“The concept of what it means to retire continues to evolve, with more American seniors choosing to spend their golden years overseas. And, as our economy sputters, this trend is likely to continue”  Daniel Stewart

By Daniel Stewart

As I write this, we are on the leading edge of an economic storm threatening to derail millions of Americans’ retirement plans. Those already retired find inflation eating into their pension and Social Security disbursements. Their hard-earned, carefully saved, and invested dollars do not go as far. Retirement may be an unanticipated struggle.

For these reasons, many people over 50 are considering retirement outside the United States to places where they have the potential to experience less expensive, less stressful, and more fulfilling lifestyles.

The cost of living in certain countries may be dramatically lower than in the United States, allowing a person to live better on a fixed income and perhaps enjoy a much higher standard of living.

For instance, countries in Southeast Asia, such as Thailand, Malaysia, and Vietnam, offer a considerably lower cost of living compared to most major American cities. Some also provide retiree-specific programs with tax and medical care advantages, affordable senior housing, and other perks. Many South American countries, including Ecuador, Nicaragua, Belize, Mexico, and Columbia, offer some attractive benefits for American retirees.

Pros and Cons of an Overseas Retirement

You may be tempted to jump on the overseas retirement bandwagon when you read glowing reports or watch videos from ex-pats enjoying fabulous lifestyles in other countries. But, as with other financial and lifestyle decisions, you must do a ton of research beforehand and know all the pros and cons, including any tax implications, before deciding to leave the US.

You should never take it for granted that rules for other countries mirror those in the US or Canada. For instance, many people love Portugal, a highly-rated retirement destination. But, if you become a legal resident in Portugal, you have just 90 days to request an exchange of your driver’s license. If you fail to do so within 90 days, you will no longer be able to drive in Portugal, although you can still request your license for up to two years from acquiring residency.

Other countries, even those with generous retiree perks, also have strict deadlines, rules, and regulations you must understand before applying for permanent residence. There are a few other disadvantages to overseas retirement.

  1. You may experience language and customs challenges. While many people in foreign countries are fluent in English, most official documents, newspapers, guidebooks, and television programs are in the native language. Do you want to take time to learn a new language at this point in your life? Are you willing to immerse yourself in a different culture to discover and understand it?
  2. You are going to be far from home. Unless you happen to live in a border state and choose to retire to Mexico, your foreign retirement will put you thousands of miles away from your friends and family.
  3. You could face the issue of double taxation. The USA is one of the only countries that follow its citizens to the ends of the earth to tax them. You could set up shop in Antarctica and still get a bill from the IRS. While most countries avoid double-taxing foreign residents, you may have to file returns with both countries. Finding a qualified bi-lingual tax expert to help you could be challenging.
  4. Goods and services could be hard to come by. Many of the convenient, innovative products you take for granted here in North America are either prohibitively expensive or unavailable in many countries. You may also have to lower your expectations regarding customer service. Some places exist where prompt, efficient service is essentially non-existent.
  5. You could encounter more layers of mindless bureaucracy. As incredible as it may seem, some countries produce even more red tape and bureaucratic hurdles than the United States. You might find the situation stressful if you’re not patient and persistent.
  6. Living in another country is not the same as vacationing. The saying goes, “It’s a great place to visit, but I wouldn’t want to live there.” That holds for many countries offering retiree enticements. Your fabulous three-week vacation in Panama may not have given you an accurate picture of how ordinary citizens experience life there. Talk to people who have lived where you want to retire and get their honest opinions, warts and all.
  7. You may experience a lack of emotional, physical, or financial support. When things go wrong with your health, business, investments, or anything else, you probably turn to your strong network of family and friends. Living far from that network could result in you feeling isolated or depressed.

On the plus side, though, thousands of older ex-pats believe the pluses of retiring in another country far outweigh any pitfalls.

  • A lowered cost of living stretches your budget. Nearly every country offering retiree visas has a lower cost of living than the United States. Several overseas programs grant permanent residency to people with less than $1,000 a month in retirement income! For some retirees, moving abroad will significantly improve their lifestyles.
  • You could improve your mental health. Learning a foreign language is a proven way to improve your brain’s cognitive functions. Life overseas offers you the opportunity to learn a new language and practice it daily. Plus, you’ll be even more motivated to gain fluency if you want to expand your social network.
  • Free or inexpensive healthcare options. Many countries on the best places to retire list offer foreign retirees the option of participating in their national health insurance plans. Even those that do not allow this may offer reduced costs for healthcare. One country I researched does dental work for retirees, costing over 50% less than the same care in the US.
  • You may have a better chance of achieving your post-work dreams. Perhaps you wanted to travel more, take up photography or painting, or start a business. Retiring abroad may be an avenue to doing all these things and more. By stretching your dollars further, you could set aside money to make your dreams come true.

Summing it up: The current economic downturn has even wealthy seniors seeking more affordable places to live. If you worry about running out of money when you no longer work, moving to another country could be an adventurous way to make your savings go further. However, there are many things retirees must consider before making a move. Due to the logistics and time involved in overseas retirement, you must start planning your exit early. It could take years to find the retiree visa program that best fits your need, plus you must allow additional time for the application and approval process. That said, your reward might be a less stressful and more fulfilling retirement that will keep you healthier and happier.