The idea of retiring in another country may be appealing, but don’t do so before weighing how living abroad will affect your lifestyle and finances.
The cost of living can be cheaper outside the U.S., but there are many other issues to consider. They include your ability to adapt to a foreign culture, overcome language barriers and find access to quality health care. You’ll also need to adjust to living far away from friends and family members.
“To move to a place just because you think you can get by cheaply isn’t a good motivation,” says Kathleen Peddicord, author of “How to Retire Overseas: Everything You Need to Know to Live Well (for Less) Abroad.”
Good candidates for living abroad have a strong sense of adventure and curiosity about other countries, she adds. Following are some things to consider before deciding to retire in a foreign country.
1. How will you find quality health care?
Medicare coverage typically ends when you move outside the U.S., so you’ll need to budget for medical expenses in your adopted country. According to the U.S. State Department, many foreign medical facilities require cash payments and don’t accept U.S. insurance plans.
People often buy health insurance policies that will cover them during their time abroad. In some countries, the cost of medical care is so reasonable that many expatriates decide to pay out of pocket, says Dan Prescher, who writes for International Living and lives in Cotacachi, Ecuador.
Throughout the world, the closer you live to major metropolitan areas, the more likely you’ll be able to find quality medical care, he adds. While small towns offer a lower cost of living, they typically have fewer medical facilities.
Prescher notes that many countries that provide government-supported health care benefits allow foreigners to participate once they’ve met residency requirements. Be sure to check out the government health care regulations of the country you choose to retire in.
2. How large will your tax bill be?
You could face an added tax burden when you retire overseas. You’ll still be responsible for U.S. taxes, so consider the tax requirements of your adopted country. You may want to work with a tax specialist who can point out any problems you may encounter.
Most countries have taxation agreements with the U.S., says Peddicord. The breakdown of taxation depends on the treaty in place and your income. In the case of earned or investment income, taxation can be complicated, since the U.S. may impose taxes on both your U.S. income and income earned abroad.
3. Will you be comfortable with another language and culture?
Part of the fun of retiring abroad is learning new customs and languages, but not everyone is up to the challenge. Visit any country where you’re thinking of retiring to find out how you’d like living there. If you expect to get by on English alone, you may be disappointed.
Americans who live abroad and want to avoid the language barrier may need to spend most of their time in tourist areas, where English commonly is spoken.
People who aren’t willing to experiment with native foods will often find it hard to replicate their U.S. diet. For example, it may be a challenge to create an American-style Thanksgiving dinner in a place where turkeys and other traditional ingredients aren’t commonly available.
4. How much will you miss friends and family in the U.S.?
Some people aren’t content with communicating with friends and family members through email or Skype, says Prescher. Expatriate grandparents often miss having a face-to-face connection with their grandchildren.
If you hope to have friends and relatives visit you abroad, don’t move to a place that’s difficult to reach from the U.S. For example, a beach condo on a Caribbean island is much more accessible than one in Southeast Asia. You’ll need to consider the cost of travel and the time it takes to reach the destination.
5. Does it make more sense to rent than to buy a home abroad?
It’s usually a mistake to buy a home right away when you retire abroad. That’s because you’ll need time to decide whether that country is where you want to spend the rest of your life. Some places that are fun to visit may not be as enjoyable after you’ve been there for several months.
Prescher suggests renting during the off-season, when the tourists have left and there are fewer Americans to interact with. As a renter, you can find how difficult it is to set up a telephone system and an internet connection. Renting before you buy also makes it easier to change your mind if things don’t work out as well as you expected.
6. Have you done your homework?
Learn all you can about a country before deciding to retire there. For example, understanding the cost of living is important if you’re on a tight budget. Identify the countries where your money will go furthest. Americans who don’t take the time to understand the country where they’re moving often regret their choices.
“People take unprepared leaps that can lead to bad things,” says Peddicord. “You’ll want to do your research.”
7. Have you thought about personal security?
Think about how safe you’ll be in a foreign country before moving there. The U.S. State Department has information online about safety and security for every country in the world. You can find data about laws, customs, health conditions and other details before you visit.
After moving overseas, you’ll need to take practical precautions against crime, just as you would in the U.S. Always be aware of your surroundings. This means not flashing around large amounts of cash in public.
Never leave valuables — such as phones, purses and backpacks — unattended, and always lock your doors and windows.
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