Retiring Abroad: Understanding the Basics

What are the Benefits and Drawbacks of Retiring Overseas?

Whether you’ve enjoyed life so far in a metropolis, in the back of beyond, or somewhere in between, you’ve surely experienced the good and bad in all aspects of life in the place(s) you’ve called home. Living abroad in your later years also has its highs and lows, and when deciding if retiring overseas is right for you, it’s important to analyze the pluses and negatives of every single aspect.

Rather than just putting a checkmark in your food column because you absolutely love the local food, you need to consider the possible negatives, however small they may be, just to keep a balanced perspective. For example, maybe you love the food so much that you overeat and develop health problems that are difficult to treat in that country. It is a more sobering, but useful and realistic approach for people who truly want to make this happen.

As such, we’re going to discuss typical pros and cons of retiring overseas, but with a more holistic view. For example, one of the first benefits people often think of is a lower cost of living, which is usually true unless you’re planning to retire to somewhere like Sweden or Luxembourg. So while your dollars may go further in Latin America or many places in Europe, it’s important to understand that the cost of living is lower because the lifestyle is different. You likely won’t have all the same amenities, public services, etc. you’ve become accustomed to at home, so it’s important to take a serious personal inventory of what is actually important to you in your life. Yes, you may save money eating out, but if you quickly tire of the town’s only three restaurants, it would be a negative overall.

Likewise, many retirees may see the cultural and/or language barriers as too big a hurdle to overcome, especially in their later years. It can be difficult to integrate into a new community at any age, but particularly if you’re no longer as active socially as you once were. This, however, can often be overcome by viewing it as a wonderful chance to learn, working to make friends and contacts both foreign and local, and embracing the adventure aspect of it all.

So while the internet is full of lists of the supposed benefits to living abroad like lower cost of living, improved climate, tax benefits, and cheaper healthcare, it is crucial to look at the bad side of the good and the upside of the down. In this guide we will aim to do just that, which is a frame of mind that would serve anyone who is looking to retire abroad well.

In this guide, we will answer the following questions:

• When Should I Start Preparing to Retire Abroad?
• What Factors Should I Consider When Choosing an International Retirement Destination?
  • Safety and Security
  • Culture and Language
  • Cost of Living
  • Housing
  • Healthcare
  • Climate and Environment
  • Visa Requirements
  • Social Life and Community
  • Proximity to Family and Friends
• Financial Planning for an Overseas Retirement
• What are the Logistics of Moving Overseas?

When Should I Start Preparing to Retire Abroad?

Now, whether you’re planning to retire abroad or in your home country. However, this immediate planning can be passive preparation in the form of saving and getting your finances and long-term portfolio in order. For more intensive and detailed preparation once you’ve got your destination in mind, you’ll still require several years.

Before investing significant amounts of preparation time and research into the topic, you need to determine if this is simply a pleasant daydream or something you truly want to and can make happen. Perusing exotic bungalows for sale and browsing foreign menus and wine lists can be part of the “research,” but there are many other less glamorous aspects that must be taken care of with great diligence and it’s best to be upfront with yourself before you start doing the heavy lifting. There is no shame in simply imagining living in a foreign land or exploring ideas for fun, even if you know it’s not realistic for you. A great retirement can be had anywhere, so if you recognize retiring abroad is not truly for you, it’s better to understand that early on before expending time and energy.

That being said, retiring in another country is a possibility for more people than ever in this day and age, thanks to easier travel, international banking, global internet coverage, and easier communication. So start by looking at your finances, then increase your monthly savings, check your 401k and any investments or properties you own, and try to get a realistic idea of where you’ll be come retirement age. While your day-to-day expenses may one day be cheaper once you’ve retired abroad, keep in mind that getting there and establishing yourself will be a major investment.

If you’ve decided you do in fact want to retire abroad and have the means to make it happen, most people still want to use the five or ten years before they retire to weigh their options carefully and strategize. When you have chosen your destination, it is advisable to spend a year or two researching and making concrete plans for every aspect of not just life abroad, but the major transition required to start that life.

What Factors Should I Consider When Choosing an International Retirement Destination?

This is where the more fun planning starts to come into play, as you contrast the idea of a relaxing life on the beach with a relaxing life in the mountains. The pictures, videos, and personal accounts you can find online are useful and can be used for motivation to get through the more tedious tasks, but it is always important not to gloss over any of the less glamorous aspects and considerations.

There are a multitude of important factors to consider, but some of the major ones are:

Safety and Security

While it is true that any city big or small can be dangerous, there are countries and cities with higher crime rates. This can range from petty theft to abduction and worse, so it’s important to study each location’s overall levels of crime, understand the sizes and locations of potential no-go areas, and also have a basic idea of what the local police customs and process is like, as this can vary wildly from the US. The idea of bribing a police officer would seem preposterous to almost everyone in the US, but is a common and accepted part of life in many other countries. You of course want to avoid doing anything illegal at all times, but need to understand that things simply work differently in different parts of the world and that forewarned is forearmed.

Culture and Language

This is personal preference, as some people are seeking more of a change and challenge, while others want as little difference as possible from their accustomed lifestyle. It is important to get a real understanding of life in the country for locals and expats alike before you make a final decision. While you may have loved vacationing at a resort somewhere, it likely involved an English-fluent staff and an idealized version of that country’s culture. Learning a new language can be fun and exciting, but can also be a major hurdle when trying to navigate issues like negotiating a housing agreement or dealing with an issue in a local hospital. Weigh the pluses and minuses carefully here, but don’t be scared to get out of your comfort zone a bit.

Cost of Living

Your dollar will indeed stretch further in many countries, especially when backed up by monthly Social Security checks, so this is usually a plus in most countries. Try to get a feel for not only the costs of day-to-day living in each potential country, but also the level of goods, services, utilities, transportation, etc. you’ll have available. You can likely live very cheaply in more rural areas, but you need to balance low costs with what you want and need for a good life.

Housing

You are creating a new home away from home, and should approach housing slowly and carefully. Renting (or purchasing!) a foreign home sight unseen is certainly not recommended, and most foreign retirees will stay in a temporary place for weeks or months as they check out local housing options in person and get acclimated to the country. While you may long to move straight into your dream home, many hearts have been broken by wiring funds overseas and signing dubious contracts without having at least a basic understanding of local laws and customs. Predators posing as reliable realtors lurk abroad and in the US, so this is not a step to be taken lightly. Even if you know this is going to be your permanent home, it is usually a good idea to rent a temporary home while you acclimate and learn more about different sectors of town, safety, etc.

Healthcare

The US has a fantastic healthcare system in terms of quality of care, but when compared to the rest of the world, the costs are indeed outrageous. That is because there are simply different systems in place and differing philosophies about healthcare. Insurance is often much less expensive abroad, but you need to have a very good idea of what kind of facilities you’ll be able to attend, the level of training of your attending physicians, and things like wait times for appointments. It is not unusual in many countries to have to wait weeks or months for something that would be attended to quickly in the US. Always weigh the monthly costs with the level of care you can expect for normal check-ups as well as potential emergencies.

Climate and Environment

Many people foresee their retirement abroad as days in a tropical paradise and fun in the sun, and this is very much attainable. Decide if you want a major change from the climate you’re accustomed to, and if having different seasons is important to you. Many warmer countries have very little variation in their average monthly temperatures as compared to most of the US. This is fantastic if you’re somewhere with an average temperature of 75 to 80° F, but less so when it’s 90°+ for months on end.

Visa Requirements

This has thankfully gotten easier over the years as many countries now welcome foreign retirees (who are going to support their local economies). For most countries in the Americas, obtaining the proper visas for retiring long-term is a somewhat complex, but doable process. Other countries, namely some in Europe, have more obstacles in the way for US or non-EU citizens. Almost anywhere is possible, however, though the price tag of circumventing particular restrictions may be extreme.

Social Life and Community

The proper attitude and preparation can make this one of the best parts of retiring abroad, but you need to research this as much as possible, preferably by visiting for extended periods. There are a myriad of complex questions to consider and this really comes down to each individual’s personality and preferences, but it’s important to think about things like local culture and customs, activities and events available, the local expat community, and your own personality, tastes, and hobbies.

Proximity to Family and Friends

Long gone are the days of expensive international phone calls, as you can easily Facetime with anyone in the world for free. It is now much easier to stay in touch with friends and family back home, but you will still want to visit the US on occasion and perhaps have people visit you. Costs of travel and travel times can be significant, and these need to be considered for both vacation and potential emergency situations. You may find that your idyllic beach home hideaway requires a boat ride and two buses to get to the airport. This may be worth it and become second nature to you, but potential visitors might not be so daring.

Financial Planning for an Overseas Retirement

This is in many ways the most important step, and many people would benefit from consulting a financial advisor who specializes in international retirement. There are a multitude of areas to consider, including tax implications at home and abroad, Social Security payments, inflation, economic stability of your destination, and the currency exchange rate. Some of these can vary wildly from year to year, and even longer-term fluctuations in the exchange rate can impact local purchasing power.

In terms of actual expenses, these can be divided into three basic sections: moving overseas, daily life, and emergencies. The move itself is a major expense not just in terms of shipping and airfare, but in terms of temporary accommodations, down payments on longer term living, potentially purchasing a car, home furnishing and appliances, etc. This is the most difficult step and comes at a time when you are least prepared in terms of language competency and familiarity with local prices and customs, so you need a significant financial cushion set aside for this stage.

Once you have your feet under you, you will get a true sense of your daily expenses and start adjusting your budget, moving assets around as necessary. Your prior planning will come in handy here, but you need to carefully monitor your budget for the first several months to see how your income streams and savings compare with your expenses.

The third consideration is to make sure you have a contingency plan for unexpected expenses or emergencies. This could include rush flights back home, major medical expenses or evacuation, a surprise change in the local economy or exchange rate, etc. This is certainly one of the least glamorous aspects of planning, but a must.

What are the Logistics of Moving Overseas?

If you have diligently done all your preparations, this can be an exciting, if intense, time. If you’re underprepared or have neglected key steps, this will be maddening and can bring you to your knees.

Before you depart, you’ll need to wrap things up in the US in terms of selling your home, making sure your local bank and financial institutions are aware of your plans, and packing up your possessions. Many people wisely choose to sell many of their material possessions before moving rather than storing them or trying to ship them. You are often better off with cash in hand in your new locale than having paid to ship furnishings and the like. There also may be import regulations (especially for automobiles), so you need to try to keep it to the bare minimum in terms of what you’re taking with you.

You’ll also need to make sure all your documentation is in order, including necessary vaccinations, temporary visas, financial records, and medical records, as well as translations of all necessary documents. When everything is in line, set the date and arrange for your big departure. Make sure you know exactly how much baggage you can take on your flight as well as the fees for extra weight or bags. You may want to arrange for a hotel immediately upon arrival or have temporary lodging lined up. Make sure you’ve planned safe transportation for you and your bags from the airport to your next stop. From there, it is either time to find a more permanent place to live or to start setting up things like power, gas, water, and internet in your new home. These have to be accomplished quickly and you’ll benefit from having a reliable person in-country to help you with this. Research this as much as possible beforehand online, but there really is no substitute for having a trusted person there who has been through it all before.

You’ll also need to handle other local matters like registering for identification, getting insurance, and setting up a local bank account. Their respective processes can seem bewildering to a new arrival, but can all be accomplished with enough time (and money). Remember that you are almost through the toughest part, so keep calm and go through whatever red tape is required.

As you make it through these steps, you’ll find your patience tested but your confidence growing. The days will turn into weeks in your new home as you move forward with this exciting new period of life.

This article is the first in a series on how to retire abroad. In upcoming articles, we will go into further detail on areas such as the necessary documents, financial requirements, the best countries for retirement, and more.