By: Mary Ellen Nessmith, MPA
The landscape of retirement has changed over the past decade. Twenty five years ago the most important consideration for choosing where to retire was based on weather and climate. Today, the primary driver of retirement location is based on cost of living and access to affordable healthcare. (Sightings, T. 2013). Due to losses from the last stock market collapse and substantial increase in health care costs retirees have begun to seek other options in retirement locations (Wood, D. 2013). They are also looking for ways to stretch their dollar and increase quality of life. One way Baby Boomers are achieving this is to move abroad. There are many popular locations all over the world where expatriates are relocating. From Europe, Australia, and Asia to Latin America- you will find expat communities. Mexico and Latin America are being dubbed “The New Sunbelt” (Wood, D. 2013). There are many factors to consider in determining if retirement abroad is for you. Research is the key to making an educated decision that matches your vision of retirement.
The advantages to living in a foreign country for recent retirees are vast. The cost of living in some countries can be significantly lower than in the United States. Some individuals are capable of retiring earlier based on a lower cost of living. Weather is still a critical factor for determining where one may retire. The most popular expatriate locations tend to have mild temperatures year around. A newer and equally important consideration in retirement choice is healthcare costs. As the cost of healthcare continues to rise in the United States, less expensive options are an attractive quality for a person living on a fixed income. Other financial enticements include governments giving discounts to foreign retirees or incentives to relocate to their country. Panama, for example, was one of the first countries to target American Baby Boomers. A series of laws created a “Pensionado” program, offering foreigners lifelong residence in Panama if they can prove they receive a monthly pension of more than $1000 US dollars. Foreign-earned pensions are not taxed by the Panamanian government (Wood, D. 2013).
Technology in banking and communication has increased convenience and connectivity for expatriates in other countries. Retirees can have their Social Security checks deposited directly into their accounts with no hassle. Families can see each other and speak daily with the technical assistance of skype and FaceTime. These changes have come to fruition in the past decade and increased the quality and convenience of life to retirees abroad.
An alternative to moving full time to another country is to live half of the year in the country of your choice. This is popular with retirees who are not interested in living year round in another country. Many retirees enjoy the warmer weather and reduced living expenses half of the year. “If you can save money living abroad full time, you can save money living abroad part-time as well.” (Block, S. 2013).
When determining whether living abroad is an option for you it is critical to consider the disadvantages. Many retirees consider moving to a foreign country for a slower lifestyle. However, this may mean giving up some of the amenities readily available in the U.S. This can range from repairs to certain items to stores and goods that may not be accessible in the country you choose. (Block, S. 2013). Another issue that is often brought to the forefront is safety in other countries. Often, expats who live in an area report low crime. However, American retirees can be targets for crime, particularly in countries with a high poverty rate. For an unbiased view of the dangers, use the State Department’s Retirement Abroad Advisory (http://travel.state.gov/content/travel/english.html).
A retired person can receive Social Security in a foreign country but cannot use Medicare. A retiree has the option to purchase local health insurance or pay out of pocket. In most cases this is at a much lower cost than the United States. In some countries, taxes will not be an issue for retirees, but keep in mind that U.S. citizens are liable for all federal U.S. income taxes and are not exempt just because they reside elsewhere. Specific country taxes, if applicable, may be written off your U.S. tax return, so finding a U.S. professional who is accustomed to preparing tax returns for expats is critical. (Martel, J. 2014). There are many advantages and disadvantages to living abroad. The most significant factor in making this decision is determining what is right for you in your retirement.
How do I decide if retiring abroad is right for me?
• Research! Research! Research!
• Contact formalized expatriate organization in location of interest
• Connect with retirees in the area through phone, email, blogs, or books
• Visit several places and spend time there
• Rent in the beginning before buying
• Familiarize yourself with local tax laws
• Review local healthcare
Expat Info Desk
U.S. Department of State: U.S. Passports & International Travel
American Citizens Abroad- The Voice of Americans Overseas
Block, S. (2013). How to Retire Abroad. Retrieved from http://www.kiplinger.com/article/retirement/T037-C000-S002-how-to-retire-abroad.html
Berman, D. (2015). 15 Best Countries for Retirement: 2015. Retrieved from http://www.thinkadvisor.com/2015/01/12/15-best-foreign-countries-for-retirement-2015?page=16
Golson, B. (2012). Best Places to Retire Abroad Paradise Found. Retrieved from http://www.aarp.org/home-garden/livable-communities/info-07-2010/paradise_found.html
Martel, J. (2014). What You Need to Know Before Retiring Internationally? Retrieved from http://www.forbes.com/sites/northwesternmutual/2014/09/24/what-you-need-to-know-before-retiring-internationally/
Sightings, T. (2013). Where Are Baby Boomers Going to Live? Retrieved from
Wood, D. (2013). Why US baby boomers are retiring in Latin America. Retrieved from http://www.csmonitor.com/World/Americas/2013/1201/Why-US-baby-boomers-are-retiring-in-Latin-America-video