Retiring Outside of the US? Some Things to Consider

If you’re thinking about packing your bags and moving abroad to live out your retirement years, there are a few things to consider.

Some of these are just basic retirement questions: How will you spend your days? What will “home” look like. Then there are also considerations specific to living outside of the United States. 

To kick things off we’ll start with our favorite topic – the money stuff – and then move on to other practical things to mull over, like residency requirements.

Estimate the cost of living outside of the United States

One of the first things you’ll want to think about is how much retiring abroad could cost. You’ll want to price out living expenses in your desired location to get an idea of just how far the money you’ve saved could take you, as well as hedge for things like the exchange rate. 

We’ve put down some potential costs to consider here – the list may look familiar if you’ve ever played with the idea of moving to a new city. But, since you’re considering moving to a new country, you may see some additional expenses. 

Home-related expenses

• Housing prices or rent
• Home or rental insurance
• Water, heat, electricity
• Internet, VPN and streaming services
• Local cellphone service
• Cars, car insurance and public transit
• Health care and prescription costs
• Food (groceries and dining out)

Taxes

• US income taxes
• Local property and income taxes

Visas

• Recurring visa fees
• Residency requirements

Travel

• Recurring travel to and from the US – include any other round trips you may expect to take during the year

Medicare may need to be on your list of expenses

Medicare probably won’t cover your health care costs abroad. But you may want to hang onto this coverage if you think you’ll want to return to the US for major surgery or health care needs. Why? Premiums can be much higher if you drop coverage and then try to restart it, or if you’ve never enrolled.

Good to know: On health care, generally speaking, it’s a good idea to do some research on your new home country’s health care and insurance system. Think about eligibility requirements, quality of care, costs and accessibility. 

Don't forget about exchange rates

The value of your money will depend on the exchange rate. Do some research to see how the dollar stacks up against the currency in your potential new home country. When the US dollar is strong, for example, your money could go further, because you’ll get more of a particular currency for each dollar you exchange. 

You may not always be able to predict what the exchange rate will be, since currencies fluctuate, but you could still get a general sense of what you could expect. You can get started by looking at trends from the past few years.

It might be tempting to convert all of your cash to local currency, but some guidance we’ve seen, such as this article from Forbes, suggests keeping money in US dollars and converting things as needed for local expenses. 

Good to know: If you’re collecting Social Security benefits (or expect to), these are paid in US dollars and changes in international exchange rates will not influence how much you receive. Visit the Social Security Administration’s website for more information about receiving Social Security benefits while living outside of the US.

Consider banking costs

You'll also want to factor in any banking costs, like ATM and foreign transaction fees tied to US bank accounts and credit cards, which you may want to hold on to for two key reasons.

1. It can be hard to open a local bank account abroad as a US citizen.
2. It can help you maintain your credit score just in case you come back to the US. Plus, US credit cards may require payments come from a US bank account. 

So check and see what your US bank requires to keep your account(s) open and in good standing while you’re living abroad.

If you're able to open a bank account in your new home country, keep in mind that you will probably need to file a “FBAR” (Foreign Bank and Financial Account) notice that includes bank account information and balances with the US Treasury Department. Consult your financial advisor or tax professional if you have any questions. 

Calculate local and US income tax payments

Keep your CPA’s contact information handy even after you move because you can expect to keep paying US income tax even if you no longer consider the US home (some exceptions may apply).

In addition to keeping tabs on US taxes and factoring them into your budget, you’ll also want to ask a tax professional about what taxes you may have to pay in your new country, too. 

Good to know: If you’re curious about the what could happen if you are in serious delinquent tax debt, it’s not great: According to the IRS, the US State Department can revoke your passport if the IRS considers you in serious debt.

Check the residency requirements 

Each country will have its own set of residency requirements, like a minimum annual income or net worth. There may also be different visas you’ll need to apply for so that you can stay for an extended period. In short, make sure you understand the rules before you say goodbye to the US. 

Consider locations from a local’s perspective (put the vacation goggles down) 

In addition to thinking about finances and residency requirements, you’ll want to make sure your new home checks off certain lifestyle needs. 

So let’s start with location. A vacation spot may seem like a great place to retire, but your needs as a local are probably going to be different than a tourist’s. In fact, you may even want the opposite of what you tend to look for when you go vacation.

Cities with a ton of activities and people may feel too loud or cramped for everyday living. And for some people, remote getaways could feel too far away and quiet when you’re no longer escaping an overbooked schedule.

When considering a potential location, also think about things like the weather and any potential language barriers you may face while going about your day-to-day life. And be sure to familiarize yourself with local laws and customs. Because depending on where you’re retiring, the legal system and culture may be quite different than what we have in the US.

Finally, check to see if there’s a good expat community you could tap into. Having a good support network can make all the difference as you navigate and adjust to your new home country. Once you get acclimated, you’ll be able to share some hard-won wisdom of your own – making new friends along the way.