If the beaches of Florida or the mountains of California aren’t exotic enough for you, then an overseas retirement might be what you’re seeking. Hanging your hat overseas might seem like a daunting task - mostly because it is. Deciding to retire in a different country introduces a new set of challenges that domestic retirees don’t have to face. With that said, your dream of living out your golden years soaking in the French countryside is possible.
After all, people do it all the time. According to a 2012 study, as many as 3.3 million Baby Boomers are planning an overseas retirement. That’s in addition to the 350,000 currently receiving Social Security benefits in a different country. Here are some of the pros and cons that millions of expat retirees can expect to face.
Con: Uncle Sam Still Gets His Slice
Although you live in a different country, you still have to pay your income taxes just like any other retiree. You will still owe taxes on your pension and 401(k) disbursements and, if you decide to work, on the income you generate while living in a foreign country. Oh, and you’ll have to pay taxes to your host country as well. While doubling your tax bill might not sound ideal, the U.S. government does offer a foreign tax credit to help lessen the burden. While that certainly helps, it doesn’t quite ease the pain of having to pay state income taxes on top of all that. Some retirees set up shop in a non-tax state long enough to get residency, just to avoid paying all the additional taxes once they make the jump to a different country.
Pro: It Can Be Cheaper To Live
This depends heavily upon location: retiring to London is going to be much more expensive than retiring to Myanmar. The cost of living is considerably higher in most European cities than in parts of Asia and South and Central America. One (surprising) exception is Carcassonne, dubbed “the other South of France,” where the cost of living hovers around $1,750 a month, making it a relative bargain.
The more exotic the location, the further your dollar will take you. In Malaysia, five dollars will get you a nice meal and, for five more, you can have a bottle of wine with it. Condos near the beach in Malta currently hover around $175,000. In Panama, if your retirement income is over $1,000 per month, you qualify for the Pensionado. The Pensionado provides you with half-off entertainment, 30% off transportation fares, 25% off monthly energy bills, and more. This program is open to foreigners as an attempt to draw in more investment.
Con: Medicare Will Stay At Home
Medicare only covers retirees who stay in the country. Medicare Parts A and B (also called Original Medicare) are still available, but only if you receive care back in the states. In other words, if you need to receive treatment in your new country, you’ll have to pay out-of-pocket or buy local health insurance. But, if you see a doctor in the states, then you’ll receive the Medicare benefits. But, if you see yourself needing extensive medical treatment in retirement, don’t forget this…
Pro: Healthcare is Cheaper, or Free, in a Lot of Countries
In most Western European countries, health costs are mostly covered by the government. If you plan on working in your host country, then healthcare costs are usually very low cost or free. For expats who do not plan on working, they will need to buy private insurance after receiving residency status.
European countries, however, have not experienced the surge in medical costs that the US has in recent years, so healthcare typically costs much less even if you do opt for private insurance. Surprisingly, many countries that Americans would not associate with great medical care actually have some of the best in the world, especially for retirees. Malaysia, Costa Rica, Uruguay, Thailand, and Panama have some of the lowest medical costs on the planet without sacrificing quality.
Con: Home Ownership Is More Complicated
Homeownership in the United States is a fairly straightforward affair. Come to terms with the seller, the bank approves put the money down, and you have your keys. In other countries, the situation is a bit murkier. In Thailand, foreigners cannot own land outright. To buy property, a foreign national would have to form a corporation that is 51% Thai owned. Certain parts of Greece have the same restrictions with high real estate transaction fees to boot. In parts of Central America, all housing is not individually owned but rather belongs to a corporation. If the corporation goes bust, your investment is at risk. Make sure you research the local real estate laws and regulations before settling on a country for retirement.