Retiring abroad

With living costs spiraling upward in the U.S., many are attracted to the thought of retiring in foreign countries. The idea of starting your golden years in a culture and environment totally different from the one you’ve known all your life – this may be either alluring or frightening, depending on your point of view. Surveys indicate that as many as 3.3 million of the 78 million American Baby Boomers are seriously considering retiring in another country. Estimates put the number of U.S. retirees living outside the U.S. at over a million.

Many retirees are attracted to the low cost of living, georgeous natural scenery, laid-back lifestyle, and exotic cultures to be found in foreign countries. Certainly, foreign destinations offer these advantages. You can potentially live quite well for a fraction of the cost, and find your retirement dollars go much farther. Retirees tell stories of living well in Central America on $1,500 per month.But moving to a foreign country in your golden years takes some thought and preparation, and isn’t for everyone.

Most people who successfully retire abroad are those who have traveled extensively in foreign countries before they retired. Living in a foreign country involves adjusting to a foreign culture. Although some countries now have significant numbers of American expatriates, Americans are still a distinct minority and you can’t expect to completely recreate your American lifestyle in another country.

Many countries have a slower pace than in America, and you might have to get used to waiting days or weeks for a delivery or to open a bank account. You should visit your destination and live there for a few weeks or months to make sure you really like it, and familiarize yourself with the language and culture. Also visit at various times during the year if possible.

Shipping household items abroad can be expensive. You’ll likely want to carry just the minimum you need, and store the rest in the U.S. You can plan on buying new furniture and large household goods after you arrive.

Retiring abroad is a realistic option for many, and lots of people have successfully made it work. Over 500,000 Social Security recipients reside abroad, an increase of 25% since 2000. But it does take a great deal of planning. Here are some specific things to consider.

Residency requirements and local laws

Different countries have different immigration and residency regulations so you will need to know what your eligibility to reside in your chosen destination and any restrictions. In fact, many countries have laws and practices that are different from the U.S. and you should carefully investigate the laws in your proposed destination country. If you’re looking to purchase property, you’ll also want to look into the real estate laws.

The State Department’s Country Specific page can give you residency information about any country, and also information about medical concerns and healthcare, crime and security, local attractions, common scams, and much more.

If you have any questions you’ll want to consult a qualified realtor, financial advisor, or tax advisor to advise and represent you.

Healthcare

Speaking of healthcare, this is a big issue for many retirees. Healthcare costs tend to increase as people get older. But everyone should have access to quality healthcare in case they need it – accidents and illnesses can happen anytime. Medicare does not cover health care in foreign countries. If you have retiree health benefits through your former employer, you will need to verify whether it applies overseas.

Private medical and dental coverage in your foreign location, and medical evacuation to the U.S. if needed, are essentials. You might also consult your physician to determine what your healthcare needs are expected to be.

Finances

You will also need to ensure that you will be able to receive Social Security benefits in your foreign location. You can consult the Social Security Administration’s Office of International Operations page for this information. If you’re receiving other retiree benefits such as military retired pay, you will want to check with the appropriate organization whether you can receive these benefits while living abroad.

You might also work with your financial advisor to help you coordinate moving your savings abroad and look into opening local bank accounts. You will also want to beware of common international scams, which are increasing in frequency with the Internet. The State Department’s International Financial Scams page can give you more information.

If you retain U.S. citizenship you will still be required to file a U.S. federal tax return every year, even if you owe no taxes. Even if your income is earned in a foreign country you may still owe U.S. taxes on it if it exceeds a certain limit. The IRS’s tax information page can give you more information about tax obligations while living abroad. Conversely, any money or other property you acquire overseas might be subject to local taxation, as well as local estate tax rules. The U.S. has agreements with some foreign countries that exempts income earned in those countries from foreign taxes. The IRS website has a list of these countries.

These are some of the main considerations when choosing to retire in a foreign country. Most people who move abroad do it for the adventure and novel experiences. They are looking for new things to try and seek opportunities to get involved in their new communities. Retiring abroad can be exciting and rewarding, as long as you approach it with the proper mindset and preparation.

For more information

For detailed articles and information about retiring in various foreign countries, see the Expat Exchange and retirepedia.com.

For more information about a specific country, see the State Department’s Country Specific page.

For information about Social Security benefits for overseas retirees, see the Social Security Administration’s Office of International Operations page.

The IRS’s tax information page gives information about taxes for U.S. citizens living abroad.

International Living magazine annually publishes its list of The Best Places to Retire, as well as other reports and articles related to retiring overseas.

Watch this video for some tips about moving abroad, by the editors of International Living.

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