The idea of retiring to another country may be appealing, but don’t make any decisions until you carefully consider how living abroad will affect your lifestyle and your finances.
The cost of living often is cheaper outside the U.S., but there are many other issues to consider. They include your ability to adapt to a foreign culture, overcoming language barriers and finding 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. What follows are seven things to consider before you decide 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, medical care is so reasonable that many expatriates decide to pay out of pocket, says Dan Prescher, a senior editor for International Living who lives in Mérida, the capital of Mexico’s Yucatan State.
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 it’s important to also 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. You should plan a visit to 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.
“The language barrier is often a challenge, particularly if you’re in an area where there is little English spoken,” said David B. Wright, an American living in Progreso, on Mexico’s Yucatan Peninsula, who writes about the community on his website, lifeinprogreso.com. Some Americans who live abroad avoid the language barrier by spending 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, Wright adds. 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 not seeing your loved ones in the U.S. for months at a time sounds unappealing, you might not be cut out for retirement abroad.
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 your 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 several months.
Prescher suggests that you rent 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.
“In general, it is highly advisable to rent before you buy abroad,” says Wright. “You want to make sure you’re happy living in a place before making an expensive commitment.”
6. Have you done your homework?
You should learn all you can about a country before you decide to retire there. For example, understanding the cost of living is important if you’re living on a tight budget. You’ll need to identify the countries where your money would go the 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.”
Thankfully, you can find a great deal of information online. For example, International Living magazine publishes an annual retirement index that ranks the World’s Best Places to Retire. Panama City, Panama-based publishing company Live and Invest Overseas has its own list of the top retirement destinations.
7. Have you thought about personal security?
It’s important to think about how safe you’ll be in a foreign country before you move 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 you move overseas, you’ll need to take practical precautions against crime, just as you would in the U.S., says Wright. Always be aware of your surroundings, he advises. This means not flashing around large amounts of cash in public. Never leave valuables, such as phones, purses and backpacks, unattended, he adds, and always lock your doors and windows.
Stories about crime abroad sometimes are exaggerated, Wright says. For example, many people consider Mexico to be dangerous. Some parts are, but others are not.
“That’s not to say that crime doesn’t happen,” he says. “It does, so just take the appropriate precautions.”
What are your thoughts about retiring abroad? Share with us in comments below or on our Facebook page.
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