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September 28, 2020
Are you wondering how to to retire overseas? If so, you’re in good company!
Retiring abroad has become increasingly popular. According to the Social Security Administration, the number of retirees who draw Social Security outside the U.S. jumped 40%, to more than 413,000 between 2007 to 2017.
And, that doesn’t even count the millions of younger Americans who are enjoying an early retirement in another part of the globe, in large part to the lower cost of living overseas.
While there are no exact figures on the total numbers of Americans living abroad, the State Department estimated that in 2016 there were 9 million U.S. Citizens living outside the U.S. (excluding military) — a significant increase over the 6 million estimated in 2011.
Canada, Japan, Mexico, Germany, and the United Kingdom top the list of countries where retired Americans now live.
If you have you always thought about living in a different country, retirement offers the perfect opportunity to make your dreams a reality. Before you make the big move, consider these 12 tips for how to retire abroad:
The world is a pretty big place, so you can’t just point to a map and choose your new home haphazardly. Make a list of your goals to consider everything you need for a happy retirement.
What is most important to you with regards to the big move?
Most importantly, perhaps, decide if you want retirement abroad to be a permanent or temporary arrangement.
And, as you figure out how to retire overseas, always keep your goals in mind!
The fun stuff – figuring out where to retire.
In most cases, retiring abroad is more than finding the ideal climate and best sunsets. Before diving into the specifics of one country or another, you will want to consider the following when thinking about the best places to retire abroad.
Looking for inspiration? Explore the 17 best places to retire in the world! Explore some unexpected locations!
Every country imposes unique immigration, visa, and residency requirements. The U.S. Department of state outlines these requirements online, so you can learn more about your top choices and decide if the requirements are feasible. Entry requirements are also important to ensure your family and friends can visit you in the future.
Many countries will offer a temporary residency permit, as long as you can prove that you have sufficient income from your home country. The required monthly income to meet this threshold varies by country. Mexico and Central America impose lower requirements than Europe, for example.
In most cases, permanent residency status is only granted after you legally reside in your new country for a certain number of years. Since the visa and residency process can be daunting, it helps to hire a local lawyer or consultant to help you navigate the task.
It is probably not the best idea to sell your home and all of your possessions and fly off to a new life sight unseen.
Retiring abroad is a big decision.
Once you have identified a place that interests you, go visit and take it for a trial retirement — 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, 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. Or, you can start packing it all up and get back there as quickly as possible.
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.
Whether you decide to move to another country in retirement, or perhaps you just want to spend some of your retirement traveling abroad, it is important that you have a strong retirement financial plan. Having a financial plan as well as considering other factors, such as healthcare and family, will help make your retirement a success.
It will be enormously helpful for you to create a very detailed financial model your new life.
The NewRetirement Planner enables you to create a comprehensive scenario with all aspects of your retirement abroad. The system will help you think through all of the details.
Compare your financial plan for abroad vs. a scenario for staying in the United States.
Create a NewRetirement Account Now and Plan Your Future!
A big financial matter to consider when planning for your move abroad is considering what to do with your home here in the United States.
Model different housing scenarios in the NewRetirement Planner to assess the short and long term financial impact.
Since Medicare does not cover health care outside of the US, you will also want to factor in health insurance or out-of-pocket costs for health care in other countries. While many countries have national healthcare systems, you will want to research your eligibility and the quality of the care.
Your exact coverage needs will vary greatly depending on where exactly you want to retire.
Options for funding your healthcare overseas include:
The US State Department has some good resources for starting to investigate health coverage abroad.
While Medicare will not be useful abroad, you will want to keep this benefit intact in case. In cases of a serious illness, you could return to the United States for treatment and use Medicare to cover those costs.
While most of us hope to remain healthy and independent until our dying day, the reality is that the majority of us will require varying levels of assistance as we age.
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.
In many countries, you may be able to find low cost assistance, but you will want to create a plan now so that you are prepared.
After you have done some research, chosen the ideal location, assessed your retirement financial plan, and figured out what to do with your existing home, it’s time to start planning for your move. There are many important details and logistics for making the best countries to retire in a reality.
The Social Security Administration has an Office of International Relations that can help you with your plans to retire abroad.
And, this pamphlet has a ton of great information about payments while outside the United States.
Setting up deposits and how to pay for expenditures – both in the United States and where you retire can be complicated. Never mind figuring out exchange rates, etc., the simplest option might be to chose to keep your money with an international bank that has a presence in your retirement destination as well as in the United States.
Taxes are difficult enough to understand when you only live in one country, so get ready for a steep learning curve when you retire abroad.
Living abroad does not exempt you from paying taxes in the United States. Before relocating, understand your tax obligations both in the United States and the place where you are moving. The IRS has some good information for U.S. residents living abroad.
As a U.S. citizen living internationally, you will still be required to file an annual tax return and report your income to your new country of residence. Depending on how your tax situation applies to the U.S. system of credits and exclusions for citizens living abroad, you may be forced to pay taxes on the same income in two countries. This is definitely something to take into consideration before selecting your final retirement destination.
For example, your new home country may count your Roth retirement account disbursements as taxable income, even though you paid taxes on your contributions at the time you made them and despite the fact that the disbursements are tax-free in the U.S. A local tax advisor can help you better understand tax rules and protect your money from double jeopardy.
Of course, it’s also critical to consider the estate and inheritance taxes in your new country. You don’t want your heirs facing steeper penalties due to your new location of residency.
If you are considering buying abroad, you will want to understand all of the peculiarities of owning property abroad. Some countries only allow foreigners to buy a home, but not the actual property. It can be confusing, but it is important to understand the various legal differences.
Things are going to be different when you move abroad. As such, you need to be prepared for some level of disappointment about certain things.
Kathleen Peddicord of Live and Invest Overseas recommends, “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.”
Use the NewRetirement Planner to set your long term financial plan for living abroad. And, then track your progress and make adjustments over time.
Plan and start live the life you want to live!
Here are a few additional resources:
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
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