Avoiding Problems When Retiring Overseas
Happy couple on the beach in their overseas retirement
Tens of thousands of Americans have chosen to move to other countries in retirement and most have had pleasant experiences, often living happily in gorgeous tropical or European locations. The people who have had the most success are those who took the time to do thorough research and careful financial planning.
Recently I wrote a post called “Investigate Exchange Rates Before Moving Overseas.” However, the currency exchange rates are not the only issues that could affect your pocketbook if you decide to move to another country. While most potential problems can be avoided or dealt with, it is important that you take the necessary steps to be assured that everything goes as smoothly as possible.
Factors To Consider Before Moving to Another Country
* Have a realistic idea of the cost of living – While it might be possible to live very cheaply in another country, will you be living in a lifestyle that is comfortable for you? One young couple we know who moved to Costa Rica recently spent $300,000 for a new, modern home in a gated community. While they could live cheaper in other areas, they preferred the safety and modern amenities that were available in this neighborhood. You need to ask yourself … will I really be reducing my cost of living? In addition, you need to factor in extra expenses, such as the cost of travel back and forth to visit family in the United States.
* Make arrangements to receive your Social Security checks in your new country – Approximately 400,000 U.S. retirees currently get their checks abroad. You can find out how to do this and whether or not the checks can be sent to your new country at SSA.gov/foreign. Once in your new country, the U.S. embassy or consulate can assist you if you have any problems.
* Investigate the health care system and medical insurance in your new country – Will you have access to the specialists you need at a price you can afford? Since you cannot use Medicare in other countries, can you buy into the national healthcare system in your new country or purchase private insurance? Should you keep basic Medicare available for when you travel back to the U.S.? Many people do, especially if they make frequent return trips or only live overseas for a portion of the year.
* You are required to continue to file U.S. tax returns – If you have any assets in the U.S., or at least $10,000 in a foreign account, or any income coming from the U.S., or you are earning foreign income, you are required to file tax returns, even if you don’t owe any taxes. Failure to file the proper forms can result in a $10,000 fine and you can be arrested upon your return for felony tax evasion. Make sure you cut all ties with the state where you have lived, too, or you could be expected to file state tax returns. You may also have to file a tax return in your new country. You need to check with an accountant in the country where you will be living to learn exactly what tax laws could affect you.
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