Tuesday, January 7, 2014

What’s Your Game Plan for Retiring Abroad?


Most people who are working in the US are toiling with the goal of retirement in mind. Especially when you get to 50 plus, you’ll want to be aiming for the retirement you actually want, not just the one you can afford.

A big part of a happy retirement for most people is finding the right location. For many, this means starting a new adventure living abroad. Tackling this daunting process can be made much easier when broken down into three major points.


Phase One: Research and Decide


If you’ve got a place in mind, you’re already ahead of the game. Perhaps you know friends who have settled in San Felipe or you’ve always wanted to live in Milan. You probably have preferences about language and culture. But before you get your heart set on a location, you should first make a list of options. What are the places you have traveled to and loved? What places have you always wanted to go to, but haven’t had the chance yet? Make your list and then research the heck out of them.

You’ll luckily be able to sidestep needing to learn about labor laws, but there are plenty of financial considerations you’ll need to educate yourself on. When Googling each place, consider searching for these financial concerns as well:

  • Insurance - My GIO personal life insurance plan, for example, covers me when I travel abroad, but it would need to be replaced if I were to move back to the US. Retiring in Australia is a one of my top goals, so I will need to switch to an Australia based insurance plan, but this is not the case for all destinations.
  • Currency value - Some areas are much more expensive to live in than others. Your dollars will stretch further, for instance, in Mexico than they will in Britain or Australia. Make sure that you’re getting the most out of your savings.
  • Tax laws - Directly related to the value of your currency is how much of it you can expect the resident government to claim in taxes. Pay special attention to how much of your remaining income will be taxed under local law.

Now that you have an orderly metric ton of information in front of you, you can make an informed decision about where you’d like to end up. This should be the fun part; it may even allow you to take that vacation to the place you’ve always wanted to go! I don’t recommend settling on a decision without having visited the area yet, so save up for a short getaway and go see how the locals live. Looking at all of the information you’ve found, make a decision and stick to it.

Phase Two: Preparation


Ok, so you’ve chosen your new home and you’ve learned a lot about it. In the early stages of planning your international retirement, your first priority should be to determine how much capital you’ll have at your disposal. Consult your financial planner (or get one) so that you suffer no illusions about the kind of lifestyle you can afford. Then plot out the cost of living in your new home.

Put in place a financial structure for your new country. This might include investing in their market or setting up accounts with various institutions. During this time, you’ll also want to make sure that you’ve found an insurance provider, bank, and lawyer that you trust in the area.

Bear in mind that you should always leave a chunk of money in your country of origin. If you’re called back for any reason, health problems or family emergencies, you’ll need to have an emergency stash. This is also useful for planning your estate. If you’d like your assets to be passed on to your progeny, it will be much easier to ensure they get their inheritance if you’ve left at least some of it in their country.

Phase Three: The Move


Moving within a country can be costly. Moving internationally will prove at least twice as expensive. The expenses add up quickly: shipping, transportation, storage, visas, and the miscellaneous costs of food, hotels, etc. Most retirees will need to find a home that is smaller and more affordable, so consider downsizing.

On top of this, you must account for loss of US Medicaid eligibility, but chances are there will be some sort of medical assistance for retired folks in your new home. Social security is also a concern, but you can check this list of foreign countries serviced by American embassies and consulates and get information about social security benefits.

A great deal of your money lost in transit will be due to property transport and the damage that occurs therein. First, take stock of what you absolutely need to take with you. Obviously, sentimental objects that make your home your own are necessary, but it will most likely be best to sell most belongings and buy new ones once you arrive in your new home. Also, keep in mind that your new country probably doesn’t sell many of the items and brands that you’re used to, but this isn’t the end of the world. For example, Australia doesn't have red Solo cups but the white ones work just as well.

With careful consideration, you can patch up the cracks through which your hard-earned capital might fall through when moving abroad to retire. Particularly when retiring, it’s vital to account for every penny. You might still have some income from a pension or disability, but you’ll primarily be living off of savings and social security. This doesn’t need to be a precarious situation, however. It will most likely be the best time of your life.

Chris Jensen is a “fair dinkum” financial adviser with GIO.com.au. He enjoys traveling all over the Australian continent, picking up the colloquial slang, and planning his retirement there in the next twenty glorious years.

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