Have you thought about other places to retire in the world? Technology makes it easy to maintain U.S. connections. Online banking can be done from almost anywhere; smartphone apps let you see and talk with family and friends inexpensively; and satellite TV lets you watch your favorite movies, television shows and sports teams.
And with the media portraying stories about the best places to retire in the world, it can be tempting to take the plunge.
5 considerations before deciding to retire abroad
Foreign banking and currency
In foreign lands, locals often charge Americans more for goods and services. If you keep your savings in U.S. dollars but use local currency to pay expenses, you are vulnerable to fluctuating currency markets.
Medical and health care
Medicare stops at the border. That could force you to return to the U.S. when you need health care. Otherwise, you may have to buy an expensive international health insurance policy or pay for treatment yourself. Some places you can retire in the world offer health care that rivals the U.S., but most don’t. Evaluate the country’s health care standards before you decide where to relocate.
Retiring abroad tax implications
If you remain a U.S. citizen, you will still owe U.S. taxes. Treaties with some countries may let you avoid their taxes if you’re paying U.S. taxes, but this does not apply everywhere. That means you might be taxed twice – by the U.S. and the country you’re living in. This is an important consideration when choosing places to retire in the world because you have a finite amount of spending in retirement.
Some Americans “expatriate” – meaning they renounce their citizenship – to avoid double taxation. This might not be helpful if your new domicile has higher tax rates than you’d pay in the U.S.
Keep in mind that low taxes could also mean reduced (or nonexistent) government services, such as road maintenance, police and fire services, building construction codes, food regulations and hospitals. Additionally, wheelchair ramps and other accommodations for people with disabilities might not be required, while smoking could be permitted in public places.
Buying property abroad
If you’re considering any number of places to retire in the world, you are probably dreaming about an ocean view or maybe some land in the mountains. However, some countries don’t let foreigners buy property. Others limit the ability for retirees to obtain a mortgage.
Before buying a retirement home overseas, make sure it is located in a country, town and neighborhood in which you envision yourself living out your retirement. You will also want to consider the possible property taxes and maintenance costs.
Renting could be an alternative until you know the details of the area. Before committing to any lease agreement, understand what is included in your monthly rent (appliances, utilities, upkeep, etc.) and how it is to be paid. Some countries, for example, may require you to have a local bank for automatic drafts each month.
Differences in culture and lifestyle
People in different countries have different views, habits and behaviors. Love baseball? You might have to trade it for cricket. Enjoy movies? Lounging in outdoor cafes is the thing in some places. Want to shop? In some countries, merchants close for hours each day.
The food will be different. Staples in your dietary routine such as brewed coffee, local fruits and vegetables, and even water supplies may be altered from what you’re used to. Grocery stores might not refrigerate eggs and other perishables.
Political views and election experiences could be very different from what you’re used to. And then there’s the language difference. If you’re not fluent in the language of the place you’re retiring to, you could experience challenges finding areas where English is spoken or paying a premium to be located there.
Finally, are you sure you’ll be comfortable being thousands of miles from your friends, family, children and grandchildren? Don’t overestimate how frequently you’ll return to visit the U.S. In some countries, your ability to leave and return is restricted, and the time, cost and effort could make the idea unpalatable.
For all these reasons, you may realize that the best place to retire to in the world is right here. Enjoy vacations abroad in retirement but consider all the factors prior to moving there. You could also try renting for a few months or a year before you decide to make the new locale your permanent home.
Neither Edelman Financial Engines, a division of Financial Engines Advisors L.L.C., nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances.