3 Tips for Retiring Abroad

If retiring abroad is something you’ve considered, you’re not alone. Whether you’ve dreamed about relocating to a Caribbean island, to Italy, or somewhere else, actually doing so is a complicated proposal. In 2000, Social Security payments being sent overseas were 400,000, which jumped to 700,800 in December 2022.

Here are three things you should know about becoming an ex-pat in retirement:

1. Determine the residency requirements of your dream destination

The hoops you’ll need to jump through to establish residency vary by country.

Some places require relatively significant passive income and significant personal savings to cover unforeseen events. One example is Ireland, which requires an annual income of $55,138 and 110,276 for couples.

Other countries have age requirements and low monthly income requirements for retirement. Costa Rica requires a cash balance of $60,000 and a monthly income of $2,500 a month, half of the annual income needed by Ireland.

Timeframes to establish residency also differ from place to place.

Finally, understand the different statuses of residency in your destination country. There may be short-term, long-term, and permanent levels, each with other requirements.

2. Figure out your tax situation

If you’re a citizen of the U.S., you will still have to file tax returns and may have to pay U.S. taxes. However, you may find that certain countries on your list are tax-friendlier than others. For example, the U.S. maintains a tax treaty with Japan and Italy that reduces retirees’ tax rates while living abroad. 

3. Have a plan for healthcare

One primary consideration for retiring abroad is how you’ll pay for medical care.

First, understand that Medicare coverage does not (generally) extend outside of the U.S., save for a handful of exceptions that apply to particular situations.

Second, remember that you’ll pay a penalty for every 12-month period that you are eligible to enroll in Medicare Part B (medical insurance) – which comes with a monthly premium – but don’t; your lifetime premiums will increase by 10% each year that you fail to enroll.

Third, if you plan to live abroad, but are considering returning to the U.S. in your later years (or if you will still spend a significant amount of time visiting the U.S.), it may be a good idea to pay Medicare Part B monthly premiums even though you can’t use the coverage until you move back to the States. Doing so means you’ll avoid the late penalty.

Still, there are some circumstances under which you should consider waiting to enroll in Part B. Understanding what healthcare will cost you in your dream destination is also an essential part of planning to retire abroad. Some countries have excellent healthcare for low (or even no) cost. Others don’t.

How to Get Started

These are just a few of the many important considerations for retiring abroad. While making such a move may excite you, it can be risky and challenging financially. Proper planning with a financial advisor ahead of your move will help you be successful while protecting your finances from unnecessary tax bills.

If you’re not yet working with a financial advisor, a member of our network may be able to help. Click here to get started with a no-cost, no-obligation consultation.