It’s Complicated to Retire Abroad. Here Are 4 Considerations Before Diving In.

Beau Henderson, founder of RichLife Advisors, is working with a 65-year-old woman near Atlanta who hopes to retire in Mexico. She is researching the social aspects, including finding a community she likes, consulting with other expatriates, and renting a place for an extended stay. He is looking into factors that normally an advisor wouldn’t have to consider, such as the country’s income tax rates, property taxes, and currency conversions.

Interest by retirees to move overseas has been growing for a while and the pandemic has only increased that interest, but it’s not a move that could or should be made hastily. Aside from the financial and social factors to consider, retirees interested in moving abroad may need to navigate residency and other local regulations, healthcare coverage, and myriad other issues that can crop up.

The pandemic “made a whole lot more people want to do it right now. People have realized, ‘Who can say what I’m going to be able to do tomorrow, next month, next year. I want to do this. I’m figuring it out now,’ ” says Panama-based Kathleen Peddicord, who runs liveandinvestoverseas.com with her husband, Leif Simon.

Now, as most countries have lifted their pandemic entry restrictions and international travel is picking up, here are some things retired who hope to live overseas should consider before locking in on an overseas home purchase:

Take a Trial Run

To realize the dream of owning a villa in Tuscany or beachfront property in Belize, retirees should first spend extended time in the country where they want to live. That’s before researching residency requirements or spending money on attorneys.

“Being a tourist is different than being a local,” Peddicord says, who recommends spending several weeks to a few months in different places in the country to get a taste of the expat lifestyle. Some tourist visas allow stays up to three months and may allow visitors to extend that time, especially Latin American countries, she adds.

For his single client who is transitioning to Mexico, Henderson created a completely separate budget for life as an expat, reviewing income sources, estimating day-to-day living costs and finetuning her financial plan.

Every 90 days, he updates the client’s plan as his experience brings more clarity. For example, renting has allowed her to narrow down where she wants to live when she eventually sells her home. She also discovered her US bank wouldn’t wire money to her Mexican bank, so she had to fly to the US to sign a document allowing wire transfers. It’s those little experiences that people will realize only once they get there, he says.

Securing Residency

People who are ready to move need to apply for a residency visa, which must be obtained in the US at the destination country’s consulate. It’s critical to start the process correctly, Simon says, as there’s a lot of paperwork and it can take several months. Expect to supply basic documentation such as passport information, travel insurance, criminal records, and your planned local residence. Once in the country, people can apply for residency permits.

Peddicord and Simon say a common mistake people make is to assume the residency process is the same for every country. Each country has specific requirements and not knowing exactly what’s necessary will make the process longer and costlier.

There is another way to gain residency that could streamline the process of applying through bureaucratic channels, but it comes with risk. A number of countries such as Portugal and Greece, plus some Caribbean and South American countries, offer residency by investment permits, or so-called golden visas, to foreign investors.

And one of the most popular investments is to buy property, says Murat Coskun, founder and managing partner of Get Golden Visa, an investment advisory firm based in Turkey that helps people acquire residency permits.

For example, investors can spend €250,000, or about $270,000, in Greece on property and get residency permits, while Portugal also has several property options at various prices, between €250,000 and €500,000, depending on the property and where it’s located. Generally, residency can be renewed for as long as the investment remains, he says, although the European Commission is beginning to consider tougher rules that could diminish the appeal of golden visas.

Retirees shouldn’t regard these programs as an easy way to buy a retirement home and a residency permit in a particular country, Coskun says. These still are investments.

Tax Considerations

Rachel Martens, international tax director at

CBIZ
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says some expats are surprised to learn they still need to pay US income tax. The US has tax treaties with a number of countries, and those will determine which country gets paid what. Taxable US income includes pensions, Social Security, dividends and interest from brokerage accounts, among other income.

Expats must also report foreign bank account holdings in excess of $10,000 to the Internal Revenue Service, Martens says, including funds in local checking accounts. Before retirees move, she recommends they consult with a tax advisor who understands the tax laws of their new home country.

“The biggest thing with international reporting is there’s all these kinds of traps for people who don’t really understand what they’re doing, and these traps often come with penalties,” she says, noting these penalties can often be as high as $10,000 for not filing out required forms to disclose assets.

Getting Healthcare

Standard Medicare Part A doesn’t cover retirees outside the US and territories, and people can’t assume they’ll automatically be covered by national healthcare services of their adopted country.

Adam Bates, vice president, Insurance Services of America, who specializes in international health insurance, recommends retirees start planning early to cover their health needs. Healthcare policies vary from guaranteed-issue short-term plans that last a few months to long-term international health insurance policies that require medical testing for approval, he says.

Even-term shorter plans offer comprehensive medical coverage outside of the US and cover anything from doctor’s visits to surgeries to emergency medical evacuation, and can range from $2 a day to $20 a day. These plans can cover common pre-existing conditions such as asthma or some diabetes, although they may cost more.

If possible, start looking for policies before turning 65 and purchase an international policy that kicks in once you turn 65, even for people who are just traveling abroad for vacations, he says.

He suggests people buy international individual private health insurance before moving to ensure coverage and look into local health insurance policies once in country. He adds local private health insurance policies are still cheaper than US private insurance.

Write to retirement@barrons.com

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