No matter how much or little you’ve saved for retirement, it can be worth weighing the possibility of joining an overseas community. American retirement homes have plenty to offer, but some seniors are better suited for life abroad.
Millions of Americans have discovered the joys of retiring overseas. Some have settled in modern Australian retirement communities, where they can enjoy a stylish living space and a lifestyle similar to home, with the added perk of the beach and local culture.
Others prefer the affordability and beauty of Cuenca, Ecuador with its vibrancy, excellent cuisine, and walkable city life. When you’re ready to retire, it doesn’t matter so much where you end up; what counts the most are the benefits of getting out of the country.
Here are the reasons you should consider retiring overseas.
Cheaper Cost of Living
This is perhaps the most compelling justification cited by people who opt for overseas retirement. The average retirement account is significantly smaller than it ought to be.
More than two-thirds of current retirees are worried they’ll live longer than their savings account can hold out, even if they live frugally, reports a Forbes article. An entire 21 percent reach retirement age without a dollar of savings.
“Meantime, the cost of quality retirement living choices in the United States is escalating,” the article warns. “The unsettling reality is that a lot of people currently working aren’t going to be able to afford to retire at all.”
The cost of living is rising steadily in the U.S. But in many overseas locales, you can live a comfortable lifestyle for a fraction of the sum required to stop working here. In one of the most affordable places to retire — Algarve, Portugal — the average person can live frugally on $1,070 per month, according to Investopedia.
In the U.S., you would need at least three times that amount to live comfortably. A MarketWatch article reports that the average retiree spends $3,800 per month stateside.
Free or Affordable Healthcare
In addition, health-care costs in the U.S. are climbing. Both medical services and pharmaceuticals have climbed to an all-time high, and many retirees understandably fear those rising costs.
Chances are, you’ll need extra medical coverage in your old age. Unfortunately, insurance costs for citizens over the age of 65 are extremely high, which makes it difficult for retirees to afford good coverage.
If you move to certain countries, you can enjoy free or more affordable healthcare that can lift that burden. Only a few nations, such as Canada, offer free healthcare to all residents. Most countries that have more affordable healthcare systems offer a two-tier arrangement in which the government pays a portion and you pay a portion.
For example, in Australia, the government pays two-thirds of your medical bills. France covers 75 percent of its residents’ costs. These options are much more affordable than what the U.S. currently provides.
To add to the cheaper cost of living, you may also enjoy a few tax breaks for moving overseas. In some situations, you can avoid paying income tax altogether, although you’ll be expected to file an annual return with the IRS.
Moving assets to a foreign country, holding money in certain foreign accounts, and removing yourself from U.S. soil can all result in significant tax breaks. While you’re enjoying those U.S. tax breaks, CPA Douglas Ralph warns in a CNBC article that you should be wary of the taxes where you settle down.
“It’s all one big equation,” he says. “Maybe it will be cheaper to live in Spain, but some of these countries have wealth taxes and different property taxes that arise from owning condos. These things crop up.”
Getting well acquainted with the local rules, understanding your tax obligations, using foreign accounts, and balancing a dual citizenship can all help you minimize your obligations and maximize tax breaks.
The financial aspects of retiring overseas are clearly appealing, but they’re not the main reason many retirees choose to ship out. People also crave the ongoing adventure of starting a new life abroad.
Retiring overseas might be for you if you’ve always dreamed of traveling but rarely or never had the time or money to do it. This might be for you if you want to spend the rest of your life on a beach instead of in the landlocked state where you currently reside.
Overseas retirement might be for you if you’ve had a yearning to learn a new language, immerse yourself in another culture, and try new and delicious cuisine on a daily basis. And there’s nothing to keep you in one spot, either.
You could spend a few years living in Portugal, a year in Italy, and another two years in Mexico. Your options and adventures can be nearly endless if you choose to live the rest of your life overseas.