For those hoping to stretch their retirement savings further, retiring in a foreign country may seem like an attractive option. Moving overseas can present retirees with the tempting opportunity to enjoy their golden years in their favorite vacation destination—and more importantly, enjoy a comparable or higher standard of living at a significantly lower cost.
Nevertheless, there are important considerations to investigate before selling the family home and packing up all your possessions. In this article, we look at three of the most important factors to consider when planning to retire abroad.
Arguably the most important factor in retiring abroad is location. Some countries are more welcoming to expats than others.
Issues to consider include:
- Ease of purchasing and owning property or cost of renting.
- Cost and standard of living.
- Residency and visa requirements.
- Affordability and quality of healthcare.
- Ease of returning home to visit friends and family.
- Language barriers.
- Political stability.
- Development and infrastructure.
For those considering buying real estate in a foreign country, it is vital to seek out reliable legal advice. Some countries apply additional levies on foreign investments. For example, in Sri Lanka, non-nationals who purchase real estate have to pay a special land tax. At 100% of the property’s purchase price, this tax represents a significant outlay.
According to Investopedia, foreigner-friendly retirement destinations include Panama, Mexico, Costa Rica, Ecuador, and Malaysia.
For those retiring to a non-English speaking country, it is vital to have a rudimentary grasp of the language to communicate on a basic level.
As Edd Staton, a US citizen who retired to Ecuador, explained to CNBC, locals generally appreciate foreigners attempting to learn their language. They may not need to be fluent, but becoming functional is a realistic goal.
Because of this, it’s a good idea for people considering retiring abroad to learn online or take classes. Cram in as much study and practice as you can before embarking on your new life abroad.
Whether you choose to retire at home or abroad, ensuring you have sufficient funds to support your lifestyle is always the most important consideration. In addition, it is important to think about healthcare costs and how you’ll cover them.
US citizens can continue to claim their Social Security benefits irrespective of where they live in the world. US citizens retiring abroad usually keep at least one domestic bank account open to collect Social Security checks and make credit card payments. However, an increasing number of overseas banks now accept direct deposits of Social Security checks.
You may want to open a local savings or checking account in the country where you reside, though it is important to seek out qualified advice. Under the Foreign Account Tax Compliance Act, US citizens are required to declare overseas assets to the US government, and complete a US tax return.
A Malta Pension Plan (MPP) is a special tax-favored retirement savings account that is particularly popular with high-income American taxpayers. Ratified by the US Senate, MPPs offer unlimited contributions, as well as several other significant benefits, including the ability to invest non-cash assets and benefit from tax-free income, capital gains, and distributions.