Retirement can be further complicated in another country.
You have made a decision.
You are going to retire abroad.
It is your dream.
You are determined to make it happen.
According to a recent Forbes article titled “7 Key Mistakes People Make When Retiring Abroad,” a successful retirement abroad takes planning.
Where should you start?
Know your currency.
The exchange rate between the dollar and other currencies is not constant.
Constantly stay updated on the changes because they will impact your cost of living.
You will need to plan for these changes and ensure that you have enough saved in your nest egg to cover them.
Social Security can help some.
Social Security will even pay expatriates and will not charge for currency conversion.
You also could have the option to keep funds in dollars and convert only when you needed as cash.
Educate yourself before purchasing property.
Some countries have restrictions on foreign citizens buying property or moving into their nation.
[Novel concept, yes?]
Do not rush into anything.
Work with a reputable local advisor.
Do everything above board and do your research so you will not be swindled.
Plan for medical coverage.
Medicare will not cover care outside of the United States.
You will need to self-insure for medical expenses.
Some foreign countries may have options for residents even if they are U.S. citizens.
It would likely be wise to keep Medicare and also maintain Medicare Part D and supplemental insurance.
Why?
If you move back, these could be hard to get or more expensive than maintaining them.
Add financial accounts.
Paying from a U.S. based account for regular living expenses when living in a foreign country can be cumbersome.
You will likely want to open a local account for this role.
Keep your primary account and the majority of your assets in the U.S.
When you need money, transfer it as needed to the foreign account.
You will not be able to rollover your IRA or 401(k) to another country as they have no foreign equivalents.
If you have a foreign account, you will need to report it to the IRS along with any foreign assets you own.
There may be fees for conversions and transfers.
Discuss your options with your financial advisor and credit card providers before you act.
Consider taxes.
Just because you live in another country does not mean you are exempt from U.S. taxes.
As a citizen, you owe taxes to the U.S. on worldwide income.
This means you still have to file a U.S. tax return if you live in another country.
You will likely owe taxes in your country of residency, too.
Check into the laws of each government and consult with tax advisors in each country.
Create an estate plan.
You need an estate plan.
You will still have federal estate taxes and returns to file if you die in another country.
There is also a possibility of owing state taxes to your last state of U.S. residence.
Fortunately, for those from Kansas or Missouri, that is not an issue.
Secure yourself an experienced estate planning attorney in both countries and review your plans regularly.
Do not assume living elsewhere is cheaper.
You may think the grass is greener on the other side.
It is not always the case.
Expenses may rise, especially if more people have your same idea.
An influx of people can raise the cost of living.
As you can see there are plenty of considerations before you choose to retire outside the United States.
If it is your dream, be sure to plan well.
Reference: Forbes (May 29, 2019) “7 Key Mistakes People Make When Retiring Abroad”
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