With over ten thousand baby boomers reaching retirement age every day, there are a growing number of Americans considering the possibilities of retiring abroad. Just the thought of spending leisurely days amid the palm fronds of a Caribbean beach or adventuring in the mountains of Ecuador in pursuit of perpetual spring-like weather is often enough to get a soon-to-be-retired boomer thinking seriously about how to make those dreams reality. Although retiring abroad will never be for everyone, it is easier and more affordable today than ever before, and well worth looking into.
When considering the option of becoming an expat in your retirement years, there are a wide variety of locations to choose from, with many variables that will affect your ultimate decision. In the following informational article, we’ll take a look at what the process of retiring abroad entails, from the actual logistics of securing visas and/or residency, to financing your move, and the cost of living of living in some of the most popular destinations.
There is no ‘best’ place to retire abroad — the decision is a particularly personal one, and not to be entered into lightly. Expats have been taking advantage of the low cost of living in Central and South America for years, but are also now retiring to places like Malaysia, the Philippines and Thailand. Even Western Europe has become a popular destination, as it has become more affordable since the economic downturn. No matter where you choose to settle, a smooth transition to your dream retirement destination will require diligent research and careful planning.
Financing Your Retirement Abroad
The first and most important concern when retiring abroad is how to finance your resettlement, no matter where you plan to retire. To begin the process, you’ll need to calculate how much money you’ll actually have to live on. Your working years will have secured you some social security benefits, and perhaps a pension from your employer, and your years of saving and investing should provide you with a certain level of income.
Consultation with a financial planner well before your retirement can help you strategically prepare for your potential move abroad, and give you a good idea of what you’ll be able to afford on a monthly basis. Knowing what you’ll realistically be able to afford will greatly affect your final decision about where to retire–the French Riviera will be considerably more expensive than the coast of Malaysia.
In addition to social security, investments, real estate, and savings, you should also consider what many people often overlook — their portable luxury assets. When calculating how much you’ll have to retire on, be sure to consider your valuable jewelry and expensive timepieces as assets you can use to help finance your dream.
Many times that forgotten brooch you inherited from our grandmother or that Rolex given to you when you got your first job can be converted into cash to help finance your transition into retirement. Diamond Estate is a top buyer of these often overlooked assets, and can buy your estate jewelry or high value watches in a quick, safe, and seamless process.
Diamond Estate prides itself in their free tips and advice on topics such as how to sell a Rolex watch or Tiffany jewelry, how to identify antique jewelry, how to evaluate a diamond, and more. That way you can be sure that you are receiving the most money for your portable luxury assets when funding retirement abroad.
Narrowing Your Decision
Once you have a reasonable idea about what your retirement income will be, you will probably find that some places are simply too expensive to live in, like Hong Kong and Singapore for instance. But beyond eliminating the obviously extravagant possibilities, you may need some other strategies for narrowing down the possible choices. One of the best pieces of advice here is to travel and stay for a bit in the place you are considering. Try renting a home or apartment before you buy a one way ticket to your new paradise. Not only will this give you a real feel for the lifestyle in you potential new home, but you’ll get a realistic idea about the cost of living, and any idiosyncrasies your destination might have.
Residency, Visas, and Benefits for U.S. Retirees
Another primary concern when narrowing your choices is how welcoming your new home is to retirees from the United States — they are certainly not all the same. Some countries really roll out the red carpet for US retirees, while others have fairly stiff requirements for new residents, with some even requiring a minimum of $250,000 in savings and hefty monthly incomes to prove that the new arrivals won’t become a burden to the state.
Many countries in Latin America offer “pensionado” programs that offer a variety of initiatives to retirees, including tax breaks, property rights, and even discounts on a wide array of goods and services.
Acquiring residency in Panama, for example, is both cheap and easy, through their popular Pensionado Residence Program. This program provides a pathway toward permanent residence, as well as many money saving discounts. All you need to prove is that you have a pension of at least $1,000 per month (and your social security income counts!), and you are eligible for 50% off entertainment like concerts and movie tickets, 25% off electricity bills, 25% off restaurants, and 25% off of air travel when purchased in Panama. Also available under this program is a 15% discount at hospitals, 20% off medical consultations, and 10% off prescription medicines.
Panama also offers a Friendly Nations visa which allows the holder to work or start a business in the country. You’ll need a business or investments to qualify, as well as at least $5,000 in a Panamanian bank, but you won’t have to reside in Panama full time, and after a few years you are eligible to apply for Panamanian citizenship and a second passport.
Mexico issues visitor permits that allow you to spend up to six months in the country, allowing you plenty of time to find your perfect retirement spot. If you decide to stay, their residence visas are easy to secure, and valid for up to four years– the only requirement is that you show a monthly income of at least $1,300. With an income of $2,100 per month you can qualify for a permanent visa as soon as you enter the country. With either the residence visa or the permanent one, holders qualify for a pensioner’s card, which is good for discounts from 5% to 50% on a wide variety of goods and services.
Costa Rica also offers a pensionado visa, available if you can show $1,000 in monthly income. Malaysia offers the MM2H (Malaysia My Second Home) visa which is good for ten years and allows you to bring a spouse and children, as well as open a business.
Remember that residency requirements vary widely, and offer a wide range of rights and privileges, so be sure to do your research carefully before falling in love with any particular destination.
Cost of Living
Though the best way to get a feel for the real cost of living for any locale is to live there for a few months, there are some aspects you can find out ahead of time that can help with your decision. Housing costs, whether you rent or choose to own, need to be considered, as do the cost of utilities, groceries, and even entertainment and the cost of eating out. Many times, you’ll find that your savings can go further in another country than it would in the U.S.
One of the more popular destinations in Europe is the Algarve region of Portugal, where a retiree can live on less than $1,500 per month, including rent. Da Nang, Vietnam, is one of the more affordable cities that some expats choose, with $840 per month covering housing, food, utilities and other bills.
You’ll need to think about your own lifestyle requirements as well. If air conditioning is a must, be prepared to pay more for electricity in South America. Gasoline is also more expensive in South America and Europe. While owning a car in the US is practically a necessity when living away from the urban centers, you may find that public transportation in your new retirement town is cheap and accessible enough to allow you to live without your car. If one of your goals in retiring abroad is to save money, you might consider living there only part time, taking advantage of better weather and the lower cost of living for only part of the year.
Owning Property Abroad
While many retirees who chose to live abroad are more than happy to simply rent their accommodations, some will want the security and familiarity of home ownership, and often real estate can be more affordable outside the United States. Some countries, like Spain, Portugal, Italy, France, and the Dominican Republic allow foreigners to buy property just as any other citizen, but all countries are different, and some make owning a home as an expat impossible. Mexico, for example, bars foreigners from owning land within 62 miles of any border and within 31 miles of the coastline. To buy property in these areas, you’ll need to set up a trust that gives a bank title to the property. If owning your home is a must in retirement, be sure to know the rules of the country you choose.
Health Care
Health care as we age is a big concern, no matter where we choose to live. Medicare is the health insurance most Americans count on in their retirement years, but it won’t cover you if you choose to live outside the United States. Generally speaking, if you’re going to live outside the U.S., you’ll need some kind of health care plan that covers you in whatever country you choose to live.
International plans are available that cover care in multiple countries, including the U.S., but these plans tend to be expensive as health care in the U.S. is generally more expensive than other countries. One option for expats is to purchase an insurance plan with a high deductible. This can provide coverage in the event of a major emergency or accident, but still allow for paying out of pocket for routine care.
In many countries, the cost of medical care is quite low, and some retirees may forgo insurance and pay for all medical care out of pocket. In Colombia, for example, medical tourism is booming because of the high quality and low cost of healthcare. Even with state of the art facilities and highly trained doctors, health care remains very affordable. Costa Rica and Malaysia also feature high quality healthcare at low prices. Even seeing a specialist in Malaysia only costs about $20.
Some Americans who retire abroad choose to keep their Medicare coverage, just in case they decide to return to the U.S. for surgery or other treatment. By signing up and staying enrolled in Medicare, retirees can avoid late enrollment penalties of up to ten percent monthly if they decide to move back to the U.S.
Managing Your Money From Abroad
Technology has certainly made it easier to manage finances from abroad, allowing retirees to have social security benefits and other retirement income directly deposited into their bank accounts. But living abroad does present some banking complications. Ideally, you’ll need two bank accounts — one in the U.S. and one in your new country. With your income directly deposited into your U.S. account, you can simply write write checks to your local account to cover living expenses.
In most cases, U.S. citizens can have their social security benefits paid to them when they live abroad, though there are a few exceptions. The Social Security Administration will not send payments to Cuba, Vietnam, Ukraine, or Moldova for example. Although some expats can qualify for exemptions to these restrictions, be sure to check with both the Social Security Administration and the Treasury Department for a complete list of countries with restrictions.
If your retirement savings is in a 401(k), you should plan to keep it in the U.S. If you cash it out entirely, you will need to pay all the taxes on it at once.
Even though you will be living abroad, you’ll still have to file a tax return every year. Though many expats receive credit for the taxes they pay to other countries, you should carefully research the local rules to factor in taxes as part of your overall living expenses. Your foreign checking account may need to be registered with the Internal Revenue Service as well.
Quality of Living and Lifestyle
Many look to retiring abroad as a way to see their savings go further, but you’ll need to remember that a lower cost of living will usually involve some trade-offs when it comes to lifestyle. Be honest with yourself, and know what you’ll be able to adapt to. If 100 percent reliable high speed internet access is something you simply cannot live without, be sure it’s consistent in your chosen new home–in many places it won’t be. While living cheaply in a third world country might mean sporadic power outages and other utility disruptions, these sorts of changes need not always be negative.
Many expats consider living a more healthy lifestyle a goal in retirement. From a greater availability of fresh, unprocessed foods to cleaner air, and more opportunity for an active lifestyle, living abroad can offer many health benefits. In Costa Rica, for example, the climate allows for fresh, local produce to be readily available at farmers markets and produce stands throughout the country. In fact, the same is true in Panama, Ecuador, Nicaragua, and Colombia. And the great climate encourages outdoor activities that are beneficial to overall health, leading to greater happiness and well-being.
Retiring abroad is not always about saving money — sometimes it’s a way to live a lifestyle you simply could not afford in the U.S. Whether it’s shopping for fresh food daily and walking rather than driving, or simply eating fantastic local cuisine, the benefits of retiring abroad are sometimes less than obvious. In France, for example, culture is heavily subsidised, making museums, concerts, and art exhibits much more affordable. You may not live more cheaply, but you might just live better. And in Central and South America, the cost of domestic help is often very affordable, allowing you the luxury of not having to care for the house and grounds of your retirement home.
Retiring abroad is an adjustment, and one surefire way to be disappointed is to try bring America to a new, foreign home. Embracing the lifestyle of the locals, in diet, shopping, and even attitude can be important factors in settling in to your new life.
How Safe is Retiring Abroad?
Many who retire abroad report that crime in their new home is often exaggerated in the U.S. press. That said, it does pay to get a good idea of the potential risks, especially if you plan to live in an area with a high poverty rate. The State Department issues a Retirement Abroad Advisory that periodically updates not only crime risks, but also information about natural disasters, civil unrest, and even road conditions.
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