From mountaintops to pristine beaches, tropical islands to hip cities, colonial towns to country villas, thinking beyond the border to spend your retirement days is gradually gathering steam among U.S. citizens. Notably, the U.S. Social Security Administration currently sends out payments to around 700,000 retirees in foreign countries. This marks 40% growth over the past 10 years, reflecting the rising number of people choosing to retire and settle overseas.
Conventionally, retirement has been about settling down, downsizing and withdrawing, but these words are slowly failing to define the modern concept. With baby boomers in the United States getting tech-savvy, healthier and more adventurous, they are looking for a change by jetting-off to places that offer lower living and healthcare costs, pleasant climate and a fascinating cultural experience.
What’s Luring Americans to Retire Overseas?
Live Large by Retiring Abroad: One of the main reasons living abroad during retirement is so popular is due to the low cost of living. The prices for rent, food, utility bills and other services can just be a fraction of what you would pay in the United States. Who wouldn’t want a higher standard of living at more economical rates? Due to lower purchasing power parity in most other places relative to the United States, the value of the U.S. dollar can actually go quite higher, giving you a lavish retired life for the price of a low-key American lifestyle. In fact, many Americans who feel that they could not save enough to retire in their homeland choose to settle abroad to maintain their extravagant way of life.
Quality Health-Care at Reasonable Costs: Another advantage of retiring overseas is the affordable and quality health-care services. As we know, rising healthcare costs in the United States is outpacing the inflation rates and you certainly wouldn’t want your retirement savings to go for a toss. Of course, an average retiree is more susceptible to diseases and disabilities and medical treatment in the United States can actually burn a hole in your pocket. With many countries giving you access to high-quality healthcare services at cheaper rates, it can be quite a welcoming factor.
Feeding the Adventure Enthusiasts: In fact, why not give retiring abroad a shot if you have worked tirelessly for decades in the United States and have the wherewithal and courage to spend the rest of your years in a new country? Apart from the financial advantages, retiring abroad can actually make you culturally rich. New places, friends, language and a whole new culture can prove to be quite a fulfilling experience — a means to healthy ageing, translating into physical, social and cognitive benefits.
With YOLO (You Only Live Once) in many people’s minds, those who love living on the edge and gathering experiences are choosing to spend their retired years abroad. This is especially true for those who did not travel much owing to professional commitments but still have the sense of adventure and passion alive.
But is This Your Calling? Decide for Yourself
Packing your bags and heading out for a holiday is strikingly different from making a permanent move to your dream paradise. Retiring abroad is certainly not for the faint-hearted, so give it much thought before making the move. While it may seem quite a thrilling experience, it requires a significant amount of introspection.
While some may find it culturally enriching, others may experience a culture shock. Having lived your entire life maintaining certain customs, are you open to adapt to new surroundings? Will language be a barrier? As an expat, will it be easy for you to leave your family and social circle and form new ties, especially after retirement? What about moving costs? Are you really ready to step out of your comfort zone?
Well, these are some of the questions that only you will be able to answer for yourself. So, weigh the pros and cons carefully before deciding.
Do Your Homework Well: Here’s the Checklist
Before buying that one-way ticket to your retirement haven, make sure you do thorough research. Remember that your retirement is not an extended vacation. Your dream retirement place might be a great place to visit, but may not be well-suited for settling down. In fact, it’s always safer to seek professional help before reallocating.
As each country has its own set of rules and regulations, check for the visa and residency requirements and other administrative requirements for a driver’s license, a tax ID or opening bank accounts. Make sure you know the local laws and political stability of the country you wish to retire to. Be aware of the tax rules, crime statistics, medical facilities, cost of living, cost of renting, ease of buying a property along with entertainment and cultural amenities the place offers.
Let’s take a look at what happens to your Medicare benefits, social security payments and tax obligations when you decide to undertake that bold migration.
Can You Count On Medicare?
For those planning to retire abroad, be aware of the fact that your Medicare (the U.S. federal health insurance program) benefits cannot be availed outside the United States. Nonetheless, you can continue paying into the system to keep the coverage active in case you wish to return for treatment. However, when you plan to settle abroad, it’s best to keep your Medicare Part A (which is basically the hospital insurance and is premium-free) active while you can choose to drop Medicare Part B (which is the medical insurance covering doctors’ services, etc. and also requires a monthly premium payment).
As your Medicare will come to little use if you are retiring abroad, you can consider opting for National Health Plan of the country you wish to spend the rest of your life in. While the quality of the plan will differ, all plans offer a basic health care safety net which the expats can advantage from. One can also choose to get a private health plan which is likely to provide similar coverage and quality care as in the United States at a much lower rate. For retirees who plan to travel extensively, they can sign up for International Health Insurance. While the premium for this will be higher than those offered by private insurances in many countries, it is significantly less than the monthly premiums in the United States.
How Secure is Your Social Security Benefits?
You will receive the social security payments if you are settling abroad after retirement unless you plan to reside in Cuba or North Korea where the payments to U.S. citizens are prohibited as per Treasury Department regulations. Also, it will get difficult for you to get your social security payments if you intend to spend your retirement years in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. However, that is not much of a problem as none of these places are retirement hot spots where one would wish to spend his/her golden years.
Beware, Uncle Sam to Still Follow You
What about the tax payments when you retire abroad? Well, it actually gets more complicated. First of all, Americans retiring abroad do not get exempted from the U.S. tax obligations unless they plan to renounce their citizenship. So, if you are a U.S. citizen, your retirement income from pension funds or withdrawals from 401(k) s or 403(b) s, etc. will be subject to U.S. income tax, irrespective of where you chose to stay post retirement. Hence, a retired American expat should understand that he/she will still need to file annually with the IRS unless you decide to give up your green card.
Moreover, depending on where you choose to retire, your tax liabilities may actually increase as you will have to fulfill the tax obligations of the foreign country as well. Hence, before boarding the flight to your preferred retirement destination, it is important to gain some insight into the tax system of the country. One should particularly note that the United States has tax treaties with foreign nations like Australia, France, and Denmark, to name a few, which may help the residents of those places avoid double taxation or limit their liabilities in the way of exemption and reduced rates.
Stay Put or Jet-Off?
Settling outside the comfortable borders of the United States can be quite dicey and is not for everyone. However, for some, picking up anew in a foreign country can be one of the most amazing and life-changing experiences. So, if you think you have got what it takes to be a retired expat, understand all the financial aspects of retirement and start short-listing your preferred destinations after carefully weighing the pros and cons. If you do your research well enough and make the right pre-move moves, you can actually explore new opportunities and lead an improved, healthier and richer life at a bargain price outside the United States.
A Simple Way to Build Wealth
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Image: Bigstock
Contemplating Retiring Overseas? Consider this Primer First
From mountaintops to pristine beaches, tropical islands to hip cities, colonial towns to country villas, thinking beyond the border to spend your retirement days is gradually gathering steam among U.S. citizens. Notably, the U.S. Social Security Administration currently sends out payments to around 700,000 retirees in foreign countries. This marks 40% growth over the past 10 years, reflecting the rising number of people choosing to retire and settle overseas.
Conventionally, retirement has been about settling down, downsizing and withdrawing, but these words are slowly failing to define the modern concept. With baby boomers in the United States getting tech-savvy, healthier and more adventurous, they are looking for a change by jetting-off to places that offer lower living and healthcare costs, pleasant climate and a fascinating cultural experience.
What’s Luring Americans to Retire Overseas?
Live Large by Retiring Abroad: One of the main reasons living abroad during retirement is so popular is due to the low cost of living. The prices for rent, food, utility bills and other services can just be a fraction of what you would pay in the United States. Who wouldn’t want a higher standard of living at more economical rates? Due to lower purchasing power parity in most other places relative to the United States, the value of the U.S. dollar can actually go quite higher, giving you a lavish retired life for the price of a low-key American lifestyle. In fact, many Americans who feel that they could not save enough to retire in their homeland choose to settle abroad to maintain their extravagant way of life.
Quality Health-Care at Reasonable Costs: Another advantage of retiring overseas is the affordable and quality health-care services. As we know, rising healthcare costs in the United States is outpacing the inflation rates and you certainly wouldn’t want your retirement savings to go for a toss. Of course, an average retiree is more susceptible to diseases and disabilities and medical treatment in the United States can actually burn a hole in your pocket. With many countries giving you access to high-quality healthcare services at cheaper rates, it can be quite a welcoming factor.
Feeding the Adventure Enthusiasts: In fact, why not give retiring abroad a shot if you have worked tirelessly for decades in the United States and have the wherewithal and courage to spend the rest of your years in a new country? Apart from the financial advantages, retiring abroad can actually make you culturally rich. New places, friends, language and a whole new culture can prove to be quite a fulfilling experience — a means to healthy ageing, translating into physical, social and cognitive benefits.
With YOLO (You Only Live Once) in many people’s minds, those who love living on the edge and gathering experiences are choosing to spend their retired years abroad. This is especially true for those who did not travel much owing to professional commitments but still have the sense of adventure and passion alive.
But is This Your Calling? Decide for Yourself
Packing your bags and heading out for a holiday is strikingly different from making a permanent move to your dream paradise. Retiring abroad is certainly not for the faint-hearted, so give it much thought before making the move. While it may seem quite a thrilling experience, it requires a significant amount of introspection.
While some may find it culturally enriching, others may experience a culture shock. Having lived your entire life maintaining certain customs, are you open to adapt to new surroundings? Will language be a barrier? As an expat, will it be easy for you to leave your family and social circle and form new ties, especially after retirement? What about moving costs? Are you really ready to step out of your comfort zone?
Well, these are some of the questions that only you will be able to answer for yourself. So, weigh the pros and cons carefully before deciding.
Do Your Homework Well: Here’s the Checklist
Before buying that one-way ticket to your retirement haven, make sure you do thorough research. Remember that your retirement is not an extended vacation. Your dream retirement place might be a great place to visit, but may not be well-suited for settling down. In fact, it’s always safer to seek professional help before reallocating.
As each country has its own set of rules and regulations, check for the visa and residency requirements and other administrative requirements for a driver’s license, a tax ID or opening bank accounts. Make sure you know the local laws and political stability of the country you wish to retire to. Be aware of the tax rules, crime statistics, medical facilities, cost of living, cost of renting, ease of buying a property along with entertainment and cultural amenities the place offers.
Let’s take a look at what happens to your Medicare benefits, social security payments and tax obligations when you decide to undertake that bold migration.
Can You Count On Medicare?
For those planning to retire abroad, be aware of the fact that your Medicare (the U.S. federal health insurance program) benefits cannot be availed outside the United States. Nonetheless, you can continue paying into the system to keep the coverage active in case you wish to return for treatment. However, when you plan to settle abroad, it’s best to keep your Medicare Part A (which is basically the hospital insurance and is premium-free) active while you can choose to drop Medicare Part B (which is the medical insurance covering doctors’ services, etc. and also requires a monthly premium payment).
As your Medicare will come to little use if you are retiring abroad, you can consider opting for National Health Plan of the country you wish to spend the rest of your life in. While the quality of the plan will differ, all plans offer a basic health care safety net which the expats can advantage from. One can also choose to get a private health plan which is likely to provide similar coverage and quality care as in the United States at a much lower rate. For retirees who plan to travel extensively, they can sign up for International Health Insurance. While the premium for this will be higher than those offered by private insurances in many countries, it is significantly less than the monthly premiums in the United States.
How Secure is Your Social Security Benefits?
You will receive the social security payments if you are settling abroad after retirement unless you plan to reside in Cuba or North Korea where the payments to U.S. citizens are prohibited as per Treasury Department regulations. Also, it will get difficult for you to get your social security payments if you intend to spend your retirement years in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. However, that is not much of a problem as none of these places are retirement hot spots where one would wish to spend his/her golden years.
Beware, Uncle Sam to Still Follow You
What about the tax payments when you retire abroad? Well, it actually gets more complicated. First of all, Americans retiring abroad do not get exempted from the U.S. tax obligations unless they plan to renounce their citizenship. So, if you are a U.S. citizen, your retirement income from pension funds or withdrawals from 401(k) s or 403(b) s, etc. will be subject to U.S. income tax, irrespective of where you chose to stay post retirement. Hence, a retired American expat should understand that he/she will still need to file annually with the IRS unless you decide to give up your green card.
Moreover, depending on where you choose to retire, your tax liabilities may actually increase as you will have to fulfill the tax obligations of the foreign country as well. Hence, before boarding the flight to your preferred retirement destination, it is important to gain some insight into the tax system of the country. One should particularly note that the United States has tax treaties with foreign nations like Australia, France, and Denmark, to name a few, which may help the residents of those places avoid double taxation or limit their liabilities in the way of exemption and reduced rates.
Stay Put or Jet-Off?
Settling outside the comfortable borders of the United States can be quite dicey and is not for everyone. However, for some, picking up anew in a foreign country can be one of the most amazing and life-changing experiences. So, if you think you have got what it takes to be a retired expat, understand all the financial aspects of retirement and start short-listing your preferred destinations after carefully weighing the pros and cons. If you do your research well enough and make the right pre-move moves, you can actually explore new opportunities and lead an improved, healthier and richer life at a bargain price outside the United States.
A Simple Way to Build Wealth
No matter what your financial goals are, investing in quality stocks is an option worth considering. Stocks have produced better returns than other kinds of investments over the years and generated significant wealth for shareholders. If you're interested in stocks but you're nervous about picking the right ones, Zacks can help. Our research team makes it simple to find long-term buys with long-term wealth-building potential. Starting today, you can see our private selection of stocks priced under $10, Warren Buffett-style value picks, dividend stocks and more.
Click here for your sneak peak>>