Digital Nomads and Early Retirement

Digital nomads and the FIRE movement

The nomadic lifestyle aligns with the F.I.R.E. (Financial Independence, Retire Early) movement. Many nomads choose low-cost countries as their base, reducing expenses and investing their savings for long-term financial growth.

According to MBO Partners, 18.1 million Americans — about 11% of the U.S. workforce — identify as digital nomads. As Carl Sagan put it: “We began as wanderers, and we are wanderers still.”

Take Michael Wardian, a professional ultramarathon runner who ran 2,197 miles of the Appalachian Trail in just 50 days to celebrate his 50th birthday. The twist? He worked remotely the entire time, overseeing humanitarian food aid cargo as an international shipping broker. “Working remotely while running solidified my belief that if you’re dedicated and not afraid to ask for help, anything is possible… you can still do your job and chase your dreams simultaneously,” he says.

If retiring early and becoming a digital nomad sounds appealing, careful planning is key. Here’s how to keep both your finances and your wanderlust on track.

Financial planning for digital nomads

Michelle Schroeder-Gardner, founder of Making Sense of Cents, embraced a nomadic lifestyle after turning her personal finance blog into a full-time business. “Becoming a digital nomad allowed me to combine my love for travel with a career I could take anywhere,” she says. She now travels full-time on a sailboat with her family.

Schroeder-Gardner emphasizes the importance of diversified, location-independent income streams, like earnings from her blog and dividend-paying stocks.

CFP Board Ambassador Elaine King Fuentes agrees: “Have multiple income streams — a mix of service, like consulting and product-based businesses.”

Both stress the need for emergency funds to cover unexpected expenses like medical emergencies or last-minute flights. Fuentes, who has lived and worked in multiple countries, adds, “Start with an emergency fund of at least one month’s expenses, and create a dedicated travel fund to support this lifestyle.”

Managing retirement savings abroad presents additional challenges. U.S. citizens must pay federal taxes on worldwide income and may face account restrictions from U.S.-based brokerages. Fuentes suggests maintaining a U.S. address or using global banks like Charles Schwab or E-trade Morgan Stanley that offer fee-free international ATM withdrawals.

For day-to-day money management, Schroeder-Gardner advises using travel-friendly credit cards with no foreign transaction fees. Fuentes also suggests multi-currency accounts to mitigate currency risks.

Navigating taxes and legal considerations

No matter where you go, the IRS follows. Fuentes encourages people to research tax rules in their home country and planned destinations, as “tax treaties can impact the duration of your stay.”

U.S. citizens living abroad are taxed on worldwide income, but credits like the Foreign Earned Income Exclusion (up to $126,500 in 2024 and $130,000 in 2025) and the Foreign Tax Credit can help offset double taxation. Tax treaties between countries may further simplify filing requirements.

Domestically, state taxes depend on primary residency. States like Texas and Florida have no state income tax, while others, like California, aggressively pursue tax liabilities even for those living out of state. Other states do not tax retirement income. Establishing clear domicile records is crucial for defending your obligations.
Beyond taxes, research visa requirements for each destination. Some countries offer retirement-specific visas with income or asset requirements, while others allow longer stays with tourist visas.

“Keeping important documents in cloud storage is a must,” says Schroeder-Gardner. Digitize essentials like passports, visas and tax returns to stay prepared on the move.

Health care and insurance while traveling

Early retirees under 65 won’t have access to Medicare, so you’ll need alternative health coverage. If not covered by remote work, the Affordable Care Act marketplace (Healthcare.gov https://www.healthcare.gov) is one option.

Many countries offer affordable, high-quality care, and some allow foreigners to join their public systems. Fuentes recommends exploring international health plans from providers like Cigna Global or IMG, which cover routine care, emergencies and medical evacuations.

Travel medical insurance is also critical. Schroeder-Gardner notes, “Travel insurance has become a must for us.” Look for policies that include medical emergencies, trip cancellations and personal liability. And if you plan to bring medications with you on international travel, don’t risk having them confiscated at the border.

Remote work: staying connected and productive

Reliable internet is the foundation of remote work. Schroeder-Gardner ensures connectivity by researching options in advance and carrying backup solutions like multiple mobile hotspots.

Similarly, Wardian relied on portable technology during his Appalachian Trail journey. “T-Mobile coverage for my phones and my Surface laptop worked surprisingly well, even in remote sections,” he says.

Co-working spaces can also provide stable internet and a professional environment. To protect sensitive data, consider a VPN when working on public Wi-Fi.

Jacob Schroeder is a contributing writer at Kiplinger.com. For more on this and similar money topics, visit Kiplinger.com.

©2024 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.

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