Between 2010 and 2015, the number of Americans retiring overseas increased 17%. Lower expenses, better weather and a desire for adventure have enticed people to live abroad. But moving away from your home country is a major life decision. Is it right for you?
Even if you don’t plan to scale back on paid work for another decade, you can start researching your options now. This post is the first in a two-part series on retiring overseas. It will help you think through whether retirement abroad may be a good plan for you.
By several measures, more Americans are retiring overseas
Estimates of how many US citizens are living abroad vary widely. The government doesn’t count non-military people living outside the United States, so we have no official census figures. But the State Department estimates that as many as 9 million Americans (of all ages) lived overseas in 2016.
Perhaps more relevant are figures on Social Security payments going to individuals residing outside the US. In June 2019, 692,000 people received Social Security or SSI (Supplemental Security Income) payments in foreign countries. Although this figure is minuscule in comparison to total beneficiaries (64 million in June 2019), it’s growing.
Compound annual growth 2001-16 for US Social Security benefit dollars paid out in foreign countries was 6.1%, compared to 5.6% for benefits paid out overall. The difference in growth rates is small, but the base is large. In 2016, Social Security paid out $652MM in total retiree benefits, $3.6MM of it in foreign countries. This is 1.5 times the amount paid out overseas in 2001.
And figures on Social Security payments abroad measure only some of the people retiring overseas. You can choose to have Social Security benefits deposited into your US bank account even if you live outside the US. Especially if you go abroad for only part of the year, you probably won’t change the account where your retirement benefits are deposited.
Thus, Americans retiring overseas are a tiny portion of total Americans who are retiring. But expat retirement is on the rise, all the same.
Retiring overseas: lots of factors to consider
In thinking about whether retiring overseas is right for you, you want to look at hard data and softer considerations. Data-driven analysis will build a picture of living costs, weather, air quality, crime and other factors affecting life in another country. You can compare data for different locations that interest you.
At the same time, you should do some soul-searching. Living in South America may sound glamorous. But the realities of day-to-day life and making new friends may prove overwhelming to you. Here are types of data you can collect as well as questions to ask yourself. Together they’ll help you determine if you’re really up for living overseas.
Hard data about retiring overseas
Cost of living
A key reason why people are retiring overseas is that their money will go farther. As lifespans lengthen and old-style pensions evaporate, retirees are finding they can live much more cheaply in a country like Mexico or Panama than they can Stateside.
Renting or owning a home can be significantly cheaper in a different country. And lower labor costs abroad imply also that your standard of living might include household help or other “niceties” you can’t afford at home.
For years, “snowbird” retirees have spent their winter months in Florida, Arizona or Palm Springs. Spending winters in a sunny location outside the US is a variation on this theme.
If you’ve been living in a cold climate for the past 25 years, you may become giddy at the thought of daily sunshine and warm temperatures. If so, use weather maps and data to whittle down your list of possible retirement locations.
Visa and residency requirements
You’ll want to look into the requirements for visas to live in the countries you’re considering. For example, a country may grant a 6-month visa and require you to leave before renewing it.
Some countries seek to attract retirees by easing their residency requirements. Costa Rica’s pensionado program of tax benefits and discounts for seniors brought in lots of retirees in past years, but it has largely ended. Now retirees can find similar benefits in Panama. Panama pensionados can enjoy discounts of up to 50% on entertainment, eye exams, restaurants, travel and so on.
While your cost of living may be lower abroad, you should investigate any potential financial management issues. For example, the foreign country may impose restrictions on money transfers in and out. It may restrict foreign ownership of real estate.
Depending on where you are, an international bank or ATM may suit your needs perfectly. Or you may choose to open a local bank account, if only for certain purposes.
You’ll need to continue to pay US taxes, so consult with your tax advisor before you move overseas.
Also, research local inflation rates and currency exchange rates. Some retirees choose to locate in countries with favorable exchange rates and then move if conditions change.
Think about whether you want to use your new home as a base to travel that part of the world. If so, make sure you have easy access to transportation networks.
Consider how often you’ll travel back to the US and build that into your budget. You may also choose to help family members travel to visit you. If so, don’t forget to include that in your expense estimates.
In some cases, it costs so much less to live abroad that overseas retirees can afford to travel more than if they lived in the United States. Be realistic in projecting how often you’ll want to travel in retirement. If travel is a key goal for you, think about how best to locate so it will be affordable and easy.
Retiring overseas: softer concerns
While reduced living costs may entice you to retire overseas, numbers tell only part of the story. You can compare data between countries, but you also need to factor in softer concerns. Things like your adaptability to change, priorities for contact with family and old friends, and ease in meeting new people.
Healthcare combines some numbers-driven concerns with less tangible considerations. Lower healthcare costs abroad might motivate you to consider retiring overseas. In many countries, it’s fairly easy to obtain residency status and qualify for government-sponsored healthcare.
At the same time, healthcare practices abroad may differ from your expectations. If you have a chronic health condition, be sure to investigate your options.
While Medicare won’t cover you in a foreign country, you can stay enrolled in it and even pay your Part B premiums if you move away. Thus you can return to the US and use your Medicare coverage as needed.
Although the cost of healthcare may be lower overseas, you may worry about access to the latest technology. You may feel reluctant to leave your US doctors behind. Or worry that moving overseas will result in limited options for you if you turn out to have cancer or a chronic disease.
International data show higher satisfaction and lower costs for healthcare in a number of countries outside the US. But you should think hard about what you expect from the medical system and where you are most likely to find it.
Work and volunteer opportunities
Many of us expect to work at least part-time in retirement. If you’re planning to work while abroad, look into work visa requirements for your particular destination.
Also consider what types of free-lance work you might like. You could work locally by leading newcomer tours or writing for an expat publication. Or you might consult or do other work for an American company from afar. A good internet connection will allow you to work remotely from almost anywhere.
Whether you choose to work for pay or to volunteer, you’ll enjoy your new community more if you get involved with it. Look for ways you can interact with locals through tutoring in English or meeting another need you see in the community.
You might prefer to move to a place where there are lots of other expats. Going to a location with a large expat community will often ease your transition. You’ll find people like yourself who are looking for new friends. You’re also likely to encounter more opportunities to socialize with English speakers, get tips on where to shop, get your hair cut, etc.
An example of a vibrant expat community is in the picturesque city of San Miguel de Allende, Mexico. About 9000 of 190,000 full-time residents are expats. The total expat population is higher than 9000, however: lots of Americans and Canadians call San Miguel their part-time home. Expats there enjoy low expenses and high culture. They connect with each other in places like the Instituto Allende, a school of art, Spanish and lifelong learning for people of all ages.
In addition to expat social activities, lectures, bridge clubs and so on, you may have other interests you want to pursue in your new home. If you like golf, tennis, hiking, sailing or other sports, make sure you’ll have access to places you can do them. If you enjoy attending live music performances, see what’s available in the area.
Likewise, consider your personal priorities for free time. For example, do you care about access to shopping malls, first-run movies in the original language, or a variety of restaurants? Develop a plan that works for your needs and wants.
Like healthcare, infrastructure includes hard as well as soft considerations. For example, if you don’t want to own a car, you’ll need abundant public transportation and/or access to app rides like Uber.
But you should also be realistic in your expectations for things we may take for granted in the US. For example, how necessary is a strong internet connection to you?
If you are planning to work remotely, you’ll care a lot about having good access to the web. Even if you aren’t working, internet connection strength and speed may matter a lot to you.
Another example involves the practice in some developing countries of restricting water or electricity use to certain hours. Such restrictions might not bother you. Or they might.
In another example, it might drive you crazy to queue up so you can pay a bill that you would have mailed in or paid online back home. But you also might view the experience as an opportunity to slow down and develop patience. Maybe even as a chance to practice your new language and make friends with the people in line around you.
This is a catch-all category that includes predicting how you’ll feel when you encounter customs other than the ones you’re used to. For example, day-to-day life may present different schedules, foods and sanitation habits. Your new time zone may complicate communication with friends or relatives back home.
If there aren’t many expats in the area, you may long to converse in English. Or to commiserate with another American about a puzzling local custom you’ve observed. You may feel bewildered by TV channels in Spanish or store shelves stocked with unfamiliar brands.
In all, you’ll help yourself by being honest when assessing your ability to adapt to a new culture. If there are elements you consider non-negotiable, look for a location that meets your criteria.
In a best-case scenario, you would experience culture shock as more of a wake-up call. Something in your new town might irritate you, but acknowledging it as an aspect of culture shock would help you learn to adjust. Sometimes even admitting something is hard for you can affect how you adapt to it. This is especially true if a spouse or companion encourages you to push through your old way of thinking. Confronting challenges, after all, is a pathway to personal growth.
And personal growth is one of the reasons people spend time in other cultures. So whether you move overseas for a few months or a few years, look forward to continued growth and change. You may even find that retiring overseas is your ticket not only to lifelong adventure – but also to becoming a better human being.
Do you have what it takes to become an expat?
Analyze the hard data and ask yourself the tough questions about retiring overseas. Then take a step back. Is the expat life something you want to try?
Next week’s post will give you lots of resources to help you work through your decision about retiring overseas. It will also highlight top international retirement destinations for 2018.
In the meantime, you have lots of things to think about.
Note on information sources: