Retirement in the Philippines by Retired American Military Members

I receive a lot of e-mail messages from retired American military members about retiring in the Philippines. Rather than continuing to answer the questions individually, I’m going to answer them in this article. I will update this article periodically to add more questions and answers. I’ll start off by answering the most frequent question: How did I retire in the Philippines?

My Retirement in the Philippines

I married my wife in 1985. Although she was born in Leyte and had spent her preteen years living there, her family had migrated to Olongapo City. In 1987, while I was stationed in Okinawa, we bought the property my mother-in-law and some of our other relatives live on. In the 90s, we bought the property that our house now resides upon.

We never planned to retire in the Philippines. Well, at least not for another 20 years (from 2005). Circumstances turned in our favor when the housing boom occurred and we cashed out months before the collapse. That was in 2006. After I made the decision in 2005 and started planning, I learned what I needed to know to actually make the move.

My wife is a dual-citizen. She had to take an oath at the Philippine Consulate in Los Angeles to become a dual-citizen because she became a naturalized American citizen before the Philippine Repatriation Act of 2003 was passed. When she did that, my younger son who was born before she became an American citizen automatically became a dual-citizen.

When I was preparing to make the move (I already had a passport, of course), I found out that I needed a physical examination and a copy of my local police records (I didn’t have any) to take with me. I went to the Philippine Consulate again and obtained a one-year non-immigrant visa. Upon arrival in the Philippines, I was directed to go through the Bureau of Quarantine before going to the Bureau of Immigration to do my thing there.

While I was in Los Angeles, I opened a US dollar account at Philippine National Bank. They opened the account in Olongapo City for me. I’m sure I could have designated some other location, but I had no need to do so.

There is some more up-to-date information on the “Thinking of Moving Here?” page for the Retired Activities Office (RAO), Subic Bay, Philippines. While I can only address a situation with a Filipino spouse, there is more information available for retirees in other categories.

Now it’s time for the questions and answers. I’ll do my best to be honest and accurate.

What state can I claim as my legal residence for tax purposes?

This is an easy question to answer, but it’s frustrating. If you no longer live in the US, why do you have to pay taxes to any state at all? After, aren’t you paying federal taxes on your US-based income (pension, social security, etc.)?

Like active duty military members, you can claim any state by showing residence or intent to reside, the primary being actual presence in the state. Other things, like registering to vote in a particular state, can also indicate your desire to keep that state as your state of legal residence.

I use Arizona because my older son and his family live there. His wife is in the Air Force. If they move to another state, I will change my state of legal residence to that state, regardless of which one it is. I’ve been in the state of Arizona less than 30 days in five years. Now, if I had relatives in Nevada (where I wouldn’t have to pay state taxes at all) for example, I would probably change my state of legal residence to Nevada.

In essence, as a retiree living outside of the United States, your state of legal residence should be the state you return to — to visit relatives, set up businesses (like LLCs), etc. You just need to be able to convince your previous state (if any) that you now reside in the new state.

Can I deduct anything for my taxes?

The rules don’t change just because you’ve left the country. You can still claim yourself, your dependents, etc. The only confusing parts happen when you try to answer questions in the tax program that don’t really pertain to your situation. An example is when it asks if your dependents lived with you in the US. Well, since you don’t live in the US, how can you answer that question? You have to pretend you’re living in the US, but only for that part of the taxes.

I use TaxAct when I do my taxes and I spend hours converting pesos from receipts into dollars. It’s better to write it down as you go, but I tend to be lazy. If you file a business (schedule C), you can deduct the same things you could in the US, except for your office space (and you probably won’t have that anyway). Start a blog with the intention of making money and call that your business. That’s what I do and I do make money. Since my business is on the Internet, I deduct everything that I pay for that’s related to the Internet, including my Skype subscription.

What about medical insurance like TriCare?

I honestly don’t know which hospitals honor US-based medical insurance. I’m sure there are one or two, but I don’t have medical insurance and I haven’t been to a doctor or hospital in the Philippines.

Frankly, unless you’re in really bad health (in which case, you shouldn’t move to the Philippines anyway), I think you’re better off paying as you go. I had three nieces go to a doctor in the same month and the total cost of all three visits, including medicine, was less than a month’s premium for TriCare. Medical care and prescription medicine is big business in the United States (and the root cause of the problems with American health insurance). That isn’t the case in the Philippines.

Nevertheless, there are local health insurance companies. In the long run, getting health insurance based in the Philippines is probably your best bet.

What about dental insurance like Delta?

My wife recently had fillings put into five teeth. The total cost was less than 5000 pesos. I think it came out to almost exactly USD $100. The maxillary denture (upper palate) that I paid for only cost 7000 pesos. When I had my upper teeth pulled, it cost me 400 pesos (less than $10) per tooth.

As with medical insurance, the cost of getting average dental work done is less than the premiums for American dental insurance. I had my teeth cleaned for 1000 pesos. That’s like USD $30.

What about medicine and medical supplies?

Nearly all the medicine available in the US is available somewhere in the Philippines. I can’t get into specifics because I have no experience with specifics. If nowhere else, whatever you need can be found in metro Manila.

A lot of drugs that are prescription drugs in the United States are sold over-the-counter here. Amoxicillin, for example, is an over-the-counter antibiotic that requires a prescription in the US. I don’t think any of the antibiotics in the Philippines specifically require a prescription even when prescribed by doctors. Just like in the US, doctors in the Philippines will prescribe over-the-counter medicine when that is what is needed.

That’s one of the reasons I haven’t been to a doctor here. The one time that I can remember needing antibiotics, I just bought them from the local drugstore.

What banking choices do I have? Are there American banks in the Philippines?

As far as I know, there are a couple of American banks in metro Manila, but nowhere else. Bank of America and Citibank are the only two that I’ve actually seen the signs for. Of course, that doesn’t help someone living in a province away from Manila.

I have two bank accounts. I receive my pension in a dollar account at Philippine National Bank (a direct deposit that is really a remittance because they deduct $7 per deposit). I also receive my Google AdSense payments in that account. I have a peso account at UnionBank of the Philippines because it’s tied to my PayPal Philippines account. I have a peso debit card with it and I pay my web hosting with it. I have to manually deposit pesos in that bank, but only when my PayPal income isn’t enough to cover expenses.

What is the best cell phone to use and what’s the cell phone service like?

I think I covered it pretty well when I wrote about cell phones in the Philippines. As long as your cell phone has a SIM card, you can get cell phone service with it.

I have no experience with good cell phone service. In the suburbs, like where I live, cell phone service is horrible and texting isn’t even reliable. People in the city areas have it much better. As far as I know, the only places where smartphones (like an iPhone) make sense are in metro Manila and Cebu City.

Should I buy a laptop and bring it with me or should I buy it there? What about WiFi?

Up until I found the new computer store, I would have said to buy it there and bring it with you. An automatic voltage regular is all that’s needed to convert from 220v to 110v and they can be had for like 600 pesos.

That’s no longer the case. The laptops at that store are comparable in prices to those in the US, although the selection is limited. The major brands are available, so it’s really whatever you want to do.

As far as WiFi goes, it’s not very good. My sister-in-law subscribed to WiFi Internet (Globe Broadband) and would be without a signal for days at a time. She now has no Internet at all. I can honestly say the best choice for Internet, if you can afford it, is PLDT DSL (I spend 3000 pesos per month for 3 megabits).

What’s the water like, for drinking and bathing? What about hot water?

If you drink tap water, you’re going to get sick eventually. Just like in the US, people drink bottled water when they can afford it. It’s not any more expensive here than it is there. I get about 30 gallons delivered periodically for 200 pesos (about $5.00 at the current exchange rate) and I have a water cooler (a misnomer since I also get hot water from it).

No, hot water is still not the norm. Most people still take cold showers. Only certain people, like me, have tied hot water heaters into our water supplies. I like hot showers even when it’s hot.

Is there a VA hospital being built in Manila, near the American Embassy?

I can’t answer that because I haven’t heard or read anything about it. I know there’s a VA regional office next to the embassy. That’s where you have to go to apply for social security when you become eligible.

Are there flights into and out of the Cubi airport at the Subic Bay Freeport Zone?

There are, but they’re only commercial cargo flights. Airlines are now flying in and out of the old Clark Air Base (airport code CRK), but I don’t know which ones other than Asiana. Philippine Airlines was supposed to move there in 2010, but didn’t.

The Clark airport is only about 45 minutes from where I live if I use the Subic-Clark-Tarlac Expressway (SCTex). Since that expressway was completed, a trip to the Manila airport usually takes around four hours.

Do I need to ship anything ahead of my departure from the US?

I shipped five boxes of clothing and kitchen items when I left the US in 2006. I can’t tell you what you might need when you get to the Philippines but you need to know that you can get almost anything here. Don’t believe everything you hear from neighbors and relatives. I was told I wouldn’t find American washers and dryers, yet I have a set in my laundry room. That’s just one example.

The key thing is to make sure you have a contact in the US who can ship you what you need after you arrive. Freight companies are most abundant in California when it comes to shipping freight to the Philippines.

What is the current exchange rate?

I hesitate to tell you since it fluctuates. As of right now, it’s hovering just above 43 pesos to the dollar. In five years, I’ve seen it as high as 50 and as low as 40.