Retiring abroad might sound like a dream—and for many, it is—but there is a long list of considerations to make and tasks to tackle before packing the suitcases.
Aside from choosing the best place to live based on weather and lifestyle preferences, Americans looking to move out of the U.S. need to think of where they’ll get their healthcare, how they’ll receive their Social Security benefits, if they’re staying long-term, the comparison between the U.S. dollar and the local currency, and so on.
“The biggest misconception is this will be easy,” said Kathleen Peddicord, who with her husband, Lief Simon, created Live and Invest Overseas in 2008, a website dedicated to retiring abroad. “You have to do your research.”
The couple moved from the U.S. to Ireland 25 years ago, then to Paris, and now splits their time between Paris and Panama. Their daily newsletter has 500,000 readers interested in moving overseas, and they have six other newsletters with niche topics, like buying real estate or diversifying investments.
Lief and Kathleen in their backyard.
Moving to another country is like “building your life” all over again, but at a rapid pace, the couple said. Americans may hit milestones over decades, obtaining a driver’s license, opening up bank accounts and credit cards, renting a first home, then possibly buying one, and so on. But when retiring abroad, all of that has to happen as fast as possible to maintain a consistent standard of living to the one back in the U.S. “Now you’re doing all of those things at once,” Peddicord said. At the same time, these retirees are learning a new language or culture depending on where they’ve moved.
Here are three complicated, but crucial, elements Americans must plan for when planning to retire abroad:
The pandemic has changed the world, including how many countries welcome tourists and more permanent visitors. Some countries are offering “digital nomad” visas for people who are working from home and looking to do so outside of their current residence. These are temporary, short-term visas and vary from country to country.
People looking to stay longer-term need to acquire a residency permit, which may be temporary or permanent and have income requirements. Temporary visas have to be updated every year or two, Simon said. There are also visas specifically for retirees, which have their own requirements, such as minimum monthly retirement income. “These programs do change as well,” Simon said. “If you do want to live and join a residency program, you should apply for it as soon as possible because programs change.”
Panama, for example, had a residency program for people from 50 predetermined countries, who would qualify just from being from those countries. That rule changed last August. Now, visitors from those countries looking for residency must make an investment of $200,000 in real estate or get a job offer to stay.
Buying real estate
Americans may be used to the multiple listing service available in the U.S., which advertises available homes on the market—but that’s not common in much of the rest of the world, Peddicord said.
In the U.S., home buyers can easily search for properties online. For example, if they want to buy a home in Los Angeles, they can search real estate sites or Google for property in that area based on their desired criteria, such as the number of bedrooms or if it comes with a pool.
In Europe, each real-estate agent has their own listings, so people looking to purchase property would be best served by meeting with multiple agents, Peddicord said. “They’ll try showing you whatever they have but you’re seeing a slice of the market of what’s available,” Peddicord said. “No MLS puts a big burden on the buyer.” Not only do home buyers have to talk to each agent about their budget, what they’re looking for in a home, and then see what’s out there, but they also have to determine whether the price is fair since it’s harder to compare.
The couple recommend renting before buying when retiring abroad, as it gives travelers a chance to see if this is really the right place for them and also avoids transaction costs and higher transfer and real estate agency fees. It’s also not as easy to get a mortgage overseas, Simon said, and cash purchases are preferable. Mortgages might be age-restricted, such as a cut off for anyone over age 75, which means a 74-year-old retiree looking to buy a home with a home loan would only be able to get a one-year mortgage.
Managing U.S. bank and investment accounts
Retired Americans living abroad can still get their Social Security benefits—those aren’t lost just because they’ve moved outside the U.S.–but they should think carefully about where they’ll receive it. Some retirees choose to have their checks directly deposited into the bank, and there are dozens of countries around the world that accept that. Americans may also decide to have their checks directly deposited in a U.S.-based bank and then access the funds through an ATM wherever they’re living.
Managing investment and retirement accounts can be a bit more complex. The money is still stored in whatever plan retirees had been saving in, but many brokerage houses no longer view these investors as Americans when they move abroad, Simon said. Americans moving outside of the U.S. should maintain a U.S. address if they can, for this reason, he added.
Managing those funds is relatively easy, however, especially if retirees do so online. When Simon and Peddicord first moved to Ireland, they had to receive paper statements in the mail from the U.S. to pay their bills, but now credit card and bank statements are easily found online.
Having a bank account offshore might seem complicated, but it’s not illegal and it’s good to have — especially if you are outside the country, the couple said. They wrote about the filing requirements with the IRS if you’re an American with money in a foreign bank here.
That said, although retirees may want to assimilate in their new country, the couple recommends keeping many U.S.-based financial aspects intact, such as credit cards. Getting a credit card in another country isn’t necessarily simple, especially as newcomers have no credit score in that country, and limits tend to be much lower than Americans would find with their U.S.-based cards. American banks and credit card companies also have great perks for their customers, including FDIC protection and scammer alerts.
Plan as a resident, not a tourist — and compare it thoroughly to your life in the U.S.
People looking to move abroad shouldn’t go to their desired location during the prime tourist season, nor should they intend to stay for just a few weeks before making their decision. Retirees planning to live abroad should try to map out a few months, at the least, to see if the place they’ve picked is right for them, from a budget, healthcare and lifestyle perspective.
They may even find that the place they truly want to live is even more affordable than they thought, Simon and Peddicord said. Retirees sometimes think they need to move to a country closer to the U.S. to live within their budgets, but it’s possible to live in hot spots in Europe for the same amount of money or less than they’re spending in the U.S., Peddicord said.
The cost of living may even go down as people become more accustomed to the area, finding the best grocery stores and pharmacies and picking restaurants not trying to attract tourists, for example. Some areas may be easy to navigate with just walking or bike riding, so families could potentially reduce the number of cars they have from two or more to one—or none.
“The big point we’re making for our readers right now is, if this idea is interesting, you have a window of opportunity right now to act,” Peddicord said. “Inflation is forcing people to defer retirement, in the meantime the cost of living is so much lower and your U.S. dollar is stronger than it’s been in your lifetime, in decades, in key places.”