PLAN AHEAD IF YOU WANT TO RETIRE ABROAD
Beautiful beaches, warm people, a new culture, and an affordable cost of living. What more could you want in retirement?
Nearly 400,000 retired Americans currently live abroad. Some of the top locations include: Costa Rica, Mexico, Canada, Japan, Panama and Portugal. Cost of living is among the primary motivators for moving to a foreign country in retirement.
But while many are satisfied, a successful transition requires planning and forethought. After all, adapting to a different language and a new culture with distinct norms and standards is not always easy.
Before you run off to retire in a foreign country, consider the following:
- Your healthcare. Are you healthy or dependent on ongoing care and support? Will there be modern medical facilities nearby that can support your needs as you grow older? Are you comfortable leaving your existing doctor, dentist and other providers? Explore the health insurance options and facilities in the country you are thinking of moving to. You will still receive social security but not Medicare. And Medicare will not pay for any medications outside the US. Consider how you will access healthcare and prescriptions abroad. Look into options for elder care. What are the cultural attitudes about aging in your destination spot? Unless you plan to move with family nearby, will you be isolated and limited as you age?
- Are you flexible enough to be able to sacrifice certain comforts? Many developing countries that appeal to retirees lack solid infrastructure. Can you adjust to electrical outages, water shortages and limited internet service? Can you assimilate culturally to the laissez-faire attitudes about such interruptions? Go for a trial run by spending months in your destination country before making a permanent change. Interact with locals and neighbors to see how you fit within in that town’s lifestyle.
- Your finances. While many international cities promise lower cost of living, be mindful of your overall finances and tax obligations. Your new country may have higher residency taxes. The US has tax-treaties with some countries, but not all, meaning you may still owe an expatriation tax. Investigate both US tax rules and other countries’ tax requirements in advance. Remember also that money you earn outside the US will still be subject to federal income taxes. The state you come from may also continue to tax you regardless of where you live. You may want to surrender your driver’s license and voter registration to avoid such state obligations. On the other hand, you may want to keep your US address to leave open the option of moving back, among other benefits. With the internet allowing for ease of transactions, you should be able to manage your investments without much difficulty while living abroad. However, remember that currency-exchange fees can vary and impact your returns. Discuss fees and exchange-rate fluctuations with your financial advisor. Strategize for the best ways to access, deposit and withdraw funds from your new country with the lowest possible fees and delays.
- Your family and friends. As you age, it will likely become increasingly difficult to travel back home. Will your family be able to visit you often? What kind of social interactions can you develop in your new home? Do your family members support your move?
Retiring abroad can be fulfilling and rewarding. Just make sure to plan carefully and thoroughly before packing your bags.
At Silverman Financial, we work with our clients to support stable and secure retirement dreams, whether at home or abroad.