Want to Retire Abroad to Save Money? Here Are 7 Questions to Ask Yourself First

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  • Visas, housing, and healthcare are all important considerations for retirees moving abroad.
  • You also need to make sure you're prepared financially and decide what to do with your belongings.
  • Asking yourself the right questions can help you prepare for a retirement abroad.

Retiring abroad has its perks, but there are some important things to consider before you commit to it.

If you want to make your retirement savings go further, retiring abroad is an increasingly popular choice. Many countries have much lower costs of living than the United States, and you could save money if you're open to moving. However, an international move is also a life-altering decision with lots of changes to sort out.

I live outside the United States, so I have some firsthand experience with what it's like to start over in another country. If you'd like to retire abroad, ask yourself the following questions to figure out if it's a good choice and to start planning.

1. What type of visa will you apply for?

With a U.S. passport, you can visit many countries as a tourist, but you can't stay indefinitely. To live in a foreign country, you'll need to apply for a resident visa.

Requirements for a residency vary depending on the country. Some of the more retiree-friendly countries offer visas for foreigners who have stable, verifiable income or savings. There are also countries that offer visas to foreigners who invest a minimum amount.

Research the visa requirements for countries that interest you to see what your immigration options are. Make sure to look for information from people who have gone through a country's immigration process to get an idea of what it's really like.

2. How will you find housing?

Short-term rental sites like Airbnb are a good way to transition to a new country. Homes you find on these sites will generally have all the basics. But renting like this tends to be the most expensive option, and at some point, you may want your own place.

Whether you want to rent or buy a home, be prepared for things to work differently than you're used to. It's often difficult to get a mortgage from a foreign bank like you could at home, and rentals might not include everything you'd expect based on your experiences in the United States.

Case in point: I have family in Germany, and it surprised me to learn that when they began renting an apartment, they needed to install their own kitchen. As it turns out, tenants often do that themselves over there. Every country has its own housing quirks, which is why it's wise to look into how buying and renting work.

3. What will you do for healthcare?

Healthcare is important for everyone, but especially for retirees. Even if you're going to have Medicare, you'll also need coverage in the country where you live. Look into what kind of healthcare plans are available in your country of choice and how much they cost.

On the bright side, this is probably an area where you'll be able to save a lot of money by moving. The U.S. healthcare system isn't exactly known for being affordable or easy to understand. Personally, I find better healthcare to be one of the biggest advantages of living abroad.

4. What will you do with your belongings?

One of the hardest parts of an international move is deciding what to do with everything that doesn't fit in your luggage. You have three options here:

  1. Move it to your new home. You get to keep your things this way, but it's also costly and inconvenient.
  2. Put it in storage. This is a more convenient way to hang on to your belongings. It gets expensive, though, unless you have someone willing to store your stuff for free.
  3. Sell and donate it. This is the most economical and convenient option, if you're willing to get rid of a large chunk of your possessions.

There's no right or wrong answer. I'd recommend downsizing as much as possible first, and then decide what's definitely coming with you in your luggage. Once you figure that out, you can take stock of what's left and decide whether to store it, move it, or sell it.

5. How will it affect your taxes?

As a U.S. citizen, you're required to pay taxes no matter where you live. There is a Foreign Earned Income Exclusion, but it doesn't apply to Social Security or retirement plan distributions.

As a resident in another country, you may also need to file taxes there. Many countries have tax treaties with the United States to prevent double taxation, meaning you'd only need to pay taxes to the United States or your country of residence, not both. Moving abroad won't necessarily cost you more in taxes, but you'll need to make sure you're following the rules for the United States and your new home.

6. Are you prepared financially?

Even when you've found a country with a lower cost of living, do the math to confirm you'll be in a good financial position. Check how much things like rent, food, transportation, and healthcare cost there, and compare that to your estimated monthly income. You don't want to move thousands of miles just to end up barely scraping by.

Before embarking on such a big move, make sure you also have enough in your emergency fund. It's wise to have at least six months of living expenses saved in your bank accounts, as this gives you a solid safety net if you need it.

7. Are you ready to live somewhere new?

While there are a lot of personal finance considerations when retiring abroad, you also have to take into account how it affects your life as a whole. It can be a massive adjustment to go from a place where you're comfortable and fit in to entering a new culture where you stand out from the crowd.

Saving money is one big benefit of retiring abroad, but hopefully it isn't your only reason. The experience is far more rewarding and enjoyable if you're truly excited about living somewhere new.

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