5 Challenges to Consider Before Retiring Abroad

If you’re thinking about retiring abroad, remember: There’s no place like home.

5 Challenges to Consider Before Retiring Abroad

Have you ever vacationed overseas and found an idyllic spot that made you think you’d like to live there permanently — perhaps retire there?

Some people actually do sell their houses and move abroad — sometimes to places they’ve visited only briefly or to places they’ve only heard about.

Many discover that the reality doesn’t match the dream and wind up moving back.

Technology has made moving abroad more enticing. For instance, online banking makes it possible to control your finances from anywhere, Skype and Internet phones allow you to call someone on the other side of the world inexpensively, and satellite TV allows you to watch your favorite movies, television shows and U.S. sporting events.

But don’t be easily beguiled when you see some magazine’s list of the “Best Countries for Retirement.” Many of the claims simply aren’t true. Here are five common challenges you should consider:

  1. Currency and banking issues Locals often charge more to foreigners — especially Americans — because they think you can afford it. You might keep your savings in one currency, while your expenses are in another, making you vulnerable to the whim of fluctuating currency markets. The U.S. dollar is strong against the euro right now, but from 2000 to 2008 it lost almost half its value against the euro. Movements can be sudden; in three months in early 2011, the dollar lost 11% against the euro. Also, U.S. government efforts to reduce terrorism financing and money laundering make it harder for Americans to maintain bank accounts abroad.
  2. Quality medical care Medicare coverage stops at the U.S. border. Thus, when you need health care, you’ll either have to come back to this country, buy an expensive international health insurance policy or pay for treatment yourself, in a land where medical care might be worse than you like.
  3. Tax issues Unlike many countries, the United States taxes your income whether it’s earned here or not. Thus, any income you earn overseas could be taxed both by this country and your host country. Singer Tina Turner recently gave up her U.S. citizenship to become a citizen of Switzerland, partly to avoid double taxation. If you decide to expatriate, realize that many nations charge tax rates for the wealthy that are far higher than U.S. tax rates, and they have tax laws that are radically different from ours. Argentina, for example, has no capital-gains tax but does assess tax on net worth of up to 1.5%. If taxes where you live are minimal, you can probably expect a corresponding decrease in municipal services. Roads, police, firefighters, building and food safety, ambulances and hospitals could be poor or nonexistent. Ditto for accommodations for the disabled, such as wheelchair ramps.
  4. Real estate If you’re taking the trouble to move abroad, you likely want a house that’s near amenities like restaurants, shops and perhaps a community where many people speak English. And some countries refuse to let foreigners buy property, forcing you to lease property. In others, it might be hard to obtain a mortgage, especially if you’re not working.
  5. Culture and lifestyle This could be the most unsettling issue of all. Even if you find a way to make the numbers work for you, you may be disappointed in the quality of life. There might be little or no entertainment and limited shopping; in fact, shops may close at the owner’s whim. Local groceries might not refrigerate eggs and — perhaps worst of all — you’ll be thousands of miles from friends and family, including grandchildren.

The next time you find yourself in an exotic location and are contemplating living there, think again. You might want to try renting there a few months before you decide. There’s a huge difference between enjoying a couple of weeks in a distant locale and actually packing up your entire life for a permanent move.

Originally published in Inside Personal Finance March 2015

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