Most Americans prefer to retire in the US, but some adventurous baby boomers are looking for ways to retire abroad. According to a study by International Living magazine in 2023, Americans are moving abroad to spend less money and live healthier and happier lives.
If this sounds like you, you probably have many questions about retiring to another country. What are the best countries to retire in? How can I find good quality healthcare? How will I learn the language? Do I have to pay taxes?
The good news is that there are thousands of retirees who have already moved to a new country. So, there is tons of information available on where and how to retire abroad.
Why retire abroad?
There are a few big motivators for retiring abroad. First is the sense of adventure. Living in a new country can be an exciting experience, giving you an opportunity to broaden your horizon, learn about new cultures, try new food, or simply have a fresh start in life.
Another big reason to retire outside of the US is that many baby boomers didn’t save enough for retirement or their retirement nest egg lost value and never recovered.
These are financial realities for a growing number of baby boomers who are hitting 65 without enough money stashed away to maintain their standard of living. The number of retirees who draw Social Security outside of the US is growing every year.
How to choose where to go?
Typically, when people start their research on where they would like to live, they often consider places where they had an amazing vacation. But vacations and reality often clash.
A beach town might seem like a perfect location for a holiday. However, once you decide to relocate issues like climate change, frequent flooding, and hurricane season become much more of a consideration.
The best advice is to make a list of priorities and what is most important for you to have in a new place.
One helpful tool is an International Living magazine thorough survey of ‘where to retire’. Annual Global Retirement Index is a study that incorporates several different factors including affordable housing, quality healthcare, safety, political stability, weather, and more.
Once you decide where you would like to retire you will need to start looking at residency requirements, visas, healthcare, and how taxes work.
Every country has its own residency requirements, such as providing a certain amount of annual or monthly income, showing substantial savings, or even purchasing real estate.
There is a difference between temporary residency, long-term residency, and permanent residency.
Keep in mind that establishing permanent residency in a foreign country does not necessarily means citizenship. In some countries, permanent residency leads to access to public healthcare and permits to work. But you cannot vote in an election or get a passport.
Several countries offer ancestry citizenship to those who can prove that they have ancestors who were citizens of that country. Ancestry law varies from country to country, but do not underestimate the value of the second passport. If you get one in a European country, you will have access to free healthcare and even send your kids to college for free.
Learn about visa requirements.
Visa requirements vary from country to country. But if you are retired and do not need to work, those kinds of visas associated with retirement (non-working visas) are relatively easy to obtain.
For example, if you want to move to Portugal, you will need to apply for the country’s popular D7 visa. It’s also known as Retirement Visa or Passive Income Visa. This type of visa means you have to prove that you can support yourself without working. First, you will obtain a temporary resident visa. Then after a few years, you can apply for a permanent residency visa, which allows you to travel through the EU like a citizen.
Keep in mind that qualifications for each type of visa typically include a background check, proof of income, and proof of international health insurance (you can switch over to a country’s health insurance after you obtain residency). Additionally, in some cases, you need to open a local bank account and have proof of local accommodation.
Pay your taxes.
Many people do not realize that there are requirements for reporting your income even though you live in another country. This is much easier to plan upfront than to deal with after the fact.
As a US citizen, you are always required to pay taxes even if you have retired in another country. You will still have to file an income tax return with the IRS and will have to declare any money withdrawn from your retirement accounts.
Keep in mind that pre-tax retirement plans such as 401(k) and IRA, retirement pensions and often Social Security benefits are incomes that remain taxable.
Organize your assets.
If you are planning to retire abroad, you have to think about how to organize your assets. You don’t need to move your assets with you. Your stocks and bonds portfolio, your annuity, and retirement accounts such as 401(k), IRA, and Roth IRA, can remain in the US.
To cover your day-to-day expenses, you can open a local bank account to accept regular transfers from your US account and pay bills.
Also, you can open an online banking account which makes it easier to manage your money while living abroad. It makes more sense to apply for a direct deposit from Social Security than wait for a check mailed abroad. Online banking may prevent currency change or check-cashing fees.
Major credit cards such as Visa, Master Card, and American Express are accepted in many locations around the world. In many cases, it will be easier to use credit cards to cover your daily expenses and purchases.
But if you decide to move your assets abroad, you need to work with your account or tax attorney to find out how your assets will be taxed.
If you choose to move to a high-tax country like France or Switzerland, your expat life can cost you more than expected due to high taxes. On top of local taxes, you may be taxed in your home country as well. Thus, before making the move, it is a good idea to investigate the tax laws of your new country to get an idea of what you will be paying for.
Think about healthcare.
When you reach your retirement age, healthcare is one of the first things you think about. The fact is the US has one of the most expensive healthcare in the world. By retiring abroad, you can save thousands of dollars and still receive the greatest healthcare service possible.
As of 2023, South Korea, Taiwan, Denmark, Austria, Japan, Australia, France, Spain, Belgium, and the United Kingdom made the list of the 10 best healthcare countries in the world.
Keep in mind that if Social Security will follow you as you travel, Medicare coverage will not because it is extremely limited outside of the US.
Depending on where you plan to live, you may find international or American insurance companies that sell health insurance to foreign visitors. Similarly, depending on your new country, you may find that healthcare is affordable, and you do not need to buy additional insurance. If not, find out what coverage you will have as a visitor and plan accordingly.
Connect with others.
When you have decided which country you want to move to, consider the expat community that you will likely be part of. Many cities have large established expat communities with regular expat meeting groups. On another hand, some cities have small tight-knit expat communities made up of just a handful of people.
Chances are, you will want to be a part of the expat community. This can be a good thing and a bad thing. Some of these communities are better than others. But it can be easier to make friends if you join an expat community.
Just do Google search for “expats+ your new city name” and you will find one. Also, it is not a bad thing to check out various websites where the global community of expats has answers to your questions and is willing and able to assist.
My favorite website is Expat.com where you can learn more about housing, health insurance, places to eat and visit, and more. There are also private Facebook groups that cater to retirees abroad including Retired or Thinking Retirement?
At the same time, you will get more from your time abroad if you take the time to learn the local language and then make friends with locals. There are tons of free tools out there to help you learn your chosen language.
For example, I am a huge fan of the Duolingo.com website which offers free language lessons in French, Spanish, Italian, German, Portuguese, and more. In addition, you will probably be surprised by how many local people speak English.
Retiring abroad has become very popular in recent years. If you are a retiree, it will offer you a unique opportunity to explore the world, expand your horizon and experience a new way of life. Whether you are looking for a warm climate and beautiful scenery or want to explore a new culture and learn a new language, retiring abroad has its own benefits.
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