Millions of Americans have retired to other countries in recent years, and more are choosing to retire overseas all the time. Moving overseas can be a dramatic change, but frequently leads to a new life that is more exciting and cheaper. Here’s how to break the adventure down into steps.
Step 1: Determine how much money you have for retirement. Calculate how much money you have to live on in retirement. Remember to include what your retirement income amounts to on a monthly basis, including pension, investment, Social Security and any other income you have.
Step 2: Identify the places where you could afford to live comfortably on the retirement budget you’ve calculated. Figure out where the monthly retirement budget you’ve identified for yourself will buy you the retirement lifestyle you’re looking for. Here are a few ideas that might suit your budget:
With a budget of $1,000 per month, consider:
- Cuenca, Ecuador
- Granada, Nicaragua
- Veraguas, Panama
- Chiang Mai, Thailand
- Nha Trang, Vietnam
With a budget of $1,500 per month, consider:
- Algarve, Portugal
- Medellin, Colombia
- Boquete, Panama
- Carcassone, France
- Mendoza, Argentina
With a budget of $2,000 per month, consider:
- Abruzzo, Italy
- Barcelona, Spain
- Las Terrenas, Dominican Republic
- Puerto Vallarta, Mexico
- Costa de Oro, Uruguay
With a budget of $3,000 per month, you could live almost anywhere you want to, including:
- Ambergris Caye, Belize
- Paris, France
- Panama City, Panama
- Santiago, Chile
- Copper Coast, Ireland
Step 3: Research residency options in the countries that have your attention. If you’re not planning to retire to another country full time and are thinking of spending only part of each year overseas, then you can skip to step four. Options for establishing legal residency in your chosen overseas retirement haven are important only if you want to retire to that country full time.
If that’s the case, some countries are rolling out the welcome mat for expat retirees, and offer special incentives and benefits for the pensioner crowd. In countries offering special retiree visa programs, you typically qualify by showing a minimum monthly income. Other options include making an investment in a business or a piece of real estate or having a certain amount of money deposited in a local bank.
Step 4: Consider your options for health insurance in the countries on your list. Your U.S. health insurance likely won’t travel with you, and Medicare doesn’t apply overseas either. You’ll need to consider other options for covering your medical expenses in your new country. You could arrange insurance in the new country, purchase an international health insurance policy or choose to go without insurance and pay health care expenses out of pocket. This last option is not as crazy as it may sound. Depending where you move, the costs of day-to-day medical care can be so low that it doesn’t make sense to insure against them.
Regardless of what you decide to do about health insurance, keep your Medicare. It won’t help you in your foreign country of residence, but it’s a good back-up plan in case of a serious or long-term health problem. If you had to, you could relocate back to the United States, where Medicare would cover your care.
Step 5: Understand how retirement overseas might affect your U.S. tax obligations. Sometimes moving to a new country as a retiree, with neither earned nor investment income, is a tax-neutral event. Your U.S. tax obligations are unaffected. However, moving to another country could also mean additional filings and reporting requirements in the new country.
If you will have non-retirement income while living overseas, you should seek advice from a tax advisor with experience helping Americans stay tax compliant. If you’re earning an income as a resident of another country, the first $100,800 in 2015 is exempt from U.S. tax annually. If you will be earning income in your new country of residence, you could also have associated tax obligations in that country, which you should discuss with a local tax specialist.
Step 6: Think through your options for renting or buying a home. I recommend renting first and maybe renting long-term. However, in some situations, buying a home of your own and even buying right away can make sense. Regardless of whether you decide to rent or to buy, you need to arm yourself with a clear and comprehensive understanding of how to navigate overseas property markets. The first and most important thing to understand about real estate markets beyond North American borders is that most don’t come with multiple listing services, making it difficult to understand all the purchase options that fit your criteria. Listings are not shared, so the only way to find out what’s on the market is to work with a number of different real estate agents.
In addition, the key to success navigating foreign property markets is engaging an attorney who is experienced working with foreigners. You should hire an attorney to help (and to review contracts) not only if you’re buying, but also if you’re renting. Note that, in most countries, a contract, including a lease, is valid only if it is signed and filed in the language of the country.
Step 7: Prepare for the practicalities and administrative requirements of living in a new country.The practical challenges of launching a new life in a new country include everything from opening a bank account and installing electricity, cable and Internet to learning a new language and finding a good plumber. On this front, ever-improving technology makes it easier then ever to accomplish these tasks. Today you can also stay in real-time contact with family, friends and business obligations from anywhere in the world you can get a good Internet connection.
The secret to practical success as a retiree in another country is organizing your life online as much as possible. This process is more likely to go smoothly if you begin to do this in advance of your move. It can be much tougher to accomplish what you need to accomplish from another country.
Make sure you can manage your administrative and financial lives virtually. This way, you won’t have to worry about not being able to access an account, get cash, move money or pay a bill. You want these critical functions to be hassle-free, not a distraction in your new life. Start with your bank and investment accounts. These are perhaps the most critical pieces of the puzzle and the most important things to get set up correctly before you make your move.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group.