5 Tips for Retiring Overseas

Here are our top 5 tips to consider for retiring overseas.

Healthcare

Many countries operate a national health service, so called “socialised medicine”, which may or may not, cover the entire cost of healthcare and, may or may not be available to foreign residents.   Healthcare is a major issue for retirees no matter where they live, but it is essential that they understand exactly what will be covered so that supplementary health coverage can be provided, usually by private provision.

A practical example of what to avoid is demonstrated by the many British retirees to Florida who have discovered that while housing and cost of living is relatively cheap compared to the UK, the healthcare bill which comes with it can wipe out their retirement savings and assets.

Cost of Living & Foreign Exchange Movements

A major issue when retiring is the transition from an earned income to a fixed one, provided by retirement pension and investment funds or state pensions. Retirement income is typically lower than earned income for many people, so it is vital their income will go as far as possible. Choose a country where the cost of living is within your retirement income budget, and don't forget to take into account the relative movements of foreign currency exchange rates.

A good example of how foreign exchange movements can work against you is again demonstrated by British retirees to Florida – 2 years ago, the Dollar/Sterling exchange rate was almost $2  = £1, but today that rate is closer to $1.50 = £1 – in other words, a retiree paid in British pounds has suffered a 25% drop in their retirement income in Florida.  This of course applies to any British retiree living in a country where the US dollar is used as currency!

Integrating into Local Society

An integral part of retirement is the development and maintenance of social connections, spending time doing the things you like and taking up new activities which working life, and other constraints on your time, have prevented you from engaging in.

Retiring overseas to a desert island may sound idyllic, but in reality the truth is this sense of isolation is unlikely to help you enjoy retirement.  It is important for your enjoyment and health to  maintain and develop a social network and unless you can speak the local language, or can readily adopt to local customs, you are going to face obstacles in developing a social network. 

Consider retiring to locations where there is already an expat community flourishing and thriving, because this will give you opportunities to network and facilities for you to enjoy will already be in place.  This does not mean you have to forego learning a foreign language or “going native”, but you at least have the option to dip in and out of both cultures.

Buying a Retirement Property

There are many overseas developers of retirement homes and communities but many find homes to retire to elsewhere.  No matter how you source a home, there are several factors aside from the price and legal issues to take into account. 

Access to shopping and medical facilities is important, as well as being able to socialise and enjoy the activities you wish to engage in whether it be needlework or mountain climbing.  You should seriously consider the presence and access to public transportation, especially trains and buses while  access to an international airport without trekking for days is also important. 

There is also the issue of hiring help not least should you require assistance.  Depending on whether you live in the  countryside or in the city, will play a significant role in how much you will pay for professional and support services as well as their general availability in any event.   Hiring a cleaner will be cheaper in the rural areas compared to urban, but you are less likely to have access to good quality medical facilities in rural locations.

Taxation

Some countries are fiscally welcoming and provide a boost to retirement finances by levying zero or low taxation on your income.  Other countries are not so inviting and can provide a serious shock to not just your income but also to your overall assets.  Switzerland provides a low taxation environment for retirees but Australia will levy a wealth tax upon your total assets, including those still located abroad including those in “tax free” shelters such as pension funds.

There is also the issue of taxation in your home country.  Just because you are no longer resident does not mean you can completely escape paying home taxes, US citizens for instance pay tax on worldwide income irrespective of where they are.  In some instances, you may well want to maintain a tax-paying presence in your home state because of the presence of inheritance tax reliefs which you may risk losing.

It is vitally important to your financial future, both for your income and your assets, that you consult with an international taxation professional who can advise you on how to proceed.  This is something you ought to do as soon as you seriously consider retiring abroad in order to maximise the relief and taxation advantages available to you.

….and Finally

This is not a “tip” rather more a reminder, that while many people do retire overseas and enjoy a comfortable and enjoyable lifestyle, many retirees make the leap again and return home.   There are numerous reasons for doing this – failing health, desire to be close to family again, simply missing home – but no matter what the reason, repatriation is a real possibility.  You ought to bear this in mind whenever you are considering any overseas retirement issue and try to foresee how your immediate plans will affect your future under such circumstances.

Photo: Matteo Castelli