Maybe you always fantasized about living in an exotic locale, of having a big, last adventure, a second chance at life – or, it could be as simple as wanting to say adios to cold, cold weather and buenos dias to a place where sunshine is plentiful and prices are low. Whatever holds promise, increasingly, tens of thousands of Americans are turning to foreign shores for retirement.
Before you start planning your escape though, there's much to consider.
What's up doc?
Medical expenses are the wild card in retirement. Nothing can wreck the best of plans like a costly illness. One of the first things on your must-know list is details about your potential country of choice's medical care. “I have a client who plans to move to Costa Rica for retirement and their big concern is having access to good medical care and facilities,” says Kevin Worthley, a certified financial planner with Retirement Planning Company of New England.
“Often retirees wish to move to tropical climates and countries such as those in the Caribbean or Central/South America. Investigating hospitals, primary care physicians and other specialists there, is extremely important, especially if one or both have pre-existing medical conditions that may require access to quality emergency facilities or special monitoring equipment,” says Worthley.
Know too, that generally Medicare does not pay for treatment outside of the United States. If you have private insurance, find out if overseas medical expenses are covered. Many foreign countries, however, have government sponsored health insurance plans that you can explore, as well as private insurers that may be cheaper than what you would pay for private insurance in the U.S. Do your homework, as there are nuances, like age limits on participation in some health plans abroad.
How sweet is home sweet home?
The other big cost is housing. What is the market like where you plan to go? You may be pleasantly surprised about how much you can get for your money. In certain parts of the world, housing can cost u $500 a month or less, and in some places, you can get away with $300 a month, such as Panama, Belize, Ecuador, Nicaragua, Thailand and the Philippines, according to Kathleen Peddicord, founder of the Live and Invest Overseas publishing group, in her recent article. She reports that in a number of safe, idyllic places, $1,000 a month or less will give you quite a nice life. Her top choices for this budget include Cuenca, Ecuador; Granada, Nicaragua; Santa Fe, Panama; and Chiang Mai, Thailand. Luxuries are hugely affordable. She writes that in these places you can can get full-time household help for $200 a month, a once-a-week gardner for about $50, and an hour-long massage from a professionally trained masseuse who will come to your home with massage table can be as little as $20.
Sort out the fine details
But for all the wondrous ways life can be just grand overseas, there are some gotchas. Government rules and regulations for home buying can vary and getting a mortgage may not be a piece of cake, particularly if you're not working.
Then there's the matter of the almighty dollar. You might have your money in one currency, while your expenses are in another. Why does this matter? It means you're subject to the fancy of the currency markets. To safeguard against currency risk, you might want to keep a healthy chunk, maybe six months worth of living expenses in the local currency. You do, however, want to keep money in your home country in case inflation is higher abroad.
Find out what the requirements are for having a bank and brokerage account abroad. And don't think just because you leave the U.S. Uncle Sam is no longer your Uncle. The United States taxes all of a citizen's income, whether earned here or not. Income earned while you're sunning yourself overseas could be taxed by both the federal government and your new locale's government. There are some special provisions that can reduce tax burdens on expatriates.
Don't expect to figure all this stuff out on your own. You'll want advisors, like an astute CPA and realtor for example, to guide you through the transition overseas. There are a plethora of places to help with your research like BoomersAbroad.com and AARP.
Search your soul
Are you really ready for this big adventure? Exciting for sure, but different. How will you manage missing family and friends? What's your budget for jaunts back home? There are many, many considerations. If after all the thinking you still feel like packing, bonne chance.