More Americans are leaving the U.S. to chase retirement dreams abroad than ever before. Though it’s hard to estimate the exact number of expat retirees, the Social Security Administration sends over 680,000 monthly checks overseas.1
For many, the main reasons are cost or a better lifestyle – with services such as housekeeping, cooking, and home care – funded by a strong dollar. Others seek travel and an exhilarating change of pace.
The biggest hotspots for expat retirees? Costa Rica, Panama, Ecuador, and Mexico.2
Sounds great, right? Not always.
Below are a few hidden risks you should watch out for before calling the U.S. quits.
7 FACTORS YOU WANT TO CONSIDER BEFORE RETIRING ABROAD
1. Can you adapt to another culture?
Think carefully about how you’ll adapt to life in a different country, especially if there’s a language barrier. Can you bring a sense of humor and adventure or will inconvenience and culture shock send you packing?
2. How will you pay for medical care?
Medicare generally doesn’t cover international medical expenses when you live abroad, so you’ll need to research how you’ll pay for medical care, especially as you age. Some countries have national health plans you can buy into, while others will require you to self-insure. If you plan to return home, make sure you understand how to apply for Medicare and what late penalties you may owe.
3. What are the residency hassles?
If you’re planning to stay longer than a tourist visa allows, be prepared to jump through hoops to get a residency permit. Some countries roll out the red carpet for expats, while others require a lot of legal legwork. Do your research on residency requirements – especially before buying real estate!
4. Will you return home to the U.S.?
Many retired expats eventually plan to return to the U.S. to be closer to family as they age. Be sure your financial plans include enough money to fund a return and that you understand what you’ll need to do to reestablish yourself back home.
5. Where do you keep your cash?
In the U.S., it’s easy to have Social Security and retirement distributions deposited directly into your bank account; however, foreign fees, additional tax withholding, and poor currency exchange rates can eat into your funds. Make sure you work with a professional to understand where you’ll keep your accounts and how you’ll access cash in your new home.
6. Will your taxes increase?
The U.S. bases taxation on citizenship, not residency, meaning you might end up paying more in taxes as well as having complicated taxes to file each year. If you currently live in a high-tax state, you might need to sell your house and surrender your driver’s license to officially cut residency ties.
7. What does being a foreigner cost?
If you’ve traveled abroad as a tourist, you know that foreigners often pay more than locals. When living abroad, you may need local consultants to help you with everything from renting a house, getting a driver’s license, to hooking up a phone line – all at an extra cost.
Understand the Pros & Cons of Any Big Retirement Move
Lower cost of living? Check. Great weather and new adventures? Check. 24-hour drugstores and the big game on television? Hmmm…not always.
Who hasn’t dreamed of hitting the road and leaving ordinary life behind? I know I have. And retirement is an ideal time to stretch your legs and decide where you want to be next.
But is retiring abroad the right choice for you?
If you’re the kind of person who is always up for a new adventure and can throw yourself into a new culture and a new language, living overseas could be a dream come true. But if you really depend on American conveniences and want to be surrounded by like-minded people, the expat lifestyle might be a disappointment.
Money isn’t everything, and pulling up stakes for a new country may not be as attractive as it sounds when you look at the entire situation.
It’s also extremely important to have your retirement ducks in a row before you make any big life moves. You don’t want to miss critical steps that cost you big-time later.
I’ve spoken to many clients and friends who are dreaming about their big retirement move – moving somewhere else, buying that second home, trading up for a larger boat, even starting a new business.
My advice to them? Take your time. Ease away from work and into retirement before you make any major changes.
What do you think? Are you itching to make a big change at retirement? Is a loved one excited about becoming an expat? If you’re not one of my amazing clients, and you’d like some objective advice from a pro who’s helped many make that retirement leap, give my office a call or shoot me an email.