You’ve worked hard your whole life. And if you’re like many people, you dream of the day you can start your carefree retirement. But to have a carefree retirement, you need careful planning. If you’re currently in that planning stage, it may be worth taking a look at a lifestyle that’s gaining in popularity: comfortable retirement abroad in a foreign country.
Not all countries make equally great retirement destinations. But if you investigate your options, you’ll find a country where you can enjoy financial security while exploring a whole new world.
Choose Your Future: Finding the Right Retirement Destination
The first step in turning retiring abroad into a reality is choosing your destination. But when faced with a (literal) world of opportunity, choosing one country can be challenging.
Don’t just go with whatever country is currently the most popular destination. You’ll need to take your own preferences and priorities into account:
- Climate: What type of weather do you prefer?
- Culture: Do your values align with the nation’s culture?
- Language: Do you know the local language? If not, are you willing to learn it?
- Healthcare: Does the country’s healthcare system meet your needs?
Once you’ve found a few promising locations, take the time to visit each if you can. There’s no substitute for actually spending time in a country.
Retirement experts also recommend renting a home before purchasing one to ensure you’re comfortable staying in the country year-round.
Top Retirement Destinations Around the World
If you aren’t sure where you want to live after retirement, check out these popular destinations:
Portugal
Portugal is both scenic and affordable — its cost of living is roughly 29% lower than that of the U.S. In recent years, the Portuguese government has also taken steps to attract retirees: Many new residents are eligible for ten years of tax benefits!
Residency requirements are less strict than they used to be, though you will need to submit a valid passport, proof of health insurance, and proof of income. You also will need to pass a criminal background check.
Healthcare in Portugal is accessible, although there is a downside. EU residents get access to free healthcare immediately, but Americans must live in the country for five years and become permanent residents beforehand. However, you can purchase health insurance in Portugal, and it’s significantly less expensive than U.S. health insurance.
Portuguese culture is laid-back, and the country as a whole has a deep appreciation for music and the arts. It’s also a mecca of winemaking. Many of its citizens’ cultural values center around the importance of family.
Costa Rica
Retiring to a tropical paradise is a dream for many, and you can achieve that dream in Costa Rica. However, becoming a permanent resident can be difficult.
There are three different programs you can take advantage of when applying. The Pensionado visa is designed for retirees with at least $1,000 in monthly retirement income. The Rentista visa is an option with less strict income requirements.
And if you have the capital to invest in Costa Rican infrastructure, you can take advantage of the Inversionista program. This residency visa requires you to invest at least $200,000 in a qualifying business.
These paths don’t give you permanent residency status immediately; you must renew your residency every two years. You can apply to be a permanent resident after three renewals in a row (six years total).
If you retire here, you’ll find plenty of activities to keep you busy. You can enjoy visiting pristine beaches, hiking through jungles, and taking traditional Costa Rican cooking classes. Costa Ricans are friendly and welcoming, and the country is a vibrant mixture of Spanish, Indigenous, Jamaican, and even Chinese cultures.
Ireland
Ireland is ideal if you want to retire in a country with breathtaking beauty and a rich cultural heritage. However, it’s more expensive than some popular destinations; living in Ireland costs almost as much as living in the U.S.
Additionally, Ireland has stringent requirements for getting a visa and becoming a resident. To take advantage of its unique program for retirees, you first need to prove that you have a yearly income of at least €50,000 per person. You also need to have an emergency expense fund of roughly $250,000.
Once you get a visa, you must renew it yearly for five years. After that, you can apply for a five-year visa. You can then apply to be a permanent resident after 10 years has passed.
Healthcare in Ireland is relatively affordable, even if you pay out of pocket. You can also access both public and private health insurance.
Irish culture is known for being especially friendly, and you can easily meet locals and expats in the country’s many pubs. Because Ireland is so close to the rest of Europe, it also offers excellent travel opportunities.
Financial Considerations
Make sure you understand how moving to another country can impact your finances. Here are some things to think about:
Taxes Can Be Complicated
No one wants to pay double taxes. But if you’re a U.S. citizen living in another country, the IRS still requires you to file a tax return.
The good news is that most retirees in foreign countries don’t end up paying income taxes (unless it’s on retirement account distributions — more on that below).
Federal taxes aren’t the only thing you need to worry about. Some states will consider you a resident and require you to pay taxes if you retain significant ties to the state, such as if:
- You have a valid state driver’s license
- You have a U.S. bank account
- Your immediate family lives in the state
- You own a car registered in the state
- You’re registered to vote
- You own a house or other property in the state
- You still have a state mailing address
Taxes in foreign countries can be hard to navigate. These countries also might require you to pay more than you’re comfortable with. If minimizing tax liability is important to you, consider these tax-free retirement destinations:
- United Arab Emirates
- Qatar
- Bahrain
- The Bahamas
- Monaco
- The Cayman Islands
- Oman
A tax professional will take a look at your finances and help you understand the tax implications of your move.
Currency Exchange
The U.S. dollar usually has more purchasing power in foreign countries. But to avoid surprises before you move, ensure you understand the exchange rate.
Some countries (including El Salvador and Ecuador) use the U.S. dollar. If you’re moving to a country that doesn’t, decide where to exchange your currency. Some locations (like airports) charge hefty fees. Your best bet is to visit your local bank before you travel.
Cost of Healthcare
Chances are good that your current healthcare policy won’t cover you if you move abroad. The U.S. has some of the most expensive healthcare in the world, so medical care is likely to be more affordable wherever you move. However, before moving, look closely at the country’s healthcare programs and determine what type of coverage you will qualify for.
Retirement Income Options
If you live in a foreign country, you can still receive distributions from your retirement plan. Unfortunately, many of those distributions are still subject to taxation:
- 401(k): All withdrawals are subject to taxation
- Social Security: Tax guidelines are typically similar to those for U.S. residents, although you won’t be taxed if you live in certain countries
- Traditional IRA: Withdrawals are taxed like income
- Roth IRA: All qualified withdrawals are tax-free
Notably, you cannot receive Social Security retirement benefits if you live in a few specific countries. These include the following:
- North Korea
- Cuba
- Belarus
- Azerbaijan
- Kazakhstan
- Moldova
- Kyrgyzstan
- Turkmenistan
- Tajikistan
- Uzbekistan
The situation around retirement income and relevant taxes is more complex than you might think. Before planning your move, consult with a tax professional who can help you better understand your options and limitations.
Preparing for the Move
Living abroad during retirement can give you a new sense of freedom. But, like all significant steps in life, it takes some degree of planning. Here are some tips to help you get ready for the move:
- Make a Healthcare Plan: Health insurance benefits vary greatly from country to country — before you move, make sure you have options for accessing and paying for medical care
- Consider Transportation Options: Try to understand the country’s transportation infrastructure — researching flights to and from the U.S. and deciding whether you need to own a car are two great places to start
- Gather Documents: Before applying for a visa or moving, make sure documents like your passport, Social Security card, birth certificate, medical and dental records, driver’s license, and marriage certificate are at hand
- Look Into Banking: See if your bank has a branch in your new country; if it doesn’t, ask how you can make sure you’ll have access to your funds
- See If You Need Additional Immunizations: You might need another vaccine or two before you travel
- Consider Pet Transportation: Some countries restrict what types of pets you can have, and they might require animals to quarantine
The logistics of moving to a foreign country can be challenging to navigate. In many cases, it’s worthwhile to consult with an immigration professional to make sure you have everything in order.
Real-Life Experiences
One example of a successful overseas retirement is Christina and Amon Browning, a couple who moved from the San Francisco Bay Area to Portugal to retire early.
Thanks to the high cost of living in the Bay Area, the couple realized that retiring there would be nearly impossible. They tried to earn and save as much as possible, and they could retire in Portugal when Christina was 41 and Amon was 39.
Dave and Marcia Murray are another great example. They could retire in Grecia, Costa Rica, when they were 66 and 69, respectively. Both had lived and worked in Michigan. They opted to take early retirement packages and sell their home to buy land in Grecia. Using those funds, they built both a home and a guest house.
Marcia also noted that she and her husband found another benefit to living overseas: Thanks to the large population of expats in Costa Rica, the couple can socialize more than they ever did in the U.S. Because of Costa Rica’s low cost of living, they have been able to live off of their savings while enjoying a great quality of life.
Is Retiring Abroad Right for You?
Life doesn’t have to be boring after retirement. Retiring abroad opens the door to a wealth of new and exciting experiences — all while enjoying financial security.
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