Expert Interview with Kathleen Peddicord About Living and Investing Overseas During Retirement
One of the biggest financial concerns Americans have today is whether they’ll be able to afford retirement. According to a 2014 Gallup poll, 59 percent of Americans rate having enough money for retirement as their top financial worry.
Fortunately, there are options for those who fret about budgets.
Retiring overseas can mean a better living or, at the very least, living well on a small budget, says Kathleen Peddicord, publisher for Live and Invest Overseas. But financial advantages are only the beginning when it comes to the perks of retiring abroad.
“There are other practical advantages, including, say, better weather and more affordable healthcare, which can be very important,” she says. “The real upside of retiring overseas, though, I’d say, is the chance to experience a new place, a new culture, a new approach to life.”
Moving to a new country as a retiree is a chance to start over and completely reinvent your life, Kathleen says.
“Retiring to a new place at this phase of life, you can pursue long-set-aside dreams and ideas,” she adds.
We recently checked in with Kathleen to learn more about her site and get her advice on considerations to make when retiring abroad. Here’s what she had to say:
What’s your professional background?
I went to work with Agora Inc., a Baltimore-based publishing company, immediately after graduating college (with an English literature degree … I always wanted to be a writer), and I worked with Agora for 23 years. When I left in 2008, I was a Vice President and Publisher of Agora’s International Living Division.
I started work with Agora in Baltimore, then moved to Ireland to open an office for them in Waterford. After seven years in Ireland, I moved to Paris to open another office for Agora. I lived in Paris for four years. From Paris, we moved to Panama City, Panama, where we’ve been living since.
Tell us about Live and Invest Overseas. When and why did you start your site?
I retired from Agora and International Living in 2008. My family and I were living in Paris at the time. After I stopped working, I enjoyed three months of freedom in Paris. I explored on foot every day and got to know the city well; but after three months, I was ready for a new challenge. I’d always enjoyed my work with International Living, and I had been living the international living lifestyle for years by this time. When I decided I wanted to start my own business, the Live and Invest Overseas idea, suggested to me initially by a longtime friend, made an awful lot of sense. Starting the Live and Invest Overseas group allowed me to leverage all the business, writing, and lifestyle experience I had to that point and gave me the challenge I really wanted at that stage.
When I decided to start Live and Invest Overseas, my husband and I agreed we would move from Paris. We loved living in that city and, in fact, are planning to return to Paris later this year. However, France is no place to start a business. The entrepreneur is not well treated in that country. On the other hand, Panama is a top choice for starting a business. Panama takes a very favorable approach to taxation. In addition, the infrastructure in Panama City is developed, and the city is home to a melting pot population, meaning the business owner has access to educated English-speaking labor from around the world.
What do you love about living and working in other countries?
I enjoy contrast and the unexpected, and living and working in different countries is all about contrast and the unexpected. When you get up and head out the door to work each morning, you can never predict what challenges the day will present. Living and doing business in foreign countries, nothing works as you expect or as you’re accustomed to from “back home.” You learn to take differences and ambiguity in stride.
I also appreciate the opportunities that living and working overseas present for constant learning. I learn new ideas, new strategies, new approaches, and new vocabulary (still struggling to learn Spanish!) every day. Life can be challenging and maddening, but it’s never dull or predictable.
What about disadvantages of overseas retirement?
The disadvantages mostly have to do with expectations. If you can check your expectations at the border, as I put it, you’ll be fine, and your new life in your new country likely will be everything you’re hoping it will be.
However, if you show up expecting things to work the way they worked back in the States, you’ll be forever frustrated and challenged.
Practical disadvantages of moving to a new country at this stage can have to do with family, especially grandkids, back home. It helps if you try to keep the move in perspective. If you choose to retire somewhere in Central America or the Caribbean, are you really farther away or less accessible to your family and grandkids than you’d be if you retired on the other side of the United States, say, from where they’re living? Retire somewhere sunny and tropical on the coast, and then invite them all to come visit you at the beach.
Another concern can have to do with serious health issues. I recommend that people who retire overseas keep their Medicare. Medicare is not useful in the new country (you won’t be able to use Medicare overseas and will need to arrange alternative insurance if you want it), but in cases of serious illness, you could return to the States for treatment and use your Medicare to cover those costs.
Long-term care is another important issue. Long-term care facilities are not common in much of the world beyond North America. In Latin America and Asia, for example, older family members are cared for by younger ones at home. However, the big numbers of North Americans who have retired to Latin America and the growing interest in the idea is inspiring the development of long-term care facilities in key places. This is a very new idea, but I believe it will grow and am working to support various efforts.
What sort of considerations should we make when deciding in what country we should retire?
Start by making a list of what’s most important to you. Write down your priorities and preferences, then rank them in order of importance. Identify the two or three things that are most important to you and don’t compromise on them. Keep them in the forefront of your thinking as you consider your destination options.
Your priorities and preferences could have to do with cost of living, with the climate, with the infrastructure (availability of high-speed internet, for example, because you want to continue day trading stocks or maybe you want to be able to do live video chats with your grandkids), or the healthcare. Or, they could have to do with smaller things, even things that might seem embarrassing. A deal breaker for me is the availability of a U.S. washing machine and dryer. This is less an issue today than it was when I moved from the States 17 years ago. Back then when moving to Ireland, it was not possible to buy an American-made washing machine and dryer. The options available in Ireland were nothing like what I was used to. I had two small children at the time, and laundry became one of the biggest challenges of my life. Sounds silly … even embarrassing. But it’s a good example, I think, of being honest with yourself about what’s really important to your quality of life given your circumstances.
Be honest with yourself about what’s important to you and pay attention to your instincts. A place can seem perfect on paper. Then when you show up in person, you might find that you just don’t like the place and you just don’t feel comfortable or happy there. Pay attention to that gut reaction. It’s at least as important as all the practical considerations like residency options and cost of living.
What are some of the friendliest countries for retirees?
The friendliest and most welcoming right now are Panama, Belize, the Dominican Republic, Nicaragua, Colombia, Uruguay and Malaysia. Many places in Europe could be considered “friendly,” of course … and, to be honest, many of my favorite places in the world are in the Old World.
However, that part of the world isn’t working as hard to attract foreign retirees. Countries in Latin America and, increasingly, particular countries in Asia, too, are working hard to attract foreigners, especially American retirees. They’ve seen what a boon an expat retiree population can be to the local economy thanks to the experiences of Costa Rica and Panama in particular, and are competing for the American retiree’s attention with special residency visa programs, for example.
What would you tell those of us who are intimidated by the thought of investing overseas? Why is it worth a second look?
First, don’t force yourself to consider this idea. It isn’t for everyone. However, if you’re intrigued by the idea of reinventing your life and, in particular, of improving your standard of living while reducing your cost of living (which is very possible), then take this one step at a time. Don’t even consider the idea of selling your home in the United States and moving to a new country full-time.
Instead, identify a place that interests you and go for an extended visit – maybe a month or two or three if you can manage it. Try the place and the idea on for size. If you find the experience nothing but challenging and frustrating, you can go home any time. Your old life is waiting for you, and you could slide right back into it. Worst case, you’ll have had a vacation you can tell your friends and family about.
If, though, you find yourself enjoying the adventure of it all (which, honestly, is what happens most of the time), then great. Return home at the end of the trial run and consider a next step. It could be likewise small and controlled. Maybe take a second, longer trip. Maybe visit another destination that interests you.
The point is that you don’t have to take this all in one go; and no matter what you do, it’s not a one-way trip. This isn’t like jumping off a cliff. You can always go back.
And you can always adjust the idea to suit you. Maybe you’ll never be up for retiring to a new country full time, so don’t. Maybe instead divide your time between your home in the United States and somewhere sunny and exotic where you enjoy being for two or three months a year.
What are your favorite types of overseas investments?
My preferred type of overseas investment is real estate, specifically real estate that generates cash flow. This could be a rental apartment in a strong rental market (such as Panama City, Paris or Medellin, Colombia). Agricultural land is also of particular interest right now when I can find a turnkey option with a farm manager in place.
What type of precautions should we take when investing overseas?
The list of caveats varies from one country to another. For example, Colombia and Brazil are two investment markets I like right now. Both impose currency controls that require you to register your money when bringing it into the country (when sending a wire, for example, to make an investment purchase) if you want to be able to take it out of the country easily somewhere down the line. If you don’t register the funds properly when you bring them into the country, you’ll take an extra tax hit when you want to repatriate them and any associated profits.
Currency is an important risk to remember. You can avoid it by investing in countries that use the U.S. dollar (Panama and Ecuador, for example), that are pegged to the U.S. dollar (Belize), or that price real estate in U.S. dollars (Uruguay, Nicaragua, and parts of Mexico). Going this route, though, you give up any opportunity for currency diversification, which can be an important advantage of investing in another country. Currency can be both a risk and a benefit.
Another consideration is how foreign investors are treated under the law. Many countries have laws that specifically state that foreigners are treated the same as nationals when it comes to investing or owning real estate. Some countries, on the other hand, impose restrictions on how or even if foreigners can own property. The key is to understand the relevant laws in any country where you’re considering investing. For example, Mexico requires foreigners to hold property that is within 50 kilometers of the ocean in a fideicomiso (Mexican bank trust). Croatia requires reciprocity – that is, the foreigner’s home country must allow Croatians to own property in that country.
One thing to keep in mind when investing in any foreign market is that just because the person presenting you with an opportunity is from your home country or speaks good English doesn’t necessarily mean they’re trustworthy. While locals in some foreign markets, especially in Central America and the Caribbean, can see every American as a piggy bank, you also should be careful when dealing with fellow Americans. In general, exercise more caution and carry out more due diligence than you would for any investment you’d make back home.
Your most important ally in any foreign investment is your local attorney. Find one who has experience helping foreigners invest. He or she should understand the relevant caveats and pitfalls.
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