Retiring abroad may seem appealing for a variety of reasons. Maybe you’ve always dreamt of living in a foreign land, or lately, the cost of living in the US made you think of looking outside the US boundaries.
No matter the reason, you aren’t alone. Over 700,000 Social Security checks are sent abroad, so there are a lot of other people making this same decision. However, before diving in yourself, consider these factors before retiring outside the United States.
Look at the Pros and Cons
Anywhere you retire has its pros and cons, but there’s more to consider when you’re leaving US soil. Looking at both the good and the bad can help you make a more informed decision.
Pros
- Finances are usually the number one reason people retire abroad. It’s cheaper to live in most other places, which means your retirement funds may go further, but don’t assume this is the case – do your research.
- It’s a new experience. Retirement is a time to explore, have fun, and live your life while not tied down to a job or a young family. If you love new experiences, this could top the list of anything you’ve done in your lifetime.
- You’ll push yourself outside your comfort zone. If you’ve always been the type to try new things, this could top the list and give you more to live for now that you no longer work.
Cons
- It’s a whole new world. You’ll have to learn new ways of life, how to navigate the healthcare system and a new culture. If you planned to work part-time or bring in some money to supplement your retirement income, it may be harder living abroad.
- You may have to learn a new language. Even if you learn the native language of the country, you won’t be as fluent in it as you are in English, which could create barriers. However, for some people, this could be a ‘pro’ as they want the challenge of learning a new skill!
- You may miss connecting with friends and loved ones. Even with today’s technology, connecting via Zoom or FaceTime may not give you the same feelings in-person visits offer.
Consider Renting First
Before you set up roots in another country, consider renting a VRBO or Airbnb. You may love a country when you visit, but living there creates a completely different scenario. What if after a couple of months you tire of it or aren’t comfortable living there?
Consider renting during the off-season, when there are fewer Americans around. You’ll get a truer sense of how the area feels and how easy (or hard) it is to set up your home there. Take time to see how acclimated and comfortable you feel before committing to the area and buying a home.
You may find you want to move around to different parts of the country or another country altogether, which renting allows and buying makes more difficult.
Understand Medical Care
If you move outside the US, you can still keep your Medicare benefits, but it likely won’t cover much, or anything while you are in another country. Do you have enough money set aside to cover medical expenses? Did you discuss your options with your current insurance company? Or could you pick up a health insurance plan in the specific country you are traveling to?
You may be eligible for government-supported healthcare after living in the area for a certain amount of time, but don’t assume, make sure this is the case.
Most healthcare facilities abroad require cash or credit card payment upfront even with insurance. Do your research and find out the average cost of healthcare where you plan to live (it may be cheaper than the US) and use that in your decision-making.
If you’ll live near a major metropolitan area, you’ll likely find more quality healthcare options, but don’t wait until you get there to find out.
Know Which Costs will Increase or Decrease
Find out the standard cost of living where you plan to retire. In your research, include the cost of housing, insurance, the exchange rate, utilities, transportation, food, entertainment, and medical care/health insurance.
Will your costs increase or decrease? For most countries, the likely answer is decrease, but it’s important to know how much, and how that affects how much you can/need to distribute from your accounts to create that retirement paycheck.
Know the Tax Implications
Taxes get complicated when you move abroad, but only on the international country’s side. You’ll still pay standard US taxes as if you lived here. You’ll pay taxes on any tax-deferred accounts which you withdraw from, but not on tax-free accounts, such as Roth IRAs or Roth 401Ks.
Where the tax implications may differ is in the country you now live. Some countries have tax implications for all residents regardless of citizenship. So even though you’re a US citizen, but you live in another country, you may have tax liabilities there.
Find out how the tax laws work and what complications you’ll face. Discuss your options with your financial or tax advisor before moving so you aren’t unpleasantly surprised with large (and possibly unaffordable) tax bills.
Wrapping Up
If moving abroad is on your bucket list – it’s easy to make it a reality, but do your research first. Picking up and moving out of the country could be one of the largest decisions you make in your lifetime. The more prepared you are, the better it will work.
Ask yourself the tough questions above and find out the answers from the experts. Retiring domestically requires plenty of planning and precautions, but retiring abroad creates even more expectations and potential roadblocks.
Before you make any decisions in retirement, get your free copy of 65 Questions to Ask and Answer Before you Retire to fully understand your options when you retire. The more prepared you are before you retire, the more you’ll enjoy your work-free years.