By Edward Reilly
Retirees looking for a lower cost of living or to carry out their travel dreams may be intrigued by the possibility of retiring abroad. However, living abroad can be a complicated undertaking, requiring sophisticated plans for managing your retirement income and taxes, not to mention negotiating immigration, property ownership, medical care, etc. Individuals considering retirement in a foreign land should do their homework and make special preparations before pulling up stakes.
The short list of popular destinations for retirees looking for a lower cost of living includes Mexico, Costa Rica and Thailand. Daily living expenses in these nations and others are well below United States averages, which can attract retirees who wish to save on living costs. However, if you want to visit family and friends in the U.S. while retired in a foreign country, your travel costs will likely exceed what you might have spent had you continued to reside in the U.S. You also may need to keep more cash reserves on hand in the event you have an emergency.
Permanent residence can be tricky
Many nations have laws that restrict or disallow property ownership by non-natives. For example, in Mexico, foreign-born residents are not permitted to own property close to the coastline. American retirees seeking coastal property can get around this restriction by purchasing a home "in trust" or through a Mexican corporation, both of which require interaction with the legal system. It's important to note that laws can change in foreign countries, which in turn could leave you without recourse to property you may have thought you owned.
Test the waters
Taking an extended trip to your intended foreign home is recommended before you pack up your possessions. During your trial stay, you can explore potential obstacles to help create a smooth transition into retirement abroad. You'll need to become familiar with laws regarding permanent residence, home rental or ownership, employment, transfer of assets, banking and more. Give yourself the opportunity to assess your comfort level while navigating the bureaucracy, culture, economy and climate.
Consider what-if scenarios
It's best to enter into a foreign-based retirement with full awareness of what could possibly go wrong, and how you and your family would respond to a disaster if it occurred. For example, if you become ill, will you have access to care that meets your needs? (By the way, Medicare will not follow you abroad, making you solely responsible for your medical expenses.) Is medical evacuation insurance necessary? What are your wishes regarding a funeral if you should die while abroad?
Crunch the numbers and pack your bags
Figuring out how you'll maintain and access your retirement fund is another essential aspect of planning a move to a foreign country. Rest assured, you can continue to receive your Social Security checks when you live overseas, however, there are some country-based limitations. If necessary, your Social Security checks can be deposited directly into a U.S. financial institution. Check the Social Security administration's website for details. Consult a tax advisor to understand the tax implications of spending your retirement outside the U.S., and ask a financial advisor to help you determine how a foreign move might impact your overall financial picture.
Edward Reilly CRPC, CMFC
Chartered Retirement Planning Counselor
Advanced Financial Advisor
Ameriprise Financial Services, Inc.
333 Earle Ovington Blvd., Suite 1010 | Mitchel Field, NY 11553
Office: 516.228.0100 | Fax: 516.228.0101
Edward Reilly is a comprehensive financial planner for Ameriprise Financial. He graduated from Siena College in upstate New York with a degree in finance and international business. Ed helps his clients with retirement planning, as well as other areas, including investment planning, estate planning and college education planning. He currently works in Garden City and resides in Bethpage, NY. Ed enjoys playing hockey and beach volleyball in his spare time, as well as watching the Mets and Islanders.
This communication is published in the United States for residents of New York; and this advisor is licensed in the states of New York, New Jersey, Connecticut and Florida.
This column is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. Neither Ameriprise Financial nor its advisors or representatives provide tax or legal advice. The views expressed may not be suitable for every situation. Consult with qualified tax and legal advisors concerning your own situation.
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