Adventures don’t have to end when you retire. In fact, your golden years can bring many new and exciting experiences, especially if you choose to move overseas for retirement. From lower costs of living to a refreshing change of scenery, retiring to an overseas destination offers plenty of benefits.
However, navigating through visa applications, taxes, language barriers, and cultural differences can be tricky. Plus, adjusting to a new lifestyle can be challenging without the comfort of familiar faces.
Nevertheless, with careful planning, retiring abroad can be a sensational adventure. If you are set on making the big move, here are some tips to help you get started.
1. Relocate Temporarily
When you go on a fun trip, it’s easy to fall in love with a place and envision it as your future home. However, there is a significant difference between being a tourist and a resident.
Moreover, keep in mind that an ideal vacation spot doesn’t always turn out to be a great place to live. For instance, some people could move to a tropical country because of its beautiful summers, only to discover that they couldn’t bear the wet season.
It’s also important to consider how your daily routine would be affected. Make a list of things you wouldn’t want to give up or change. Then, try to live in your desired destination for a few months to see if it really fits your lifestyle.
2. Rent First
Do not rush into major commitments like buying a home. After a few months, you may realize that the place isn’t for you, so it’s not sensible to own real property. It’s best to rent first to get a feel for the location. Even if you’ve chosen the correct country, you might not like the particular neighborhood. When you’ve finally decided that the location is right, only then should you consider purchasing a property built to trends and code.
Even if you plan on staying for a long time, renting can be a less costly option that allows you more flexibility should you decide to relocate again. The home buying process can also be more complicated in foreign countries, especially for ex-pats. Hence, do your research and consult a professional to ensure a safe and legitimate transaction.
3. Look into Insurance Requirements
In some countries, travel insurance with medical coverage is mandatory for entry. You may be asked to provide proof of insurance covering full hospitalization, air ambulance, and COVID-19 medical costs to be granted a travel visa. Moreover, look into additional insurance requirements introduced in response to the pandemic.
Given the current situation, it’s crucial to determine if the country you’re planning to move to is known for offering quality health care. Note that in some countries, foreign retirees who have acquired residency are eligible for public health insurance plans, so take advantage of this.
4. Study the Language
Learning the local language of the country you choose to move to will benefit you in many ways. Thus, take some time to study and memorize at least the basic vocabulary. There are a lot of different language learning programs available one of my favorites is DuoLingo which has a free app that you can load on your phone to help you practice your new language any time. You can also familiarize yourself better by watching a handful of television shows or movies in the local language.
Along with learning the language, spend some time researching the city’s geography and important landmarks. The last thing you want to do is arrive in a foreign country without knowing where you’re going.
5. Calculate the Cost of Living
While some people may have more financial freedom in retirement, some retirees may retire overseas to reduce expenses. Either way, it’s important to be mindful of your costs in a new situation. Generally, living in a location is much cheaper than being a tourist in that exact location. Compare the cost of living in your hometown to that of your desired location to see if making the move is truly worth it. Create a spreadsheet that compares the cost of rent, food, and transportation in your top 5 target destinations. Several sites provide good comparison calculators, including Numbeo, which compares countries, although you need to keep in mind that costs vary drastically from place to place within a country.
If you are considering retiring overseas, you’ve probably already heard of the oldest proponent of retiring overseas, i.e., International Living Magazine, which publishes an annual “Best Places to Retire” index. This index ranks various countries by several factors including, cost, healthcare, housing, benefits, visas, entertainment, climate, etc. (FYI for 2021, Costa Rica regained the #1 spot after years of falling out of that coveted spot).
Remember, planning for your retirement shouldn’t stop when you retire. While there’s nothing wrong with focusing on enjoying your golden years, putting the thought of saving behind you can be detrimental to your financial security.
CityGlobe created a video showing the top 20 highest cost-of-living countries by year, starting in 1990 through 2021. So you can see how they changed over time.
6. Keep Your Taxes in Check
If you continue to earn income as a U.S. citizen, the IRS expects you to continue paying taxes, regardless of where you live. Thus, be sure to accomplish and file your tax forms correctly and on time. Ex-pats do have a little longer to file than U.S. residents. Typically, the deadline is June 15th, but you can still file for an extension at that point.
U.S. citizens and resident aliens who move overseas are taxed on their global income, but they may be eligible for exclusion from foreign earned income. The deductible amount can reach up to $112,000 in 2022, adjusted every year for inflation. Look into this to significantly lower your taxable income. Moreover, see if you are also qualified to exclude foreign housing expenses from your taxes. Note: This only applies to “Earned Income,” not pensions, Social Security, etc.
On the flip side, your foreign country may tax a resident’s income, pensions, wealth, etc., so be aware of that.
7. Consider Transportation
If you are moving overseas for retirement, where road regulations differ from what you’re used to, it can be tricky, as can obtaining a license to operate in said country. But there are options. Many countries rely more on public transportation, low-cost taxis, Tuk-tuks, “chicken-busses,” and open-air trucks, so you may find them more convenient than owning a vehicle. Plus, due to tariffs, etc., the price of owning and operating a vehicle overseas can sometimes be quadruple that of a car in the U.S.
Consider the condition, cleanliness, fare cost, and running schedule of public transportation modes like subway systems. Also, take into account how near they are to your desired location.
8. Prioritize Your Safety
A country’s political stability is essential in ensuring your safety as a foreign resident. Recent government instability may deter your relocation plans. Furthermore, do some research on the crime rate of the cities you have in mind. Look up the proximity of police stations, firehouses, and hospitals to your target location, as well. You’ll want to be ready in case you face a slip and fall accident, an injury, or any other danger.
The Bottom Line
Uncertainty will loom over retirement if you don’t take steps to plan for it properly. If you are nearing retirement and want to move abroad, it’s crucial to hold this goal firmly in mind and devise a course of action. This way, you can freely enjoy the fruits of your labor without having to worry about your financial security.
About the Author:
Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers.
Here, they help taxpayers save money on their tax returns.
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