Retiring Abroad: Pros, Cons, and Best Practices

Retiring abroad can be an enticing option for many, offering a chance for a change in lifestyle and potentially significant cost savings. However, it also comes with its own set of challenges and considerations.

If moving to another country is on your retirement bucket list, it’s crucial to understand the potential benefits and drawbacks to make an informed decision. Here are some of the pros and cons of retiring abroad, as well as a list of best practices to facilitate a smooth transition.

Pros of Retiring Abroad

Retiring abroad can offer a multitude of advantages, ranging from financial benefits to improved quality of life. Here’s an expanded look at some of the key advantages:

Lower Cost of Living

According to the Bureau of Labor Statistics (BLS), average monthly retirement expenses in the United States for someone 65 and older in 2021 totaled $4,345. One advantage of retiring abroad is that many countries offer a lower cost of living.

For example, the cost of living excluding rent in Portugal is 37% cheaper than in the United States, according to data from Numbeo. Meanwhile, it’s about 34% less expensive to retire in Spain.

Depending on where you prefer to live, you may be able to save even more money. For retirees, a lower cost of living can mean cheaper housing, healthcare, and daily expenses, allowing you to stretch your retirement savings further.

Climate and Lifestyle

The allure of retiring to a destination with a warmer climate, like Spain, Mexico, or Southeast Asia, extends far beyond the mere comfort of sunny days. These regions offer an attractive mix of climate, natural beauty, cultural richness, and a relaxed lifestyle, making them popular choices for retiring abroad.

For retirees, warmer climates tend to be easier on the body, particularly for those with arthritis or other conditions exacerbated by cold and damp weather. Warm weather also encourages an outdoor lifestyle. Activities like swimming, hiking, cycling, and golfing are often available year-round, contributing to physical fitness and a healthier lifestyle.

Meanwhile, retirees seeking a slower pace of life can typically find it in these regions. Many foreign countries emphasize living in the moment and enjoying life over the fast-paced culture of the United States.

For these reasons, retiring abroad provides the opportunity to dramatically improve your quality of life in your golden years. Beyond a change of scenery, these destinations offer a new community and lifestyle that can keep retirees active, engaged, and healthy.

Potential for Better Healthcare Retiring Abroad

Another advantage of retiring abroad is the potential for more accessible healthcare. This can be a significant benefit considering the high and rising cost of healthcare in retirement.

In countries with affordable healthcare systems, the cost of medical services—from routine doctor visits to complex surgeries—is often much lower than in countries like the United States. This affordability can make a substantial difference in your retirement budget, allowing your savings to stretch further.

Furthermore, many countries with affordable healthcare provide comprehensive coverage that includes preventive care, treatment of acute conditions, and management of chronic diseases. This holistic approach can prevent minor health issues from becoming severe, thereby reducing long-term healthcare costs.

Countries that top the list in terms of affordable healthcare include Portugal, France, and Mexico, according to Nasdaq. Retiring abroad to one of these countries can significantly reduce your healthcare expenses without sacrificing quality of care.

Cons of Retiring Abroad

Despite the advantages of retiring abroad, certain drawbacks can complicate or diminish the experience. Here are some of the potential downsides of retiring in a foreign country:

Financial & Legal Complications

Managing finances across international borders as a retiree can be complex, often requiring careful planning and continuous oversight.

For example, opening a bank account in a foreign country often requires navigating a series of bureaucratic hurdles, including proving residency and understanding local banking laws and regulations. Maintaining an account can also involve additional paperwork and compliance with both local and home country tax regulations.

In addition, retirees living on a fixed income from the United States must convert these funds into the local currency. Fluctuating exchange rates can significantly affect how much money you receive each month, potentially impacting budgeting and spending.

Lastly, filing and paying taxes can be complicated when retiring abroad. Understanding both your U.S. and your new country’s tax obligations and taking advantage of available treaties to avoid double taxation are essential steps in managing this complexity effectively.

Culture and Language Barriers

Not speaking the local language can be a significant barrier in some countries, affecting everything from daily communication to understanding legal documents and accessing healthcare. For some, this disparity can lead to feelings of isolation and frustration when retiring abroad.

Meanwhile, adapting to new social norms, customs, and etiquette can be challenging. What’s considered polite or routine in one culture might be different in another, which can lead to misunderstandings or social faux pas.

Despite these hurdles, retiring abroad shouldn’t feel out of reach, especially if you enjoy challenging yourself and learning new things. Nevertheless, it’s a good idea to spend time in your country of choice before committing to it to ensure the culture and lifestyle resonate with you.

Social and Emotional Impact of Retiring Abroad

For many people, one of the main drawbacks to retiring abroad is the lack of social support and interaction—at least initially. This can be problematic, as research shows that social isolation is linked to higher risks for developing a variety of medical conditions, including high blood pressure, heart disease, anxiety, depression, and cognitive decline.

Furthermore, living abroad can mean less frequent visits with family and friends back home. This distance can be especially challenging during holidays, family milestones, or emergencies.

Indeed, building a new social network in a different country can be difficult, particularly if there are strong cultural divides or if the expatriate community is small. This is a significant consideration for retirees, especially those susceptible to loneliness.

Best Practices for Retiring Abroad

Retiring abroad can be an exciting prospect that requires careful consideration and planning. To make the most of this experience (and ensure it’s the right move for you), consider the following best practices:

Research Extensively

Investigate potential destinations by considering factors such as cost of living, healthcare quality and accessibility, climate, language, and cultural environment. In addition, be sure to spend time in the country before deciding to move permanently to get a real sense of daily life and whether it meets your expectations and needs.

Understand Visa and Residency Requirements

Each country has different requirements for visas and residency, especially for retirees. You’ll need to thoroughly research the specific requirements for the country you’re considering, including any financial thresholds or insurance requirements.

Plan Financially

Beyond basic financial planning and organization, make sure you understand the tax implications both at home and in the new country when retiring abroad. It may be wise to consult with a tax advisor who specializes in expatriate affairs to ensure you’re adequately prepared.

Review Your Healthcare Options

Research the healthcare system of the new country, including the quality of care, accessibility, and whether you need private health insurance. In addition, verify whether you have comprehensive health insurance that covers you internationally, or in the specific country, until you’re eligible for local coverage.

Update Your Estate Plan

Before retiring abroad, it’s a good idea to update your will and any other estate planning documents to reflect the laws and practices of your new country of residence. Additionally, consider power of attorney and other legal instruments that might be necessary in your new country.

Emergency Planning

Be sure to have a plan for returning to your home country, if necessary, whether for medical reasons, family emergencies, or other unforeseen circumstances. Moreover, keep important documents readily accessible and have a clear understanding of how to get help if you need it.

Milestone Asset Management Group Is Here to Help

Retiring abroad presents a unique blend of opportunities and challenges. Indeed, the allure of a lower cost of living, favorable climates, and rich cultural life can be compelling.

However, navigating the complexities of foreign tax laws, legal paperwork, and cultural adjustments can be daunting. It’s essential to carefully consider all the potential pros and cons, so you can fully embrace the changes and new experiences that lie ahead.

At Milestone Asset Management Group, our team of experts is here to guide you through the financial complexities of retiring abroad, including differences in tax laws and estate planning considerations. Contact us today to develop a comprehensive financial plan that supports your retirement and lifestyle goals.