Retiring in another country can have a lot of appeal, whether it’s the prospect of a lower cost of living or the allure of a new adventure in your golden years. But actually making that goal a reality requires more work than packing up your belongings and shipping them overseas when you reach retirement age.
A first step is to indicate where exactly, you want to settle when you retire. This requires a bit more research than just looking for places with good weather. Start by making a list of what matters most to you. Conde Nast Traveler suggested, whether it’s affordable housing, security and political stability, easy travel to and from the US, or nice weather. Also consider where people will speak English if it is your only language. All these factors can help you narrow down the possibilities.
There are many resources to help you identify attractive places to retire. For example, Investopedia identified Top five places to retire abroad Based on an in-depth scoring system. International Living also publishes a Annual Global Retirement IndexWhich takes into account the inputs of the retirees living in those places.
Or, you can go where retirees have been before: The most retired US workers receiving benefits overseas are based in Canada, Mexico, Japan, Germany and the United Kingdom, Forbes reportedCiting data from the US Social Security Administration.
Visa and residency requirements can vary greatly from country to country. Some countries will grant citizenship if a relative of yours was born there. Others may have residence permits that are “limited or renewable and will come with application and renewal fees” and you “often have to live in the country for a certain number of years” before you can get permanent residency, Forbes said. Forbes said in other cases “there are specific visas for retirees who can demonstrate that they earn a certain income per month,” or a residency offer may be made to foreigners who buy real estate for a certain amount. Could
“Find a place with a fairly straightforward residency process, and one that you can qualify for,” Kathleen Evans, who holds permanent residency in Costa Rica, told Condé Nast Traveller. “Not every country is trying to entice foreign residents.” For example, in some countries, social security payments are restricted for residents, while in others there are financial incentives to settle.
You can find more information about specific visa and residency requirements for each country on the website US State Department website, While you’re there, also consider checking the State Department’s information on the security and political stability of your top-choice countries.
Since you are planning to settle down in this place for the rest of your years, your first instinct might be to buy a house. But Before You Do Everything, Try Renting First, Investopedia suggested, noting that “living in a country is very different from being a tourist.” You should move to your desired location in more than one season, and especially when weather conditions are not ideal, Investopedia recommends.
If you still want to buy, know that the buying process won’t be like in the U.S. According to Forbes, “U.S. banks often won’t approve mortgages for foreign properties,” and “it can be difficult to get local mortgages.” ” Financing as a US Citizen in Another Country.”
Forbes states that to make a real estate purchase in a foreign country, “explore your options with the help of an attorney who understands the local market.” Or, if you can, you can aim for an all-cash purchase to overcome the financing constraints.
When it comes to banks and retirement accounts, “Americans who retire abroad should generally keep most of their money in the US,” The Wall Street Journal said, This will enable them to take advantage of the tax benefits offered by their retirement accounts.
However, the Journal warned that “some US banks and brokerage firms are turning away customers with foreign addresses.” Check with your financial institution and transfer any money before making the move.
You’ll also want to learn about wire transfer and ATM transaction fees before you go, as well as whether your credit card charges foreign transaction fees. And take a look at currency conversion rates, the Journal recommended.
Health care is another factor in working before retiring abroad, as the Journal notes. Noting that “Medicare generally does not cover services outside the U.S.” In some countries, “you may find that health care is so affordable that you don’t need insurance,” according to Investopedia. But in other cases, you may need an international health insurance policy.
Consider the quality of care in the country you’re visiting — it may not meet the standards you expect in the U.S.
You may think you can say goodbye to taxes when you leave the US, but in fact, “your income is subject to US income tax wherever you live,” the Journal said, and this includes taxes on pensions. 401(k) plans, and Social Security benefits. In fact, you may end up paying taxes to both the US and the country you move to, although this will depend on which country you choose to call home: Tax Treaties in the US with Certain Countries which “allow” Condé Nast Traveller, “retirees abroad to either be taxed at a reduced rate or to be exempt from foreign taxes altogether.”
You will also need to complete some paperwork to avoid heavy fines. For example, if you are required to submit a report of foreign bank and financial accounts to the Treasury Department and willfully fail to do so, the penalty is “in excess of $100,000 or more for each year you fail to file could be half the value of,” according to the journal,
Consult a tax attorney or advisor before moving abroad and stay in communication with them to ensure you remain in compliance with US tax laws. They can also offer guidance on tax credits or other ways to reduce your tax burden, so that you have more money saved to enjoy your retirement abroad.
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. He previously served as managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week.