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Five Important Considerations in Choosing International Retirement Destinations
Having a second home, vacation retreat, or retiring to another country is alluring for a variety of reasons. To name a few of these attractive considerations:
- A lower cost of living;
- Advantageous exchange rates;
- Cultural experiences; and
A couple of years ago we vacationed in Belize. While there, we had the privilege of staying with a couple from the U.S. who had sold everything they owned to buy their "dream home" in this country. The husband was clearly enjoying his "ideal" retirement, but the wife was terribly lonely, mostly missing her grown daughters and grandchildren.
Therefore, if you are married, it seems very logical that first you both must answer the question of "Is this the right move for both of us?" before making such a drastic move.
However, if after much research and soul searching, you've decided on a specific glamorous locale and found it to be the ideal place to spend your golden years -- then, you will need to dig deeper into the realities. If this is your heart's desire, there are many things to consider. It's a lot more than finding the perfect spot, ordering the language tapes, and breaking the news to your children, friends, and other family members.
Now, it the time to get down to the essentials of truly retiring abroad. The following five key considerations, are but a few of the things you need to give serious thought to:
Renting Compared to Buying
Experts counsel that the newly internationally relocated spend at least one year renting before on taking the enormous step of buy a home. Spending time in a rental can give you perspective. You'll have time to discover what neighborhoods are the greatest and which are the pits. It's also easier to beat a fast flight back to the United States, if you find moving there was a big mistake.
Home ownership in another country can be a complicated thing. Some countries won't allow foreigners to purchase property. Others may, but some Americans have been cheated. They found that their property rights weren't what they were led to believe they were. Another concern, is that in the end, your heirs will have to worry about the disposal of the property or finding a way to manage it from abroad. Additionally, in some countries, the rights of heirs do not exist if the property is foreign owned.
Regardless of whether you move to a foreign country forever, or just for a few years --- be sure to have your estate in order prior to the move. Estate law varies by country, so once there, also have a local attorney, as well as your American lawyer, review your options.
Just as you need to attend to this same reality here in the states, it is even more important if you move overseas. This isn't a do-it-yourself topic, get professional advice.
Popular International Retirement Destinations
With fears of extreme poverty in retirement years, many Americans are considering international retirement destinations. In fact, over one million U.S. retirees are already living in other countries.
The attraction to these international destinations are obvious, with retirees seeking:
- Lower cost of living
- Hopes for a more adventuresome life
- A better climate
- Stretching a retirement income to include some sense of luxury
Some of the more popular international retirement destinations are:
- Costa Rica
- South Africa
Some of these international retirement destinations are being sweetened by the government of those countries, offering special deals with respect to visas, resident status, tax reductions or no tax if retirement income is verifiable, duty free importing of your personal belongings, including vehicles.
Many of them offer good medical care and reasonable rates on health insurance.
Gaining access to your money is an enormous factor that you need to get right from the start. While you should have a local bank account, it should be in addition to your American based checking account and/or savings account.
Additionally, make sure you use a large U.S. bank -- a bank with many offices. The bank needs to have a large distribution -- where you can have 24 hour availability on the phone and Internet access. Also, make sure it is a bank that is used to dealing with foreign transactions.
Remember, prior to your move to establish a good working relationship with your American bank. Find a bank, preferably where you have a contact person within the bank that you can call personally, should you have any problems. You should also set up a direct wire transfer authorization from your U.S. bank account into your foreign account for emergency purposes.
Keeping some accounts in the United States makes a lot of sense. First of all, access is easy -- just use your ATM card. In addition to be uncomplicated, it also sometimes affords you a great exchange rate, the same one your bank receives. However, just like here in the U.S. -- be extremely careful where you use your ATM card.
Prior to your relocation, set up an automatic deposit of any Social Security benefits, monthly pension, or 401(k) check. While you can actually receive your Social Security dollars overseas and have it mailed to a foreign location, generally that is not recommended.
Likewise, use your U.S. bank's electronic withdrawal services to guarantee that any bills for which you still may be responsible for, back in the states, are paid on time.
Having your major account in the U.S. can also guard you from overseas currency fluctuations. The dollar tends to be more stable, but it largely depends on the country you are living in.
Also, be aware that these are very shaky times for the American dollar overseas.
Retiring overseas requires some tax and pre-move tax planning. Just because you reside outside of the United States does not mean that you do not have to worry about taxes. The government will be keen to find out whether your move has anything to do with dodging taxes, rather than evading severe winters, or trying to live more abundantly on a fixed income.
Additionally, because each country is governed by its own tax system, residency and ownership laws -- it's impossible to know what other tax issues you will face in your new retirement country. Retirees should be extremely careful to do their research in this area before deciding on moving.
Just in case, you are thinking that renouncing your citizenship would simply eliminate the problem -- be aware that too, may not negate your tax liabilities. The government presumes that wealthy Americans who renounce their citizenship are doing so, just to dodge taxes. Since 1996, anyone earning over $124,000 or more a year -- or who has a net worth of $622,000 or more -- who renounces citizenship, must continue to pay taxes in the U.S. for ten more years, unless they can prove that they should be exempt from the law.
The IRS takes renouncing your citizenship very seriously. If it suspects you of suspicious motives of moving just to evade taxes, you could be banned from returning to the U.S.
When you retire, health and health care become more important as you age. Certainly, it presents some issues to consider if moving to a foreign country. Definitely check out the local rules on health care, to see what your obligations are there.
Also, there may be something in your retirement plan that allows your health care benefits to continue during retirement -- but it may not cover you in a foreign country. Remember, you are not eligible for Medicare while you are overseas.
In conclusion, don't let all of the above considerations deter you if international retirement is your hearts desire -- just make informed decisions.
So, maybe you're not ready to make the leap of faith and decide to retire permanently overseas, there is an alternative to moving from the United States. As retirees, you can take advantage of lower costs for one of our biggest retirement financial realities -- medical procedures. Medical tourism is rapidly becoming one of the top determiners of retired couples.
What is medical tourism? Retirees are opting to travel to foreign countries to get high quality affordable health care, while combining the experience with a vacation.
Perhaps surprising to many is the fact that India, has become one of the most preferred medical tourism destinations. They have world class hospitals, very qualified physicians, and care is very inexpensive compared to the United States.
Many of these medical tourism facilities in India are combined with five star hotels. If you think about, you are being seen by many physicians already from India, here in the U.S.
Some of the more popular medical tourism procedures in India are:
- Open heart surgery
- Hip replacement
- Knee replacement
- Eye surgery
- Gastric bypass
- Spine surgery
- Cochlear implant
- Liver transplant
- Bone marrow transplants
- Cancer therapy
International Panama Retirement Facts
If You'd Like To Know More!
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- International Household Moving at SentryInternational.com
- Moving to and living in...Argentina: Oleada Holistic Wellness Center begins with Juice Saturdays
- ExpatExchange.com: Working Abroad, Expatriate Resources, Moving Overseas, Living Abroad & Overse
- VOOVit.com - Low Cost International Shipping
This article is for information, inspiration, and support and not a substitute for professional tax, legal, or financial advice.