Rican cuisine is a treat for food lovers. Popular dishes include:

• Mofongo (mashed plantains with garlic)
• Empanadillas (stuffed pastries)
• Tostones (fried plantain slices)
• Pernil (roasted pork)
• Pastelillos de Guayaba (guava pastries)

These cultural elements contribute to Puerto Rico's rich, welcoming atmosphere for retirees.

Financial Considerations for Retirement

Retiring in Puerto Rico presents unique financial opportunities and challenges. Understanding the cost of living, tax implications, and social security benefits is crucial for a successful retirement on the island.

Cost of Living in Puerto Rico

Puerto Rico offers a lower cost of living compared to many parts of the United States. Housing expenses are generally more affordable, with options ranging from beachfront condos to inland properties. Groceries and utilities costs vary, but are often comparable to or lower than U.S. mainland prices.

Retirees can expect to spend less on everyday expenses, allowing retirement savings to stretch further. However, imported goods may be pricier due to shipping costs. Healthcare costs are typically lower, but it's essential to factor in potential travel expenses for specialized treatments.

Public transportation is limited, so budgeting for a personal vehicle is advisable. Overall, retirees can maintain a comfortable lifestyle for less in Puerto Rico, but careful financial planning is still necessary.

Taxation and Tax Benefits

Puerto Rico offers significant tax advantages for retirees. Act 60 provides substantial tax exemptions for new residents, including a 4% flat tax rate on income and zero tax on certain investment gains.

To qualify for these benefits, retirees must:

• Spend at least 183 days per year in Puerto Rico
• Make Puerto Rico their tax home
• Purchase property within two years of relocating

Dividends, interest, and capital gains from Puerto Rico sources are tax-free. U.S.-sourced investment income remains taxable, but at lower rates. It's crucial to consult with a tax professional to navigate these complex regulations and maximize benefits.

Retirees should be aware that while local taxes are lower, they may still be subject to U.S. federal taxes on certain income sources.

Social Security and Medicare

Social Security benefits remain unchanged for retirees moving to Puerto Rico. Recipients continue to receive their full benefits, as Puerto Rico is a U.S. territory.

Medicare coverage extends to Puerto Rico, but with some differences:

• Part A and B coverage remains the same
• Part D prescription plans may have limited options
• Medicare Advantage plans are available but may differ from mainland offerings

Retirees should review their Medicare coverage options carefully before relocating. Supplemental insurance might be necessary to cover gaps in care or potential off-island medical needs.

It's important to notify the Social Security Administration of any address changes to ensure uninterrupted benefits. Retirees should also consider the availability of healthcare facilities and specialists in their chosen area of Puerto Rico.

What is the Cost of Living in Puerto Rico?

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. 

Housing expenses are generally more affordable, with options ranging from beachfront condos to inland properties. Groceries and utilities costs vary, but are often comparable to or lower than U.S. mainland prices.

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.

Retirees can expect to spend less on everyday expenses, allowing retirement savings to stretch further. However, imported goods may be pricier due to shipping costs. Healthcare costs are typically lower, but it's essential to factor in potential travel expenses for specialized treatments.

Public transportation is limited, so budgeting for a personal vehicle is advisable. Overall, retirees can maintain a comfortable lifestyle for less in Puerto Rico, but careful financial planning is still necessary.

What are the Benefits?

There are many good reasons to consider Puerto Rico as your retirement destination, especially if you are a US citizen. 

1. Taxes
2. Climate
3. Convenience
4. Housing
5. Healthcare

Tax Benefits

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. 

Location and Climate

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. 

Convenient 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!

Housing

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. 

Affordable Healthcare

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.

Where are the Best Places to Retire in Puerto Rico?

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: 

1. San Juan
2. Dorado
3. Ponce
4. Bucana Bario
5. West Coast
6. Cayey

San Juan

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. 

Dorado

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

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

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.

West Coast

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

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. 

Lifestyle and Living Experience

The Expat Community Influence

Puerto Rico boasts a growing expat community, particularly in popular retirement destinations like San Juan, Dorado, and Rincón. This influx of retirees from the mainland U.S. has led to the development of social clubs, cultural events, and support networks tailored to newcomers.

Many expats find comfort in connecting with others who share similar backgrounds and experiences. These communities often organize gatherings, volunteer opportunities, and group outings, helping retirees integrate into their new surroundings.

The presence of a strong expat community can ease the transition for those facing language barriers. While Spanish is the predominant language, many locals in tourist areas and retirement hotspots speak English, making daily interactions more manageable for non-Spanish speakers.

Recreational Opportunities

Puerto Rico's tropical environment provides retirees with a wealth of outdoor activities year-round. The island's pristine beaches offer perfect conditions for swimming, snorkeling, and sunbathing. Water enthusiasts can enjoy world-class surfing spots in Rincón and Aguadilla.

For those who prefer land-based activities, Puerto Rico offers:

• Hiking trails in El Yunque National Forest
• Golf courses with stunning ocean views
• Bioluminescent bay kayaking tours
• Historical site explorations in Old San Juan

Retirees can also participate in local festivals, art exhibitions, and culinary events that showcase Puerto Rico's rich cultural heritage. These activities provide opportunities to socialize, stay active, and immerse oneself in the local way of life.

The combination of natural beauty and diverse recreational options makes Puerto Rico an appealing destination for retirees seeking an active and fulfilling lifestyle in their golden years.

Residency and Legal Requirements

Establishing Residency in Puerto Rico

To establish residency in Puerto Rico, individuals must spend at least 183 days per year on the island. This requirement is crucial for tax purposes and legal status. Retirees should maintain documentation of their time spent in Puerto Rico, such as travel records and utility bills.

Purchasing property or renting a home can help demonstrate intent to reside in Puerto Rico. Opening local bank accounts and obtaining a Puerto Rico driver's license are also important steps in establishing residency.

It's advisable to consult with a local attorney or tax professional to ensure compliance with residency requirements. They can provide guidance on necessary documentation and help navigate the process.

Understanding US Territory Status

Puerto Rico's status as a U.S. territory offers unique advantages for American retirees. As U.S. citizens, they do not need a visa or residency permit to move to Puerto Rico. This simplifies the relocation process significantly.

Retirees maintain their U.S. citizenship and can freely travel between Puerto Rico and the mainland United States. Social Security benefits continue without interruption, and Medicare coverage is available on the island.

However, Puerto Rico has its own tax system. While residents are exempt from federal income tax on Puerto Rico-sourced income, they may still have obligations for income from U.S. sources. Understanding these nuances is essential for financial planning in retirement.

Healthcare 

Puerto Rico's healthcare system offers a mix of public and private options for retirees. The island has modern medical facilities and skilled healthcare professionals, though access can vary between urban and rural areas.

Puerto Rico's healthcare system includes both public and private hospitals and clinics. The public system, known as Mi Salud, provides basic coverage for low-income residents. Private insurance is widely available and often preferred by retirees for more comprehensive care.

Many doctors in Puerto Rico are bilingual and trained in the United States. The island has several accredited medical schools and teaching hospitals. Prescription medications are generally affordable, with many pharmacies offering competitive prices.

Accessibility and Quality of Care

Urban areas like San Juan offer a higher concentration of medical facilities and specialists. Rural regions may have fewer options, potentially requiring travel for specialized treatments. Wait times for appointments can be longer in public facilities compared to private ones.

The quality of care in Puerto Rico's top hospitals is comparable to mainland U.S. standards. However, some rural clinics may have limited resources. Many retirees choose to maintain Medicare coverage, which is accepted by some providers on the island.

Wellness services, including yoga studios, fitness centers, and nutrition specialists, are readily available in major towns and cities. The island's natural environment also promotes an active, healthy lifestyle.