Three Things to Know When Retiring Abroad

Many retirees consider moving abroad so their money can go further.

It’s often much cheaper to live outside the US, especially if you’re relying on a fixed income or Social Security benefits. Although the cost-of-living for Social Security increased by 5.9% in 2022, the cost of living in the US remains much higher than many parts of the world.

If you’re thinking of retiring elsewhere, here are three things to consider:

You will need a long-term visa.

Immigration, visa, and residency laws vary internationally. Different requirements may exist depending on where you hope to move with regards to passport validity, recommended or required vaccinations, and currency restrictions for entry and exit. Moreover, countries have their own unique policies for the perks and limitations of a residency visa.

For example, a standard visa in Spain, prohibits work in the country, but allows entrance and egress at will for ease of travel.

On the other hand, Panama offers a great visa policy for US citizens. If you invest more than $200,000 in real estate, you automatically get their “Friendly Nations” visa with no taxes on foreign income and low property taxes. Panama even provides retirees a pension program with plenty of benefits for travel, dining, entertainment, and healthcare.

Your taxes will get more complicated.

Tax structures abroad are quite different. For federal countries like the US and Canada, personal income taxes have additional federal or provincial taxes specific to your region. In Canada, US citizens are required to pay federal taxes on retirement pensions, 401(K)s, and Social Security benefits, as well as state taxes on your properties — on top of paying taxes in your host country. If you plan on moving to Quebec, residents have a tax bracket unique from other parts of Canada. Check out this income tax calculator for information on the region.

Fortunately, US tax treaties with certain countries allow Americans living in those places to pay Social Security tax to only one country. Greece is one example.

Greece recently proposed a 7% flat tax for foreign nationals willing to transfer tax residence to the country. This means retirees will only need to pay a 7% tax rate on pensions, rental income, and other transferable investments for up to 10 years. Of course, it’s best to consult with a tax attorney before you move and keep in touch with them while abroad to ensure you’re complying with any tax laws at home.

Your healthcare plans may change.

Countries like France, Sweden, and Ireland are great for retiree healthcare, while low- to-no cost healthcare in countries like Ecuador and Costa Rica are particularly enticing to US citizens. However, major illnesses like cancer or big accidents can be a financial burden wherever you go. Furthermore, these countries may have different healthcare practices than you’re used to, and the language barrier and cultural differences could impede your access to healthcare services.

With these factors in mind, do plan for your needs. For the most part, Medicare will not cover costs incurred outside the US, although some Medicare Advantage plans offer options for expats. Look into private insurers that offer international coverage for US citizens and other foreign nationals as well.

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