Living Abroad in Retirement: Five Things to Know
If you could retire and live anywhere, would you choose to live in the United States? For some Americans, the answer is no. Travel lovers may be seeking a new adventure, while cost-conscious retirees may hope to stretch their nest eggs in countries with a lower cost of living. While living abroad may be at the top of your retirement bucket list, doing so requires careful planning. Here are five things to keep in mind before you make the leap:
1 – Nice places to visit may not make the best places to live.
Have you ever vacationed at a spot you loved and wondered what it might be like to live there full-time? Try taking an extended vacation there before committing to a move. Some tourist visas allow visitors to stay for up to three months. If you are still working and can do so remotely, you may be able to get a “digital nomad” visa, which could enable you to stay for a year or more. During your temporary residency, research what permanent residency looks like. Ask questions of locals and other expats.
2 – Medicare coverage is limited outside the U.S.
Once you move to another country, don’t expect to rely on Medicare to pay for your health care expenses. Medicare.gov lists just three situations in which it will pay for certain types of health care at a hospital outside the U.S. All are intended to help Americans in emergency situations when a foreign hospital is the closest option, or while traveling through Canada on a direct route to Alaska. To ensure you have coverage outside the U.S., consider purchasing an international health insurance policy. Also, be aware that you may face a penalty under the U.S. Affordable Care Act (ACA) if you don’t meet the IRS’s “Physical Presence” test. You may also qualify for exemption from the ACA’s mandatory health care rule if you meet the requirements to become a bona fide resident in your new country.
3 – Make sure you can still receive your Social Security payments.
U.S. citizens who are eligible to receive Social Security payments can still get them if they move to another country. While the Social Security Administration can only send wire transfers to U.S. banks, it can mail you a check in many locations all over the world, but not all. You can learn more about receiving benefits while you’re outside the U.S. in this brochure.
4 – Look to see whether your new country offers tax breaks to retirees.
U.S. News & World Report indicated in a recent article that some countries offer significant tax breaks, in-country discounts, or other perks to foreign retirees. Do your research to learn what your new country offers. Taking advantage of these benefits could save you money.
5 – Have a plan to return to the U.S. if things don’t work out.
Expats recommend communicating openly with your spouse and family about how things are going, and having enough money budgeted to cover an unexpected return home.
If you’re considering spending your retirement years in a different country, don’t forget to share your plans with your financial advisor, and enlist your advisor’s help to understand any tax and estate planning considerations you may face. U.S. expats must still file a tax return and pay U.S. taxes, even if they move their assets to accounts in their new country. In addition, you may need to draft new estate planning documents if your new country doesn’t recognize your U.S. documents.
Living abroad in retirement can raise some complex issues, but many expats have found ways to anticipate potential problems and develop plans to resolve them. Organizations like ExpatExchange offer resources and ways to connect with expats around the world, and your local library may also offer guides and information. If retiring abroad appeals to you, commit to doing your homework first. Doing so may make the difference between a relaxing, enjoyable experience and one plagued by problems.