As baby boomers have advanced in their careers, they have grown increasingly comfortable working in a globalized world. So it should come as no surprise that many boomers are considering retiring abroad.
And who can blame them? Year-round beautiful weather, as well as exotic locales, food and culture, are hard to resist -- particularly when such a lifestyle can be had at a fraction of what it would cost in the United States.
Although Americans have traditionally looked to Central America and South America, many of their countrymen are choosing to retire in more remote locations, such as Thailand, Malaysia or Ghana. But financial, medical, legal and political questions need to be resolved before a move. Here are some tips for preventing that dream of paradise from turning into a nightmare.
First, determine your available budget. Do not despair if your budget is limited. Some destinations, such as Nicaragua or Belize, where monthly expenses can average $1,500, are so inexpensive that a couple can live off their Social Security benefits, according to the AARP's Sid Kirchheimer. Check with the Social Security Administration's Office of International Operations and the Department of State's Bureau of Consular Affairs to confirm what federal benefits you can receive in your retirement destination.
Also, consider how you will bank abroad. Foreign currencies can fluctuate in value quite quickly and dramatically. As a hedge, consider maintaining both a U.S. bank account and a local bank account, but be aware that international ATM and wire-transfer fees can add up. Additionally, the 2010 Foreign Account Tax Compliance Act has made some U.S. banks reluctant to carry accounts for Americans without an American address.
Lastly, do not forget that Americans living abroad are still required to file U.S. tax returns. You may also be required to file local tax returns. Thankfully, the U.S. has negotiated tax treaties with many countries to avoid double taxation. The Internal Revenue Service has a list of these treaties posted online. But it is important that you find a trusted financial adviser, both in the U.S. and abroad, so that you can coordinate your finances.
Second, research the differences between your retirement destination's laws and those of America. Your U.S. attorney can determine whether your will, trust and powers of attorney are enforceable abroad. According to the Bureau of Consular Affairs, the local U.S. embassy or consulate can provide you with a list of English-speaking attorneys willing to assist U.S. citizens. Meet with one prior to your retirement in order to learn more about visa and residency requirements, as well as laws regarding real estate renting, ownership and renovation.
Third, determine how you will address your medical needs while abroad. Medicare does not cover health care overseas. Moreover, few U.S. companies offer health care for expat retirees (although companies such as ASA Inc. and BUPA International offer health insurance for Americans living abroad). Accordingly, most retirees either return to the U.S. for medical care, or they use local services.
Consider the quality and costs of local hospitals and health care. Countries rated highly in the World Health Organization's World Health Report or those that are medical tourism destinations will likely satisfy your needs. Ask a local lawyer how you can join national health care systems. Also, consult your U.S. physician regarding any local health issues that might affect you, given your medical history.
Finally, prepare to live under a different political system. Bureaucracies may be larger and less responsive than what Americans are accustomed to, with delays and logistical headaches. Consult State Department officials regarding the potential for political instability and how to respond in a crisis.
You can begin a new adventure by retiring abroad. But without proper planning, the adventure may be more trouble than you bargained for. Consult your U.S. physician. Meet with lawyers and financial advisers both here and abroad. Visit your potential retirement destination several times at different times of the year, staying for increasingly longer periods. This will give you a chance to meet other expats, learn from their experience and get a feel for day-to-day living.
When making this leap, mistakes made abroad can take longer to fix, and they can break your budget. Take the time to plan properly and cover your contingencies. Then you can truly enjoy paradise, stress-free.