Instead of enjoying one’s golden years in Arizona or Florida, many dream of villas in Tuscany, or surf shacks in Nicaragua. But while retiring abroad may not be entirely original, it does come with some unique challenges. Do your homework before making the big leap, so you can enjoy ex-pat life to its fullest.
Research your desired location
Seems obvious, right? And yet it isn’t just about choosing the best surf spot or your favorite wine region. While many countries are very welcoming to retiring expatriates, it is still a different country. That means different laws and requirements for residents. For example, are non-citizens allowed to purchase real estate? In Iceland, citizens of European Union (EU) member countries can buy without restriction, but non-EU citizens have to receive government approval to purchase.
One of the most important issues to understand is medical insurance. Medicare, the U.S. government health insurance program for people 65 and older, will not cover medical expenses in another country (there are three very limited circumstances in which Medicare will reimburse such costs—for instance, if an emergency happened in Canada while traveling between Alaska and the lower 48 states—but those would not apply to someone who retires abroad).
You might be tempted, therefore, to stop paying your Medicare Part B and Part D coverage premiums—but don’t do it if there’s any chance of your returning to live stateside. Gaps in your Medicare Part B and Part D coverage will result in higher premiums for the rest of your life.
Additionally, countries that provide health services to citizens might not provide those same services to non-citizen residents. Retirees abroad might need to purchase local coverage, the cost of which will vary widely based on one’s existing health and the options available.
Visit the State Department website
The U.S. State Department is an invaluable resource, with detailed information for travelers of all kinds. They also handle travel alerts or warnings, with a searchable database of destinations that provides detailed information about embassies, consular offices, trouble spots, visa requirements, and lots more.
You’ll also find a detailed list of steps to take before you go. First on their list is to “check visa and residency requirements.” Each country will require different documentation, some, like Canada, even have financial reporting requirements. Detailed questions about immigration status, visas, dual citizenship, and other more complex issues might require the assistance of a qualified legal professional.
The State Department also suggests preparing for emergencies in part by staying connected. The Smart Traveler Enrollment Program sets up an automatic system for receiving information about travel or safety alerts directly from the State Department. Enrollment also allows the department to contact your family or friends—leaving contact information is important in the event of an emergency. You’ll also want to leave a copy of your passport biographic data page with a family member or a trusted advisor who is remaining in the United States.
Get your finances (including your taxes and Social Security) in order
Retirement financial planning is important whether your preferred destination is South Carolina or South America. But if you choose to retire abroad, currency fluctuations can become a huge factor. Many people choose foreign locales because of the destination’s lower cost of living, but a change in exchange rates could impact that perceived value. A few other considerations:
- Taxes Sadly, moving abroad doesn’t mean you get to take a pass on your taxes. If you are a U.S. citizen, you are still required and responsible for filing and paying your income, estate, and gift taxes, whether you are in the United States or not. The IRS is very clear about this: “Your worldwide income is subject to U.S. income tax, regardless of where you reside.”
- Social Security The SSA publishes a guide to help recipients understand and prepare for how to receive and handle their payments outside of the United States. Social Security is a particular concern for older Americans who choose to retire abroad. Unlike Medicare, Social Security is an earned benefit that can be paid to recipients living outside the country. But there are restrictions. U.S. Treasury regulations prohibit the Social Security Administration (SSA) from sending payments to some countries (North Korea, for example). Meanwhile, some countries, like Azerbaijan and the other Caucus states, carry general restrictions, but there are some available exceptions in those regions.
- Estate Planning Before leaving, you should meet with an estate attorney to discuss any estate planning issues and determine how such issues will be handled in the event of your death abroad.