Retiring out of the country is an exciting opportunity, filled with adventure and discovery. American retirees are increasingly considering their options for retiring abroad, and rightfully so: retirees often have more flexible spending on an affordable budget, and they get to see the world as well.
However, a big decision such as moving abroad carries certain financial considerations, especially for individuals planning to retire. Let’s look at some of the tax laws and costs you need to keep in mind before you commit to this new adventure.
If you plan to stop working and keep it that way, then the move should be fairly simple. Retirees can claim their social security benefits by keeping a bank in the United States and transferring the money to a foreign account, and retirees who retain their U.S. citizenship will pay their taxes normally.
That changes if you end up claiming non-retirement income in your new residence. How you claim your income depends on the country you move to and the source of that income, but it’s a good idea to look into the tax laws for your new country, as well as if you need to claim taxes both there and in the United States.
Cost of Living
Whether you retire in the United State or abroad, you need to stick to a budget. Researching the cost of living in your dream country can be tricky, but we can start you off with some resources. This website estimates the cost of living in cities around the world, and International Living is a great resource for learning about the country you’re moving to.
Also, keep in mind the additional expenses of living abroad. While you might have a cheaper cost of living, you might also pay for things like car insurance, traveling to the U.S. frequently, or other hidden costs.
Navigating health care is tricky, both in the U.S. and elsewhere. However, many expats recommend signing up for Medicare the moment you turn 65, even if you’re living abroad. You may end up moving back to the states in your later years or needing medical assistance when you visit, and the fees for enrolling late in Medicare can add up.
Additionally, while some countries boast comprehensive healthcare systems, others might not have the resources for certain medical needs, meaning you’ll need health insurance to cover practices only available in the U.S.
Have a Re-Entry Plan
While living your retirement abroad sounds amazing, you might want to have a plan in case you need to move back to the states. Medical or family emergencies happen, as does nostalgia for the country you’ve spent most of your life in. Having a re-entry plan means maintaining property, paying insurance, and retaining your citizenship, so factor in these costs to your budget for living overseas.
Need help figuring out your budget for retirement or what tax laws you need to be aware of? Let EFC Wealth Management help – we’re dedicated to improving the community by providing financial planning resources and retirement opportunities to people like you.