By Robyn A. Friedman
City & Shore Magazine
Have you fantasized about retiring to a tropical island and spending your days sipping piña coladas as you watch the tide roll in?
It’s tempting to retire abroad — to live in an exotic locale and perhaps even lower your cost of living. Considering the average monthly social security benefit for retired workers this year is $1,360, retiring abroad might be a way to stretch those retirement dollars further — provided you choose the right country.
But there are plenty of things to consider before heading overseas—mundane things like healthcare, money and taxes. Failing to do so could be disastrous.
“The more research you do ahead of time, the smoother the relocation and transition,” says Shomari Hearn, a certified financial planner with Palisades Hudson Financial Group in Fort Lauderdale. “Understanding what the foreign jurisdiction requires for you to become a permanent resident is important.”
Here are just a few of the factors to consider well in advance of retiring abroad:
Healthcare. Medicare generally doesn’t cover medical expenses outside the United States, Hearn says, although in limited circumstances the program provides emergency coverage in Canada and Mexico. Many countries have national health systems, but eligibility requirements vary. It’s a good idea to purchase an international health insurance plan that can travel with you.
Taxes. You can’t ignore the IRS, even if you live abroad. You’ll need to file a tax return and may be taxed on your worldwide income. It’s wise to consult with a U.S.-based accountant knowledgeable about the taxation of expats.
Money management. Hearn recommends keeping the bulk of your assets in the United States and transferring funds to your local foreign bank as you need them. “Staggering transfers removes some of the risk of currency fluctuations and also protects you if your new country’s economy is unstable,” he says.
Language. You may want to stick to a nation that speaks your first or a second language. According to the Social Security Administration, of the 272,517 retired American workers living abroad in 2015, most were in Canada, Japan and Mexico.
There are numerous other issues that need to be addressed by those retiring abroad, such as estate planning, visa requirements, social security benefits and housing needs. Hearn advises pre-retirees to start planning at least two years in advance.
Most importantly, don’t move until you’ve spent a significant amount of time in your new home country. Consider renting a place for a few months first to get a sense of what it’s actually like to live there. Your experiences while on vacation for a week might be very different than living there permanently.