The third age of retirement: enjoying retirement.
If you haven’t seen the social media ads, you’ve certainly read articles or heard friends and family talk about it. And, even if briefly, you’ve probably considered it yourself.
“Retirement overseas. I can live like royalty on a couple thousand a month. Healthcare is cheap, and the food! The scenery! Plus, I hear the residency requirements are simple.”
It sounds great, and it can be great. But, if you suspect it’s not that simple, you’re right. Financially, socially, and personally, it can be challenging; but, by doing some research and asking yourself and your family some questions, you’ll be better prepared to make this decision.
Consideration One: A Big Learning Curve
As one study of retirees abroad put it about retired expats, “Retirees who report more optimal experiences are relatively younger, sociable, financially stable, and psychologically more patient and optimistic, with higher tolerance for frustration.”
Patience and optimism are helpful when coping with a second start. According to this same study, the greatest challenge is language. How will you learn (or improve) a second language in retirement? Isn’t learning a language something we’re “wired” to do only when we’re young?
Lingvist published an interesting article about the correlation between age and ability to learn a language. Briefly, there is data indicating that to develop a perfect accent you should have started in elementary school, but many people experience a renaissance of language learning after age 50. If you do decide to give it a go, there’s no time like the present to start getting your skills sharpened via books, apps, online courses, or in-person classes.
Consideration Two: There’s No Place Like Home
Moving where the weather, food, pace of life, and culture are new gives us the opportunity to reinvent ourselves. Old habits can be left behind. For lifelong learners, a new country is like starting a new degree program, with every café, museum, and shop serving as a classroom. However, what seemed entertaining or interesting at first can become routine or even worse – irritating over time.
“At first the attitude about work was refreshing,” said one executive who spent a summer living in France to determine if it was a good fit for retirement. “Lunch is at least 90 minutes, you’re not allowed to take emails or calls after work, and vacations are respected.”
But, he explained, he sometimes found himself frustrated.
“The transport strikes seem to be as regular as the trains,” he went on. “Want to get from Nice to Lyons? Desolé, monsieur. There is a strike this week. And just buying shoes or sunglasses won’t happen if you go to a small shop around lunchtime.”
Finally, if you haven’t quite fit into your new home’s culture, you may find yourself spending most of your time alone or with a small community of expats. You probably will be far from family and old friends.
Before moving abroad you’ll want to ask yourself how settled you are in your ways. Are you a go-with-the-flow person, or do you need your habits and routines? How will you feel about your new home once the honeymoon period is over?
Consideration Three: Money Makes the World Go ‘Round
Even before language and culture, you’ve probably thought about your financial life abroad. From housing to healthcare to insurance and banking, you’ll have the same financial needs as in the U.S., but few of the same resources.
Here are some things to discuss with your financial advisor as you consider retiring abroad:
- Social Security. Even if you’re not planning on collecting Social Security payments immediately, you’ll want to understand how it’s done. While it’s often straightforward for a U.S. citizen to receive payments while living abroad, talk to your financial advisor before making assumptions. One useful resource is the Social Security Administration’s Payments Abroad Screening Tool. You can also get information at the Social Security’s Office of Earnings & International Operations at www.ssa.gov/foreign. Consulting your financial advisor is something you’ll want to do sooner rather than later.
- Currency. If you had a vague knowledge of currency exchange rates before, you’ll find yourself watching rates with the intensity of the Super Bowl if you retire abroad, assuming your investments are paying dollars but you spend another currency locally. You’ll want both U.S. and local bank accounts, and a service to move funds with minimal charges (banks seldom offer the most economical rates for this). You also can investigate retiring to a country that either uses the dollar or pegs their currencies to the dollar.
- Buying Property. If you’ve narrowed your list of future homes to a handful of countries, it pays to investigate the process of buying a home. With the legal, cultural, and procedural complications that can arise, many people choose to rent before buying. This gives you time to know neighborhoods better, and you won’t be trying to manage a potentially frustrating purchase – or worse yet home repair – process remotely.
- Healthcare. Medicare doesn’t normally cover care you receive outside the U.S., but you may want to keep your coverage in case you return to live the U.S. Every country will have different healthcare regulations for permanent residents, so once again, it pays to do your research before you become attached to any destination.
- Taxation. As a U.S. citizen, you will still have to file U.S. income tax returns regardless of where you live, in addition to filing taxes in your new home. There may be a tax treaty with the U.S. to minimize your total tax obligation or at least make understanding simpler. But keep in mind that your new home might have additional types of tax, such as a wealth tax. Once again, research carefully and talk with your financial advisor.
- Estate. Be sure your estate plan covers both counties. And your will should be clear and accepted in both the U.S. and in your new country of residence.
Living the Dream
Culturally and financially, retiring abroad can offer a lot to those who do their research, get expert advice, and are ready to be challenged. Talk to your financial advisor, talk to people who’ve made the move, and perhaps most importantly, ask yourself the right questions.
Retiring in a place where you’re comfortable and budgeting for travel is an option if you’re not sure you want to start over in a strange place. But, for the prepared, it can be a rewarding challenge.
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