Financial Impacts To Consider If Retiring Abroad
3 min read
Some 10,000 baby boomers now retire daily and Americans with dramatically meager retirement accounts are living longer and must support themselves in retirement well into their 80’s and 90’s. Some retirees, by choice and some by necessity will look at living abroad to make their retirement money go farther and produce a better standard of living than remaining in the United States.
Someone considering doing this would obviously want to research the potential country and visit to make sure it is a good fit. Outside of the destination and move itself, there are financial ramifications from a move abroad that also have to be known and considered. Here are five important ones:
Taxes are already complicated enough for citizens that never leave the United States, so just imagine for a moment what moving abroad can do to your ongoing relationship with the IRS. For example, any income you earn abroad may be excluded from federal taxes, non-earned income like pensions or distributions from retirement accounts are all still fair game for Uncle Sam. However, that’s just one piece of the puzzle. You’ll also need to know and understand the rules in the country where you are going to move to. It’s best to consult tax experts before you move to guard against any ignorance or confusion.
The exchange rate can be an important factor to consider especially in times of volatility or extreme swings. Most people will keep their money in U.S. dollar-based assets and then convert to the local currency as needed. Retirees can take steps to minimize the chance of currency fluctuations by settling in a country that either uses the U.S. dollar or pegs its own currency to it. Social Security benefits, which you can receive in all, but a few foreign countries are paid out in U.S. dollars and won’t be adjusted because of exchange rates.
Another big consideration: Medicare. While Social Security isn’t generally impacted by living abroad, traditional Medicare does not cover medical expenses outside of the United States. There are Medicare supplement plans do cover some foreign emergency expenses, but this is meant for travelers, permanent residents. There can be insurance plans specifically designed for retirees living abroad but that takes on the additional costs of paying it yourself.
Retirement is changing. More and more retirees will continue to do some form of work after they retire, whether that’s a new career altogether or a less involved part-time gig that gets them out of the house and lets them earn extra money. However, the country where you’re moving may require a work permits or exclude non-residents from some kind of jobs. Doing business in a foreign country can also lead to a host of cultural considerations that you must be aware of and abide by.
Deciding you want to put down roots in another country can come with a laundry list of legal considerations. One of the biggest is figuring out residency requirements in your target country: how to attain, how to prove and how long that process may take. Start your research by checking the immigration website of any country you’re considering determining how you can legally retire there. Don’t just move somewhere and try to figure it out once you get there.