Retiring abroad offers a lot of perks the U.S. just can't match. You can enjoy a tropical climate if that's what you prefer. You'll get to experience new cultures and activities. And you can sometimes save quite a bit of money, especially if the country you move to offers affordable healthcare.
But there are downsides to retiring abroad, and your dream retirement could quickly turn into a nightmare if you aren't prepared for them. Here are three things all aspiring expatriates need to know.
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1. Your tax returns will be more complicated
Living abroad doesn't exempt you from filing a U.S. tax return each year, and you'll likely have to file one in your new country as well. Not only does this compound the amount of time you have to spend on this dull task, but it also opens the door to double taxation. This could drain your savings more quickly than you were expecting.
But not every expat runs into this problem. If the country you retire in has a tax treaty with the U.S., you might not have to pay income taxes in both countries. You could also qualify for a U.S. tax credit for the foreign taxes you've paid.
Don't wait until retirement to sort this out. Look into the taxation laws before you retire abroad. You might want to consult a tax professional who is experienced in this situation to be sure you're not surprised by the tax bills you encounter when you retire.
2. Medicare won't cover you
Medicare is the standard health insurance for seniors 65 and older in the U.S., but it only covers care that takes place within America and its territories. While many other countries have lower healthcare costs than the U.S., Americans retiring abroad will still want some sort of healthcare coverage to help with their out-of-pocket costs.
The easiest way to address this is to purchase an international health insurance policy that will cover you anywhere in the world. You could also look into health insurance policies in the country you plan to retire in.
You might still want to enroll in Medicare if you aren't living abroad full time or if you make frequent trips back to the U.S. Price out all your options before deciding which is best for you.
3. Getting Social Security could be challenging in some countries
Generally, the U.S. will pay Social Security benefits to American citizens retiring abroad. But there are countries it doesn't send benefits to, like Cuba and North Korea. It also doesn't generally pay benefits to those residing in the following countries:
- Azerbaijan
- Belarus
- Kazakhstan
- Kyrgyzstan
- Moldova
- Tajikistan
- Turkmenistan
- Uzbekistan
But if you retire in one of these countries and later move back to the U.S. or to another country that the U.S. will send Social Security checks to, it will give you all the money it had been withholding.
The rules for receiving Social Security abroad are a little more complicated if you aren't a U.S. citizen. If you leave the U.S. for six full calendar months, the government can suspend your benefits until you return to the U.S. again for 30 days in a row. But there are exceptions for residents of certain countries that the U.S. has agreements with.
Ask the Social Security Administration any questions about how retiring abroad could affect your benefits. And watch for future changes to the program that could affect you if you retire abroad.
If retiring abroad is something you want to do, don't let any of this discourage you. Just familiarize yourself with these challenges so you can prepare ahead of time. With that out of the way, you can focus on enjoying the benefits of retiring in your preferred country.
