Dear Savvy Senior: What are some financial factors to consider when retiring abroad? My husband and I will be retiring in a few years and are interested in living in a foreign country that’s cheaper than the U.S. — Frugal Couple
Dear Frugal: Retiring abroad has become a growing trend for millions of U.S. retirees who are looking to stretch their retirement savings. Here are some tips and resources to consider.
Another good tip is to talk or network with some expatriates who have already made the move. They can give you tips and suggestions on many issues, as well as the advantages and disadvantages and day-to-day reality of living in a particular country. Some popular sites for finding expat resources are ExpatExchange.com and ExpatForum.com.
But before committing to location, most experts recommend that you visit multiple times during different seasons to see whether you can envision yourself living there and not just exploring the place as a tourist. Also, consider these financial factors:
>> Cost of living: Retiring abroad used to be seen as a surefire way to live beyond your means, and for some countries it still is. But the U.S. dollar isn’t what it used to be, so your money may not stretch as far as you think. See Numbeo.com for a country-by-country cost of living comparison.
>> Taxes: No matter what foreign country you decide to retire in, as long as you’re a U.S. citizen you must file an annual tax return reporting all income above certain minimums, no matter where it’s earned. For details see the IRS publication 54, “Tax Guide for U.S. Citizens and Resident Aliens Abroad” at IRS.gov/pub/irs-pdf/p54.pdf.
>> Health care: Most U.S. health insurance companies do not provide coverage outside the U.S., nor does Medicare. Check with the embassy (see USembassy.state.gov) of your destination country to see how you can be covered as a foreign resident. Many countries provide government-sponsored health care that’s inexpensive, accessible and just as good as what you get in the states, or you may want to buy a policy through Medibroker (Medibroker.com) or Bupa Global (BupaGlobal.com).
Also know that most people who retire abroad eventually return to the U.S., so you should consider paying your Medicare Part B premiums. If you drop and resume Part B, or delay initial enrollment, you’ll pay a 10 percent premium penalty for every 12-month period in which you could have been enrolled.
>> Banking: Opening or maintaining a bank account abroad has become more difficult because of the Foreign Account Tax Compliance Act, a U.S. law designed to prevent Americans from hiding assets abroad. So, you may have to establish a savings and checking account with an institution that has international reach like Citibank. Or consider maintaining your U.S. bank account if you can access online, and get U.S. credit and debit cards that don’t charge foreign transaction fees.
>> Rent versus buy: Buying a home in a foreign country can be complicated, so it’s usually cheaper and simpler to rent, unless you know you’re going to live there for a long time.
>> Social Security: You can receive your monthly Social Security benefits almost anywhere you live (see SSA.gov/international/payments). Your benefits can be deposited into your bank account either in the U.S. or in your new home country, but there are some exceptions.
The U.S. State Department offers a handy checklist that can help you think through all the issues on retiring abroad. To access it visit Travel.state.gov and search for “retirement abroad.”
Jim Miller is a contributor to NBC-TV’s “Today” program and author of “The Savvy Senior.” Send your questions to Savvy Senior, P.O. Box 5443, Norman, OK 73070; or visit savvysenior.org.