Rosalind Evans
Beau Henderson, the founder of RichLife Advisors, collaborates with a 65-year-old woman based near Atlanta who dreams of retiring in Mexico. Her research focuses on social dynamics like finding a community she can connect with, consulting with expatriates, and arranging a long-term rental. Conversely, Henderson explores factors usually outside an advisor’s purview, like the country’s income tax rates, property taxes, and currency exchange rates. Their collaborative retirement plan has been in the works for about a year.
Retiring overseas has been popular among retirees for some time, and the pandemic has only fueled this interest further. However, it’s not a decision to be taken lightly. Beyond financial and social aspects, retirees aspiring to settle abroad may need to understand residency and local laws, arrange for healthcare coverage, and be prepared to deal with many potential issues.
Kathleen Peddicord, who operates the Panama-based liveandinvestoverseas.com with her spouse, Leif Simon, says the pandemic has provoked a sense of urgency among people. With most countries now lifting pandemic-related travel restrictions, retirees contemplating a move abroad should consider the following before committing to an overseas property purchase:
Trial Period
Before buying a dream villa in Tuscany or a beachfront property in Belize, retirees should spend considerable time in their chosen country. Peddicord suggests spending a few weeks or even months in different locales to understand the lifestyle of an ex-pat. Henderson has created a unique budget for his client transitioning to Mexico, reviewing income sources and living costs and refining her financial plan every 90 days based on her experiences.
Securing Residency
Potential ex-pats must apply for a residency visa through the destination country’s consulate in the U.S. Peddicord and Simon highlight that the process is different for each country. Certain nations also offer golden visas or residency by investment permits, which can simplify the process but come with risks.
Tax Implications
Rachel Martens, the international tax director at CBIZ, emphasizes that U.S. ex-pats are often taken aback when they learn they still need to pay U.S. income tax. She recommends consulting with a tax advisor familiar with the tax laws of the retiree’s new home country before moving.
Healthcare Coverage
Adam Bates, vice president of Insurance Services of America, points out that Standard Medicare Part A doesn’t offer coverage for retirees outside the U.S. and its territories. He advises retirees to plan for their healthcare needs early, exploring short-term and long-term international health insurance policies. Bates suggests purchasing an international policy before turning 65 to ensure coverage, even if the plans are for vacations abroad, and exploring local health insurance options once they’ve moved.
Understanding the Cost of Living
One crucial factor that retirees must consider before relocating is the cost of living in the destination country. While some places may have lower living costs, others can be expensive. For his client transitioning to Mexico, Henderson had to create a separate budget considering life as an ex-pat, including estimated daily living expenses. As retirees adapt to the local lifestyle, their budget might need frequent fine-tuning based on their experiences and changing market conditions.
Culture and Language Adaptation
Immersing oneself in a new culture and language can be exciting and challenging. To ensure a smooth transition, retirees should take the time to learn about the local customs, traditions, and language of their chosen destination. This will help them integrate into the local community and enrich their retirement experience.
Legal and Property Matters
Before purchasing property abroad, it is crucial to understand the local laws and regulations. This includes property, inheritance, and contract laws, among others. Consulting with a local lawyer familiar with these matters can be incredibly helpful and may prevent future legal issues.
Safety and Security
Safety and security are paramount, especially for retirees. Before making a move, it is essential to research the safety levels of the destination country, including the crime rate, political stability, and healthcare infrastructure. Expats should also stay informed about local laws and customs to avoid legal problems.
Accessibility and Proximity to Home
Retirees who wish to maintain a close connection with their home country should consider the accessibility of their destination country. This includes the travel time and cost, the availability of direct flights, and the time zone differences that might affect communication with family and friends back home.
Community and Social Opportunities
Finally, robust social networks and community support can significantly impact retirees’ happiness and satisfaction. Before moving, retirees should investigate the local ex-pat community, social opportunities, and whether the local population is generally welcoming to foreigners.
Retiring abroad is a significant life decision that requires careful planning and consideration. It’s recommended to seek advice from financial advisors, legal consultants, and other experts to ensure a smooth transition to the next exciting chapter of life.
