Do You Have What It Takes To Retire Overseas?

There’s more to choosing an overseas retirement location than the cost of living. How are you going to spend your time? And how flexible are you really?

Shellie Karabell

When you start approaching 65, you take out your calculator and start figuring out how much income you’ll have – and how much you’ll need -- when you decide to retire. Once the shock wears off, you may start thinking about downsizing…sometimes downsizing overseas, where your dollar often goes farther, and the lifestyle looks cheaper and better overall than in the U.S.

But wait. Before you plunk down your Pesos or Euros or Escudos for white beaches and sunshine, think about what matters to you. Besides money.

What will you do all day?

Think about time…because you will have more of it on your hands than you are accustomed to, and possibly more available time than money. Think about your own ability to be flexible. And think about how reliable the public services – such as infrastructure, health care and even political stability – are on the foreign shores that beckon.

Because once the charm of the new location wears off, the reality you encounter might shed a bit of rain on your parade. Those dreams of writing your novel in a Paris café could fade once you discover the cost of a coffee in central Paris.

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So before making the move, consider these questions:

What activities do you enjoy or want to pursue anew? What will the cost be? And how accessible are the facilities you need?

If you’re a culture vulture you may want museums and theater within walking distance. If you are a tennis player, city courts may be a bit expensive if available at all. Make a list of activities and check out their availability and cost in the location you’re considering.

What five things (at least) make living abroad for retirement a better bet than your own country? How important are these things to your life and well-being?

How flexible are you? Have you traveled abroad extensively? Do you speak the language of the country you are considering? Can you adjust to different ways of thinking and behaving? American pop culture may have spread around the world but that doesn’t mean it’s appreciated or applauded everywhere.

What are the costs and conditions of public services? Think public transport, road maintenance, Internet connections, telephones. These are central to your ability to communicate and move around as a senior citizen. As is political stability. Just because you don’t vote in a country, don’t think you’re not subject to its laws and leadership.

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What freebies are offered to seniors? Many countries offer benefits to seniors who legally reside within their boundaries, such as free or heavily discounted public transport, reduced or free admissions to museums, free classes or sports activities through their social services department or local administration offices.

What does it take to move there legally? Each country differs, but no country wants to take in foreigners who are going to be a drain on their social service systems. In general, there is a series of steps to take to obtain residency: a temporary visa, and proof of fiscal and physical stability. Information on the process is always available on country websites, and in most cases, the process must be initiated from your home country.

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Sell your home and buy abroad? Rent? Unless you’ve already lived where you want to retire and have a clear idea of how life will be…don’t plunge ahead in a fit of starry-eyed enthusiasm.

Better to rent out your home in the U.S. and find a place for a year in the country you’d like to retire in. You’ll have to prove financial ability to obtain a lease or in some cases pay for the year up-front. Some countries – for example, France – have websites for people-to-people long-term rentals (not Airbnb). In addition, almost every country has an Americans Abroad group in addition to Democrats or Republicans Abroad that can be useful in suggesting housing referrals.

Some countries – Portugal being the big attraction at the moment – offer residency when you purchase a house for a set amount of money in cash (as of this writing, the amount is 350,000-Euros, about $425,000 USD). You still have to go through the administrative formalities, and if you don’t want to be bothered, there are plenty of individuals and agencies to take care of the legal and financial details…for a hefty fee.

Residency requires spending a certain amount of time in the country. In France, it’s 180 days a year. In Portugal, seven. Again, this info is available on country websites.

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How will you make friends? How much will you/can you integrate? The locals may find you fun initially – a new immigrant is always amusing – but after a while your continued ignorance of their history, customs, and language will irritate them. Besides that, being a stranger in a foreign land is no way to spend your twilight years.

How much and what kind of health care will you need? Nowhere in the industrialized world is health care as expensive as it is in the U.S. Even paying out of pocket in Paris, for example, is MUCH cheaper than in the US, even with insurance cover (GP visit is 26-Euros --$30 -- 70% f which is paid for by the state…yes, by your taxes).

Most countries allow resident foreigners access to their health systems after a few months for a fee and then an annual charge. Taking out additional private insurance is a cost-efficient way of covering what the state doesn’t, as well as “soft” medical services such as visits to a chiropractor. In general, there is no hassling with insurance companies over what’s covered and what’s not, no paperwork to file. In France, you can file a claim using a phone app in under five minutes and reimbursement from the state and your mutual policy arrives in your bank account within two weeks.

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Death and taxes

First, taxes. Each country has its own tax regime regarding what it taxes and how much, and most industrialized countries have tax treaties with the U.S. to avoid double-taxation. In France they are alarmingly efficient at figuring this out.

If you’re an American, you will have to file a tax return – and over a certain amount of income pay taxes – even if you no longer live in the USA. Somalia is the only other country in the world that taxes its citizens on a passport basis. The nine-million-plus Americans who currently live abroad (according to the US State Department) have been trying to get Congressional attention to change this, but for obvious reasons have not had much luck recently.

Now, death. At some point, most ex-pats start thinking seriously about where they want to die. Key to that decision is your heirs, your estate, and the taxes to which they will be subjected. These laws tend to be fluid and are in no way comparable to the American inheritance laws with their many escape clauses.

Your in-place U.S. arrangements may not be applicable abroad, while accumulating a sizeable estate abroad can render your heirs liable for high inheritance taxes. Going it alone is foolhardy. Consult an international lawyer or accounting firm. Burial insurance in your chosen foreign residence country is a good way of ensuring your heirs will have the funds and local assistance for your send-off.

In conclusion…

Novelty, unpacking, and settling into a routine will occupy you for a good three months. After six months, you begin to see how your quality of life in your new location is different from what you left behind and adjust accordingly. Or not. It takes about three years to be acclimated re: customs, language, food, friends, etc…and up to five years to feel as though you may have made the right choice in making the move.

Remember: retirement is not just about the money.

(Shellie Karabell has lived in Europe for 30 of the past 36 years and is currently “retired” in Paris.)

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Shellie Karabell

Shellie Karabell is an international broadcast journalist who has held positions with CNBC, ABC News, PBS, AP Broadcast, Wall Street Journal TV, and Forbes.com.