More Americans than ever are considering the possibility of moving to another country after they retire. Some people look for a location where they can live an upscale life on a modest income. For others, the appeal is to reside in an exotic location, become fluent in a foreign language or immerse themselves in a different culture. There are plenty of reasons to consider retiring abroad, but before you travel too far down that path, here are a few things to think about.
The Difference Between Visiting and Residing
Just because you had the best vacation of your life somewhere, doesn’t mean it would make a great place to live. If you are considering the possibility of moving abroad when you retire, here are some starter questions to ask about your desired destination:
- What is the cost of living?
- Would there be a language barrier?
- Would it be a permanent move, or do you plan to travel back and forth?
- How would you maintain family connections?
Livability involves more than great beaches or scenic mountains. You should also think carefully about the practical considerations. What happens when your car breaks down, your cat gets sick, or you have a plumbing problem? A resurgence of COVID-19 could also lead to restrictions or limit your ability to move freely from country to country. If you can see yourself successfully navigating these situations, that’s a good start.
Research Health Care Options
Medicare doesn’t cover medical expenses outside the U.S. so it’s crucial to look at the quality and affordability of the available coverage in your destination country. If you have prescriptions, you should also check the costs and availability of those, as well. Some countries have low-cost out-of-pocket care options, while others may have national health care-coverage you can buy into. Either way, the U.S. State Department suggests you maintain a health insurance policy for both medical and dental, along with an option for medical evacuation to the U.S. just in case.
Banking, Taxes and Compliance
Credit history doesn’t transfer well from country to country, which can be a problem if you intend to seek a foreign mortgage to buy a home. Banks often set the bar higher by requiring things like proof of life insurance, adjustable rates, and larger down payments. Even if you don’t pursue a foreign mortgage, you’ll want to open an account with a local bank in your new country. When you do, you should continue to maintain a bank account in the U.S., which may require the use of a friend’s or family member’s address. Some U.S. banks have relationships with foreign banks that let you transfer cash with a modest fee, so it’s worth asking about.
As an expatriate, you’ll be subject to new rules in order to be in compliance with U.S. tax law. All financial institutions outside the U.S. are required to report assets held by U.S. citizens under the Foreign Tax Compliance Act (FTCA), and you will be responsible for filing a Foreign Bank and Financial Accounts (FBAR) report if the combined value of all foreign accounts exceeds $10,000 at any time. Remember, as a U.S. citizen living abroad, you must still file a U.S. tax return every year in addition to fulfilling the tax obligations of your host country. Because tax policies vary widely by country, be sure to do your research so you know what to expect.
Retiring in another country isn’t for everyone and requires serious research and forethought, but if it’s for you, it can be the adventure of a lifetime.
If you’d like to learn more about what it takes to retire outside the U.S., contact The Planning Center today. Having attained the Global Finance Planning (GFP) designation, I can help you understand all the financial implications and requirements as you consider your options and set goals for your future.
Jude Boudreaux, CFP®, is a Partner/Sr. Financial Planner in the Chicago and New Orleans offices of The Planning Center, a fee-only financial planning and wealth management firm. Email him at jude@theplanningcenter.com.
