A new life overseas usually begins with a dream about somewhere beautiful, interesting, and affordable. But there are many steps between the spark of an idea and packing your bags. Here’s how to make your retirement overseas adventure manageable:
1. Figure out how much money you have to retire on. Determine how much money you have to support yourself in retirement. Calculate what you would have if you sold everything, including your home, car, collectibles, and jewelry. If you sold it all and invested it in something safe and conservative, how much money would it generate on a monthly basis? Add to that amount any Social Security or pension income you’ll receive. That’s the total amount you have to retire on. If your total monthly income will be more than $800 per month, you have many appealing options on that budget.
If your total retirement nest egg, calculated as I’ve suggested, amounts to less than $800 per month, you’ll need to figure out a way to supplement it. You probably won’t be able to easily get a job in most foreign countries, but there may be opportunities to start a small business to make some extra money. In some cases, you could start an Internet business now and take it with you when you move.
2. Consider your housing options. Wherever you decide to retire overseas, you should rent first for at least three to six months. You won't be able to get a true feel for a place until you've spent at least a few months getting to know the neighborhoods, day-to-day costs of living, and transportation options. Sometimes it can make sense to rent long term, as well. Renting frees you from the carrying costs of home ownership and keeps you flexible and mobile. If you eventually decide you’d like to make a second move to another city or country, you only need to wait until the term of your lease runs out.
However, renting in a foreign country can be more complicated than you might be prepared for. A contract typically must be in the language of the country where you’re signing it to be legal. So, make sure you have a trusted adviser review it if you are not fluent in the local language. In some countries, renters can be responsible for repairs and maintenance of the property.
You’re likely to get the best deal on a rental or property purchase if you search locally. Searching for “apartments for rent” in Panama City, for example, will yield only apartments listed in English. Search instead for “se vende” or “se aquila” to find the (almost always cheaper) local listings. To get an idea what is available at what cost, you’ll probably need to meet with as many local agents as possible, and certainly more than one or two.
3. Decide whether you want to reside in another country full-time. If you’d like to move to another country full-time, you’ll need to research the options for obtaining a foreign residency visa there. You can generally avoid this issue altogether by spending fewer than three months in any one country annually. In some countries you can remain in the country as a tourist for only two months, while in other places it’s as many as six months. The most foreign retiree-friendly countries are Panama, Belize, Uruguay, Ecuador, Nicaragua, and Malaysia.
4. Think through how your move overseas will affect your tax burden. Moving overseas as a retiree, earning only retirement income, should be a tax-neutral event. Any local tax obligation in the country where you relocate will depend on where and how your income while living there is derived. Foreign retirement income such as Social Security or pension income typically isn’t taxed anywhere in the world. But your tax situation can be more complicated, and it is possible that you could acquire a new tax burden in the country where you relocate if you have earned or investment income in addition to your retirement income. Seek experienced, professional counsel on your tax obligations before making your move.
5. Determine how you will get health insurance. With few exceptions, your U.S. health insurance and Medicare benefits won't travel with you beyond U.S. borders. But there are many good and affordable options for obtaining health insurance in many other places. In some countries, full local coverage can cost as little as $100 per month or less. A local policy covers you only in the country where you’ve purchased it or, in some cases, only in particular regions of that country or at particular medical care facilities. In some countries, including Uruguay, Panama, and Ecuador, you can buy a hospital policy good at the one hospital where you’ve purchased the coverage only. In this case, if you injure yourself or have a health emergency in another part of the country or world you could face significant medical expenses.
You could also buy a policy from an international health insurer, such as Bupa International. An international policy can cover you anywhere in the world, including in the United States, but is typically more expensive than a local policy. Some people also go without health insurance overseas. This can seem like a radical strategy, but, in some parts of the world, quality medical care is so affordable that going without insurance and paying out-of-pocket for care as you need it can be the most affordable choice.
6. Make a plan for addressing administrative issues. The administration associated with retiring in another country can be a lengthy and frustrating process. Be prepared for it. Here’s a short list of what you’re going to need a plan for accomplishing:
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter. Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.