Relocating to another city or state for retirement is a time-tested strategy for stretching retirement dollars. Now retirees are increasingly taking that concept global by expanding their search to destinations around the world. In the process, they’re partaking in what’s known as geo-arbitrage: garnering retirement income in U.S. dollars and living in places where it’s possible for a couple to live comfortably on $1,000 to $2,000 a month.
Meanwhile, the Internet has made it easier than ever to learn about far-flung destinations, connect with locals who can facilitate the move—and stay connected with friends and family back home when you get there. A couple decades ago, retiring overseas meant walking away from the life you knew, says Kathleen Peddicord, founder of Live and Invest Overseas, and a long-time expat. “Now, when people say they’re retiring overseas, it doesn’t seem like such a crazy ideal,” she says.
Even so, it’s a big world, and every country poses unique opportunities and complications. Here are five practical questions to ask as you bring your search into focus.
Q: Is retirement residency even an option?
A: One of the first things to consider in a would-be country is access. Australia and New Zealand might seem like fantastic places to land, but both countries have stringent requirements for would-be foreign residents. “It’s difficult if nearly impossible for foreign retirees to relocate there,” Peddicord says.
Fortunately, many countries are rolling out the welcome mat for foreigners interested in relocating. Belize’s Qualified Retired Person (QRP) visa is open to people over the age of 45 and is one of the most accessible retirement programs available, Peddicord says. Portugal’s Golden Visa offers a number of avenues for foreigners to secure residency, including buying local real estate.
Q: What’s the real cost?
A: This is a big one, no doubt, for anyone interested in getting the most out of a nest egg. Just as you would with a domestic move, you’ll want to price out the true cost of living—factoring in not just the obvious housing expenses, but also any additional or atypically high fees. If you’re counting on traveling around the region or flying home frequently, build that into your budget.
Meals, entertainment, and leisure should also be part of the equation. Reykjavik, Iceland might be your idea of a dream, but you’ll easily pay $15 for a simple sandwich. Contrast that to Da Lat Vietnam, where it’s possible to dine well on a few dollars.
One of the biggest uncertainties of all, of course, is the exchange rate, given that most of your assets and retirement income, such as Social Security, will be based on dollars. There are different strategies expats can use to balance some of this risk, including putting some cash in local currency as a hedge against a weakening greenback.
Q: How will retiring abroad impact my taxes?
A: Unless you’re earning income in these countries, you probably need not worry about paying local or national income tax. “It should be a tax-neutral event if you’re retiring,” Peddicord says, noting that most foreign countries don’t tax retirement income, including Social Security and pension income. You’ll still owe taxes to Uncle Sam.
Earned income is a different story – you’ll likely owe tax in your new home country but qualify for foreign earned income exclusion on U.S. returns. Investment income, however, can get tricky. This is all to say that a visit with a tax professional is a must before you relocate to the other side of the globe.
Q: Can I get the health care I need?
A: It’s a huge world, and quality of health care varies from country to country, and city to city. Even so, in many overseas destinations, health care is as good or better as it is in many U.S. cities—and it can be considerably less expensive. Portugal, France, Italy, Malta, and Colombia are perennial winners when it comes to quality and access to health care, taking some of top spots in the World Health Organization rankings.
Although many retirees have a tough time getting their heads around not having insurance—and staying on Medicare is an option for retirees— access to high-quality, low-cost public health care makes it possible to pay as you go, Peddicord says. A compromise: Save what you would have spent on insurance premiums so you have a lump sum at the ready if you need it.
Q: Will I be happy there?
A: Don’t get so caught up in the practicalities of retiring in another country that you overlook what is arguably the biggest question of all: Does the move make sense for your lifestyle? For most people, that means balancing affordability with access to culture, recreation, and other key amenities. Language is also a factor. While English is widely spoken in most overseas retirement havens, don’t underestimate the daily stress of navigating life in a different language. It can also be immensely rewarding.
While everyone is different, most people who relocate in retirement want to know that they’ll be able to plug into their new community—whether that means connecting with long-time locals, making friends with other expats, or, ideally, moving to a place where it’s possible to do both.
After all, if you’re shopping the world for a place to call home in retirement, why not have it all?
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