Expert @ ACCESS WEALTH MANAGEMENT Addresses the Topic
AUGUST 20, 2024, Roseland, NJ — Are you seriously thinking about retiring abroad?
If so, you’re not alone. The number of new Social Security recipients annually living outside the U.S. increased from 307,000 to more than 450,000 over the last 15 years. That shouldn’t be surprising, as a recent Gallup poll shows just 43 percent of non-retired adults in the U.S. think they’ll have enough money to live comfortably in this country when they retire.
“In addition, there are those who have always had a penchant for the beaches, the food, or the romance of living abroad, as well as others who say they don’t like the direction our country is headed in and, depending on the upcoming Presidential elections, might just prefer to live somewhere else,” said Leo Chubinishvili, CFP, with the wealth management firm Access Wealth in Roseland, NJ. “Yet, the roadmap to retiring abroad can be one filled with potholes.”
He points to a number of prime locations – Spain, Portugal, Italy and Slovenia in Europe; Panama, Costa Rica, Colombia and Mexico in South and Central America; Thailand, Malaysia and Indonesia in Asia; and nearby islands like Belize and Aruba – that generally offer what American retirees are looking for: quality and affordable healthcare, low crime rates, political stability, the potential for a better quality of life, and a more affordable cost of living.
“In some cases, retirees can live comfortably on a fraction of what it will take to retire in the U.S. Some countries have even started to compete for U.S. retirees by easing their visa requirements,” he said.
Cutting through the red tape can be complicated and time consuming, he said. Certain attractive locations, like Canada and Costa Rica, for example, restrict foreign retirees to six-month and two-year visas, respectively. Purchasing property in certain countries can run afoul of national regulations. Learning a new language can be prohibitive – although in at least several of these countries English is widely spoken. Moving far away from children and grandchildren can be heart wrenching.
Mr. Chubinishvili offered as an example the case of one client. A year-and-a-half ago, the client – who he calls Molly – told him that she wanted to move to Israel. “I helped her develop a plan to achieve her objectives. Having some family in Israel made her decision to retire overseas easier, but the primary motivation was the significantly lower cost of living and healthcare expenses. She lived in New York City, where the cost of living is notoriously high compared to the rest of the country and the world.”
Molly made the physical move to Israel several months ago. “With her pension and social security payments, her quality of life has greatly improved,” said Chubinishvili. “She now has considerably more leftover income after paying her bills in Israel, allowing her to allocate more to her discretionary spending. She sold all her real estate and personal property in the U.S. and purchased a three-bedroom condo in Israel, which costs less than the one-bedroom condo she sold in NYC. This process wasn’t easy, as there were specific regulations and steps to follow when purchasing real estate in Israel and leaving the U.S. We had to plan carefully and time the transactions correctly.”
So, if you’re intrigued by the thought of retiring aboard, what else do you need to consider? Cbubinishvili offered these additional thoughts:
- Healthcare. Healthcare in the U.S. is far more expensive than in most other countries. Without the ability to use Medicare in your new country of residence, you will need to purchase supplemental international comprehensive coverage. However, quality medical care and health insurance is often available at a cost far below what you pay for Medicare. In some countries, like Italy and Spain, foreigners can quickly become eligible to participate in their government-run healthcare systems. Medications can be far less expensive than in America. Take, for example, the price of brand drugs, which may cost 2.5 to 3 times less abroad.
- Taxes. You will still need to file U.S. tax returns as US citizens living abroad are subject to federal and sometimes state income taxes on their world income. However, many countries have tax treaties with the US, so you should not be double taxed.
- Income (e.g. Social Security and bank accounts). You can receive Social Security payments in most countries. However, it would make sense to keep a bank account in the U.S. to receive payments such as Social Security and retirement distributions and also pay bills if needed. Some banks may not allow you to keep the accounts as they do not accept foreign addresses on the account. Most likely, you will also need to open a bank account in the new country to establish residency. You can always transfer funds between the two accounts.
- Investments. These should be kept in the United States as it is simpler for reporting purposes, insuring compliance with U.S. tax laws, and offering greater security. Not many investment companies allow you to keep your investment accounts once you move overseas, although some do. You may have to change your bank, custodian or broker dealer. It is easier to keep your investment accounts in the U.S. as opposed to transferring money to the new country of residence and opening accounts there. Investment fees are typically lower in the U.S. as well.
“The right move abroad can make your retirement a rewarding and affordable one,” added Chubinishvili. “However, like with most things in life, research and planning need to take precedence over whims of fantasy.”
