Choosing where to retire is an exciting decision! If you’re considering retirement abroad, information is going to be your best friend. Before you know it, you’ll be looking for answers you never thought you’d need: What type of visa will I get? How does healthcare work? Where do I pay taxes?
Retiring abroad is not for everyone—but if you’ve often felt the pull of wanderlust or you’re looking to keep things exciting in retirement, it could be for you! Whether you’re sure you want to move abroad in retirement, or just toying around with the idea, here are some things to consider before taking the leap.
Settling On Your Dream Destination - What to Consider
Living in a foreign land offers a chance to see more of the world and make the most of your retirement dollars. It’s a prospect full of beauty, adventure, and cultural appeal. The added stimulation even helps keep you active, healthy, and engaged in your later years.
But don’t get swept up in the romance without facing the reality. The more you know what to expect, the better your chances of finding a place that meets all your needs in retirement. Do plenty of research in order to make your transition as smooth as possible, starting with the following:
Consider the visa options and whether you’ll seek to establish residency in your new home country. Some countries, including Spain and others, have special programs for retirees that include tax breaks, property rights, and other perks. Or, you may choose to split time between your new country and the U.S., avoiding the need to establish residency. You’ll need to consider your personal financial situation as well as the residency options in the country you retire to.
Cost of Living
Stretching your retirement savings further is a big motivation for moving abroad. The dollar goes a long way in places like Mexico, Costa Rica, and Panama or in Southeast Asia, where the cost of living is relatively low. The American dollar has less power in Europe; however, the cost of living is still lower in many countries (especially in popular retirement destinations like Spain and Portugal). Take the exchange rate into account when doing your calculations to make sure you can swing it financially.
Healthcare in other countries can be pretty great for retirees, especially if you become a resident of the country. In many places globally, healthcare is high-quality and yet cheaper than in the US. Medicare typically will not pay for health care expenses out of the country. So you’ll need to buy a plan for whatever country you’re in, and learn the rules and regulations for getting access to the nationally-funded plan. You also need to consider what you’re not willing to do in your retirement country - do you need to go back home or to a bigger city for certain medical procedures?
If you’re going to rely on Social Security for some or all of your income, use this tool to find out whether you can receive Social Security payments in your new country. You can also learn whether your retirement, disability, or survivor’s payments will continue indefinitely or if certain country-specific restrictions apply.
Taxes are more complicated when you live abroad. The United States taxes its citizens on their income no matter where they live. However several (mostly European) countries have agreements with the U.S. for the purpose of avoiding double taxation. We suggest talking to your tax advisor before making a move.
Housing & Real Estate
To ensure a country is a good match, it’s a good idea to live in a place for several months before deciding whether to move there permanently. An extended stay as a housesitter or in a rented apartment will help you get comfortable with the culture. During this time, you can scout out a favorite region or neighborhood. Make note of what you’d need to buy there vs what you can bring with you.
Find yourself a good local real estate lawyer and learn the rules for renting and buying. Understand how an overseas real estate purchase may incur taxes in the U.S. and in your new home country. And some countries have rules that limit foreigners from buying property.
Have important documents in place before moving abroad. You may want to assign financial-power-of-attorney to an adult child or someone you trust to handle financial matters in your place while you are overseas. If you don’t have a will or estate plan in place, now is the time. Make sure your lawyer and/or financial advisor knows how to handle your domestic and foreign assets. Also, learn about insurance laws abroad and make sure you cover what needs to be covered.
Think ahead about what events might cause you to move back to the U.S. and when/if you’ll ever consider it. Even if you don’t intend to come back, it’s a good idea to have a plan B in case something changes. Set aside some emergency savings in case you ever need to return. Some people also choose to keep some or all of their retirement assets and a long-term-care insurance plan in the States. Your financial advisor can discuss your options with you.
Don’t Forget About Lifestyle
Culture shock is real, and it happens in ways we never expect. Smaller towns may have a rustic charm, but will you grow bored or miss the creature comforts after a few weeks? You can’t always predict what it is you’re going to miss when you’re far from home, but think critically about the retirement lifestyle you want. What are your needs when it comes to:
- Continuing education, hobbies, cultural events, etc.
- Grocery stores & restaurants
- Community & social life
Get the Scoop From Other Retired Expats
Go beyond the “best places to retire” lists and get some inside intel. There are many Facebook groups and online communities for “expats in X country” where you can get recommendations and hear the good, the bad, and the ugly. International Living’s Annual Global Retirement Index is also a go-to resource for information about retiring abroad. It measures many factors listed here and contains on-the-ground info from retirees living all over the world.
Understanding Your Goals is the First Step to an Ideal Retirement
If reading this got you excited, great! We’re here if you have any financial questions along the way. It’s also possible that this article stirred up questions about retirement—do you know what kind of lifestyle you want for the next chapter? How about your spouse?
The first step to getting the retirement you want is knowing what you want. If you need a gut-check when it comes to your retirement readiness, take our 3 minute quiz!