Saturday, 24 October 2020

Retiring Abroad? Here’s What You Need to Know

Relocating to another country requires careful planning—financial and otherwise. These 8 questions can help.

THERE’S SOMETHING UNDENIABLY appealing about the idea of living an expatriate adventure in retirement. Striking out for foreign shores can seem pragmatic as well as poetic.

Relocating to another country requires careful planning—financial and otherwise.

“Most people envision a twofold advantage: the romance of experiencing a different culture and the notion that they can get more bang for their buck living abroad,” says Bill Hunter, head of strategy for Retirement Client Experience at Merrill Lynch. “And countries like Mexico, Costa Rica and Panama— popular destinations for retirees seeking warmer climates and lower costs—may offer both.”

- Advertisement -

But relocating to another country isn’t always easy. You’ll need to consider a range of factors, from your destination country’s political stability to the logistics of managing your assets from afar. Hunter urges retirees to plan carefully and consider the following questions before packing their passports.

1. Is your family on board?
The migration of a close family member across the globe can change the family dynamics, whether with children and parents or within couples. Understand the impact your move will have on close relationships—especially the one you have with your partner.

“Make sure your spouse is as invested in the idea as you are,” Hunter says. “That way, when unexpected issues arise—and they will, no matter how carefully you plan—you won’t have the added complications of resentment and blame.”

2. How will you handle health care needs?
Access to quality health care is paramount in retirement, so be sure to understand the relative cost and quality of care in the country where you hope to retire. “While many countries can offer health care that’s as good as, if not better than, what you get in the U.S., that can vary by city or region, and even by type of care,” warns Hunter, who suggests researching the physicians and facilities in your potential destination and planning accordingly. “Make sure quality remains on par with what’s available in the U.S. even for more complex procedures—and if it doesn’t, budget for the possibility that you may need to travel back home for certain medical procedures.”

Medicare doesn’t cover health services outside the U.S. You may want to look into private health insurance.

- Advertisement -

Given that Medicare doesn’t cover health services outside the U.S., you may want to look into private health insurance—often less expensive overseas—or seek out a country such as Mexico, which allows those holding permanent residence visas to buy into its national health plan. Some retirees plan to live in another country for the early years of their retirement and then come back to the U.S. in later years. But keep in mind that if you return home and sign up for Medicare, your premium will be 10% higher for each 12-month period you could have been enrolled but were not.

3. Are you looking for a tax advantage?
If lower taxes factor into your decision, think again. The IRS taxes U.S. citizens on income no matter where they live. In fact, even if you relinquish your citizenship (which few retirees do), you may owe an expatriation tax. The good news? Many countries, such as Canada and Mexico, have tax treaties with the U.S. that prevent double taxation.

4. How does the cost of living really compare?
You may be able to buy a beachfront home in Mexico for far less than what you would pay in the U.S., but you need to consider your entire budget. For example, relocation costs—whether moving your belongings or furnishing a home from scratch—may be higher than if you moved somewhere domestically. And groceries, heat, electricity, cellphone service and transportation may not cost less than what you’re now spending, and could cost more.

5. Will you be able to work?
Although many of today’s retirees hope to work during their retirement, living in a foreign country may make employment more complicated. “If that’s part of your vision, consider the job prospects for folks with your experience in your destination country—and whether you will be allowed to work as a U.S. citizen abroad,” Hunter suggests.

It’s also worth looking into the professional culture of the location you’re considering. Be prepared for a potentially lengthy adjustment period, which could affect your income.

6. How will you manage your assets?
Because finances can usually be managed from afar with relative ease, expat retirees can keep their assets in the U.S., where the economy and political situation are relatively stable. “But you’ll also want a local account to avoid currency exchange fees and ATM withdrawal charges,” Hunter says.

- Advertisement -

Depending on your destination, you may also want to find out how you can proactively address cash flow issues—like your bank account automatically freezing after you’ve repeatedly accessed your credit card from a remote location.

“Talk to your financial advisor about how to hedge against exchange-rate fluctuations by setting up a local account and making regular transfers from your U.S. account to cover everyday expenses,” Hunter suggests. It’s also a good idea to know whether these transfers might incur their own fees, and to ensure that legal documents—trusts, wills and powers of attorney—will be enforceable in your destination country.

When moving assets abroad or acquiring new investments in another country, consult a lawyer to determine whether those assets will be subject to local estate tax rules.

7. Can you adjust?
After the fantasy of living abroad becomes reality, some expats find themselves feeling isolated, particularly when they don’t speak the local language. Consider whether you might want to live somewhere with a vibrant expatriate community. Also keep in mind that the amount of English spoken in various countries may vary from region to region, or even from neighborhood to neighborhood.

Hunter suggests spending a few months in the potential destination before making a permanent move. “You’ll get a sense of life there and have the chance to scope out the housing situation and whether you’ll be able to build a network,” he says.

8. How will you connect with family and friends?
Lengthy plane rides can grow more difficult as you age. Email and video chat make it easier to stay in touch with family members and friends back in the U.S., but if you want to see them regularly in person, choose a destination that will enable you and the people you care about to travel back and forth easily and affordably.

“There’s a lot of appeal to the idea of leaving the culture you grew up in and starting a brand-new life,” Hunter says. “But retiring abroad adds a layer of complexity to virtually every aspect of retirement planning. So make sure you do your homework and make the decision with your eyes wide open.”

3 Questions to Ask Your Advisor

  1. How could the tax situation in the country where I want to live affect my portfolio?
  2. Will I be able to afford my current lifestyle there on the retirement income I’m likely to have?
  3. What is the best way for me to manage my financial needs from afar?

Source: Merrill Lynch financial

- Advertisement -
Q Costa Rica
Q Costa Rica
Reports by QCR staff

Related Articles

One important reason Costa Rica is a better retirement choice than Panama

(QCOSTARICA) After the U.S. pulled out of Panama on December 31,...


Legislators approve elimination of annuities for the next two years

QCOSTARICA - The Legislative Assembly approved this Monday, in a second and final debate, a bill that will eliminate annuities for the next two...

Exercise their powers effectively and with a sense of urgency

"Exercise their powers effectively and with a sense of urgency"

Change in restrictions increased number of cars on the streets

QCOSTARICA - Did you notice more cars on the streets this Saturday? German Marín, director of the Policia de Transito (Traffic Police), confirmed "an...

Marchamo reduction enters crucial stage in Congress

QCOSTARICA - The race is for a reduction of the property tax of the annual circulation permit, the Marchamo, to be approved into law...

Chile mine rescue: 10 years on, survivors left to fend for themselves

In 2010, the San Jose copper-gold mine located in the Atacama Desert in northern Chile caved in, trapping 33 miners. Previous geological instability at...

COVID-19 in Costa Rica: 1,503 new cases for Wed October 21

QCOSTARICA - Following a drop in the new cases daily since Sunday, there was a spike on Wednesday, with the Ministry of Health reported...

Let's Keep This Going!

To be updated with all the latest news and information about Costa Rica and Latin America.

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.