PARADISE FOUND? MAYBE
While there are many offbeat possibilities for retirees who want to skip retirement communities, some seniors are dusting off their passports and pulling up stakes to move abroad. It’s easy to see why the idea has appeal: There’s a new culture and landscape to explore, but there may also be a gentler climate, and maybe even a more favorable cost of living. Still, an international move requires a lot of forethought. Here are 13 things to consider before deciding to hop on that plane and retire abroad.
Deciding you want to put down roots in another country can come with a laundry list of legal considerations. One of the biggest is figuring out residency requirements in your target country. For instance, Vietnam is temptingly cheap, but it lacks a retirement visa and you may need to constantly renew a tourist visa instead. Peru grants an indefinite retirement visa with proof of modest monthly income — but you’re not allowed to earn any further professional income. Start your research by checking the immigration website of any country you’re considering to determine how you can legally retire there.
POTENTIAL TAX SURPRISES
Taxes can be complicated enough for those of us who never leave the U.S., so imagine what moving abroad can do to your relationship with the IRS. For instance, while any income you earn abroad may be excluded from federal taxes, non-earned income like pensions or distributions from retirement accounts will still be fair game for Uncle Sam. But that’s just one part of the puzzle. You’ll also need to know the rules in the country where you’ve moved. You may benefit from a tax treaty that the U.S. has with that country, but it’s best to consult tax experts before you move to guard against confusion.
Pay attention to the exchange rate, advises John Piershale, a wealth adviser with Piershale Financial Groupnear Chicago. “Some people keep most of their money in U.S. dollar-based assets and then convert to the local currency as needed. On the other hand, if you think the dollar will weaken, you may want to keep most of your assets in the local currency.” U.S. News and World Report recommends that retirees minimize the chance of currency fluctuations by settling in a country that either uses the U.S. dollar or pegs its own currency to it. Social Security benefits, which you can receive in all but a few foreign countries unlikely to be popular with retirees (think North Korea or Kazakhstan), are paid out in U.S. dollars and won’t be adjusted because of exchange rates, Piershale says.
QUALITY OF HEALTHCARE
For all its flaws, you know what you’re going to get in the U.S. healthcare system. But what can you expect abroad? Suzanne Garber, co-founder of Gauze, a database of international hospitals, recommends retirees research a host of factors. They include the response time of emergency services, presence of nationally or globally accredited hospitals, doctor-to-patient ratio, condition of facilities, and the availability of your prescriptions. But don’t automatically assume you’ll be downgrading, she says. “Costs will likely be much lower and access may or may not be improved in other countries. Quality is also a top consideration, and the U.S. ranks 37th on the World Health Organization’s list of global health. American retirees may actually get better care abroad.”
LOSS OF MEDICARE
Another big health-care consideration: Medicare. “While Social Security isn’t generally impacted by living abroad, traditional Medicare does not cover medical expenses outside of the United States,” cautions Michael Newcomer, principal founder of Novel Insurance and Wealth Management near Tampa. “Some Medicare supplement plans do cover up to $50,000 of foreign emergency expenses, but this is meant for travelers, not retirees living abroad.” Newcomer recommends looking into insurance plans specifically designed for expat retirees. Ken Moraif, a senior advisor with Dallas-based Money Matters, recommends continuing to pay into the Medicare system if you can swing it. “Even though Medicare won’t cover you, it may be a good idea to keep paying premiums for Medicare Part B. You never know when you may want to return to the U.S.”
COST OF LIVING
Stephanie Cunningham, a retiree who decided to settle in Australia, says there’s certainly the potential for sticker shock on certain things once you move abroad. “I regularly pay $5 to $6 a gallon for gas,” she says. And while you’re tallying up your new cost of living, don’t forget to consider one particularly big piece of the pie: Utilities. “After years of living in the same home and using roughly the same amount of energy, it is easy to overlook the possibilities of what those same costs amount to in another country,” warns Doug Keller, community manager with Payless Power in Texas. “Given the added pressure of an often very fixed income, this can affect a number of things.” Cost-of-living calculators like the one at Expatistan can help highlight differences in crucial areas like transportation, rent, and more.
SELECTION OF GOODS
Cunningham also warns American retirees that no matter where they end up, they’re unlikely to benefit from the same unending choice of goods they’re used to in U.S. stores — and that can be an unexpected source of frustration. “You are coming from a huge market with many levels of quality and price. In a country that is much smaller, you will have far less choice,” she says. “In Australia, there is cheap and very expensive because the number of people can't support a large medium price tier. So to buy quality, you will pay a lot.”
COST OF RETURNING HOME
Yes, it’s likely you’ll get homesick, even if you’re retreating to a place with white sands and swaying palms. Don’t forget to figure in return trips for holidays, casual visits with the grandkids, or medical care. Kelly Hayes-Raitt, a journalist who has also been a housesitter in countries across the world, cautions retirees to consider not just the cost of a plane ticket, but even the cost of getting to the airport itself. “An outrageously expensive or time- and logistics-consuming return trip a few times each year can easily wipe out any financial savings realized at the retirement destination,” she says.
OBSTACLES TO WORKING
More and more retirees are opting to do some form of work after they “retire,” whether that’s consulting or a low-key part-time gig that gets them out of the house and lets them earn extra spending money. However, the country where you’re moving may require a work permit for non-residents, or even prevent foreigners from holding certain kinds of jobs. Doing business in a foreign country can also lead to a host of cultural considerations, notes the AARP. For instance, immediately tucking someone’s business card into your pocket without studying it could cause offense in several Asian countries.
RULES ABOUT RENTING VS. BUYING PROPERTY
“In some countries, it's fairly common for resident expatriates to buy and sell property, with the aid of a local attorney, of course,” says Timothy Wiedman, a retired professor of management and human resources at Doane University in Nebraska. “But in other places, non-citizens can only lease real property. Thus, many expatriates choose to rent instead, which also allows them a good deal of freedom and flexibility.” Renting first is a particularly good idea for any fledgling retirees who want to test the waters and ensure they like living in a particular country before they buy. If you do want take the plunge and buy, look into crucial factors like ownership laws, financing possibilities, and taxes,warns SmartAsset.
POTENTIAL FOR CULTURE SHOCK
It takes time to adjust to life in a foreign country, even if you’re convinced during visits it doesn’t feel all that “foreign.” That’s what Cunningham found after moving to Australia. “Speaking the same language does not mean you will understand and immediately feel comfortable in the culture. But actually living there will give you a new view of where you moved from compared to your new home. This comparison and contrast is very enlightening.” The Canadian government outlines useful coping strategies for expats, particularly after the “honeymoon” phase of moving to an exciting new place wears off.
No want wants to think about it, but it’s all the more important to have an end-of-life plan if you’re retiring abroad. “Think of the practical details, like whether you want your body returned to your prior home,” advises Jennifer Gumbel, an estate planning attorney in Minnesota who blogs at An Organized (after)Life. “Talk to a funeral home located where you want any ceremony or internment to take place and ask about options for the return of your body. Have a conversation with relatives, so they know your wishes and know how to accomplish them.” She also recommends researching local laws regarding what could happen to your foreign assets. “Take nothing for granted regarding the law,” she cautions. “How things work in your new home may be completely unlike anything you are used to from back home. Work with estate planners in your new country who are experienced working with foreign residents.”
CONSIDER A DRESS REHEARSAL
Several experts recommend that anyone considering overseas retirement take an extended trip before putting down permanent roots. “Rent a house and live in your potential new hometown for six months,” Moraif advises. “A lot of places are fun to visit, but you may become bored with white sand beaches, especially if there’s nothing to do but lie in your hammock. You may also find that you have unexpected expenses, or neighbors who just aren’t your type of people.” Moraif says this strategy saved one of his clients from a very expensive mistake a few years ago when the client decided retirement in Belize wasn’t for him after all.