If you’ve been wondering lately whether you want to stay in the U.S. for the duration of your retirement, you’re not alone. International Living magazine recently released its list of the world’s best places to retire in 2017—the United States didn’t make the top 10. And, AARP.org reported that Americans might be able to retire 10 years earlier and enjoy a higher standard of living by moving overseas. Some 400,000 retired Americans already live abroad and that number is growing. There can be benefits to retiring overseas, but it requires even more planning than retiring stateside.
The first question: When to go? It can seem like no time is ideal for making such a big change, but the years when your children are living on their own, but haven’t yet started families might just be the sweet spot. Children or grandchildren with active needs will make it hard to leave, but don’t forget that technology makes it easier than ever to stay in touch with friends and family.
Before committing to spending any number of your retirement years abroad, consider what you’ll do with your time—community, language and work are taken for granted in the U.S., but are less straightforward abroad. Many retirees choose to work part-time to stay involved in their community and to earn some money on the side. If that’s something you’re counting on, you’ll need to consider whether there are job opportunities and whether you can get a work visa. Many countries will grant temporary residency permits to retirees, but a work visa is much harder to come by. If you’re able to get the visa, can you speak the language? Are you willing to learn? See if you can connect with an expat community in the city you plan to live. Ask about work opportunities, if that’s applicable to you, and quality of life. In addition, take a test drive by living in your desired city for a while to see if it lives up to your expectations—are things more expensive than you anticipated? Do you like the people you meet?
Once you’ve tried out the city and spoken to current residents, there is housing to consider. Where will you live? Will you rent or buy? Kathleen Peddicord, former editor and publisher of International Living magazine and author of How to Retire Overseas, recommends renting before buying when retiring abroad. It will give you time to test out your surroundings before making a serious investment. Whether you’re renting or buying, she recommends employing both a real estate agent and an attorney experienced in working with foreigners. You should also be sure to research average utility costs in your country of choice.
Healthcare and taxes are two additional complications. Medicare does not apply overseas, so you’ll need to arrange alternate healthcare. According to surveys reported on by AARP.org, healthcare is typically more affordable for retirees living abroad. However, Peddicord suggests keeping Medicare as a contingency plan—in case something goes wrong, you can fall back on your U.S. coverage. And don’t forget that you’ll still have to pay U.S. taxes even while living abroad. The forms and filing can be complicated. Ben Garfunkel, a partner in charge of KPMG’s Global Mobility Services in the United States, suggests expats seek help from a tax professional. Sources of American income, including pension and Social Security would probably be subject to tax, according to Garfunkel.
You will also want some guidance from an advisor while planning how much you can spend per month while staying comfortably in your allotted retirement budget. You will need to factor in pension, Social Security, investments and any additional income, while also thinking about plane ticket prices and exchange rates. Your advisor can work with you to keep all these moving parts in order and help you make an actionable financial plan. To further assist with your planning, you can consult AARP.org’s Retirement Abroad Tip Sheet; American Citizens Abroad, a membership organization for expats; the State Department's website; or Escape Artist—a blog about moving abroad with a section dedicated to retirees.
To continue the conversation about moving abroad during retirement, visit our blog on related topics or contact a CIBC Atlantic Trust advisor today.
Ryan Christine Coulson is a wealth strategist for CIBC Atlantic Trust Private Wealth Management's San Francisco office, with more than 12 years of industry experience. In this role, Ryan is responsible for developing integrated wealth management solutions, providing comprehensive estate and financial planning services to high net worth clients, as well as serving as a fiduciary representative for individual trusts and foundations