Retirement may be one of the best times of your life, but one thing's for certain: It's not cheap. The average person age 65 and up spends nearly $46,000 per year, according to the Bureau of Labor Statistics. If you spend that much every year for, say, 25 years, it comes to a grand total of $1.15 million.
That's a hefty price tag, and most soon-to-be retirees don't have nearly that much saved. In fact, a whopping 42% of baby boomers don't have anything at all saved for retirement, according to a 2018 report from the Insured Retirement Institute. That means those who are behind on their savings will likely end up depending on Social Security benefits to make ends meet -- but when the average check is just $1,300 per month, that leaves much to be desired.
If you're nearing retirement age and your savings are coming up short, you may think your only option is to find a way to save more. While that's never a bad idea, there is a way to potentially lower your costs without sacrificing your lifestyle: Retire abroad.
A drastic (yet potentially cost-effective) move
Moving to a new country is a big decision, which is probably why very few retirees even consider it. In fact, only 4% of Americans said they would move abroad to find a more affordable lifestyle in retirement, according to a new survey from financial planning company Stash.
Without a doubt, retiring abroad isn't for the faint of heart, and many people balk at the idea of leaving their friends and family behind and starting anew in a different country (and potentially having to adapt to a new culture and learn a new language as well). That said, it can provide the opportunity to live a more lavish lifestyle at a much more affordable price than what you'd find in the United States.
For example, move to Buenos Aires, Argentina, and you can enjoy beautiful beaches, world-class restaurants and museums, and a city rich with historic culture. The best part, though, is that the average furnished apartment in a ritzy part of town costs less than $600 per month, according to expatriate resource Expatistan. Even if you're surviving on Social Security benefits alone, you can live a relatively lavish lifestyle in a city with a lower cost of living.
Before you start packing your bags, though, it's important to do your research to determine if retiring abroad is the right decision for you.
Weighing the pros and cons
While a lower cost of living is a definite advantage of moving to a new country, there are risks as well. Some countries may have subpar healthcare, for example, or high crime rates -- so the affordability aspect may come at the cost of your health or safety.
Even if you find a safe, affordable city with a great healthcare system, you'll still need to consider the costs of traveling back to the U.S. on occasion to visit friends and family, as well as expenses related to moving and potentially buying new furniture, vehicles, etc.
There's also the culture shock that comes with moving to a new country. For some people, the idea of learning a new language, trying new foods, and immersing yourself in a new culture sounds like a thrilling adventure. For others, it sounds more stressful than enjoyable. Understanding how far you're willing to venture outside your comfort zone will help you decide if moving abroad is the right choice.
If you've decided that moving to a new country is the retirement adventure you've been looking for, it's time to start researching your options. Before choosing a destination, think about factors such as how far you're willing to move from home, whether you're open to learning a new language, and how much you expect to spend on housing and other necessities. Also, be sure to look into what it takes to legally reside in your prospective country. For example, will you have access to healthcare even if you're not a legal resident? Will living as an expat restrict your ability to own property? These are important questions to ask before you pack up and move.
Also, be sure to calculate how much you can reasonably afford -- and stick to that number. It may be harder to find a job in a new country than if you were to stay in the U.S., so if you move and then realize you can't afford your new lifestyle, your options may be limited.
Testing the waters
Sometimes the best way to decide whether or not retiring abroad is the right decision is to test it out for a few weeks. Try your best to live like a local and not a tourist in your prospective new city; you'll want to be sure you're moving to a safe and affordable neighborhood with access to everything you'll need.
This is also a good time to see how friendly the city is toward newcomers. While you probably won't make any new best friends after spending a week or two in the neighborhood, you may get a sense of whether or not most people are welcoming toward expats. You may even find groups of other Americans living in your new city, which can make the transition a little easier.
Finally, consider the big factors like affordability and healthcare. Will you be able to afford your ideal lifestyle in this new city? How much will you be paying for healthcare? Keep in mind that while your Social Security benefits will follow you to your new country, Medicare won't -- so you'll need to find other ways to cover your healthcare needs. You'll also still be subject to U.S. income taxes on retirement account withdrawals if you move abroad (after all, Uncle Sam still wants his piece of the pie regardless of where you're living), so be sure to factor those expenses in when you're determining how much you can afford.
Deciding whether to retire abroad isn't an easy choice, but it could potentially be one of the best decisions you ever make. If you do your research and choose the right destination, you could spend your retirement relaxing on the beach with a drink in your hand -- without breaking the bank.