Expert Tips for Retiring Abroad in 7 Steps – A Helpful US Expat Guide

If you’re like many (if not most) Americans, amassing enough money to retire seems overwhelming.

The DQYDJ net worth by age calculator shows that even for Americans in their late 60s, the median net worth (excluding primary residence equity) is a mere $132,290. Using the 4-percent rule, that can provide about $5,300 a year.

Add the $32,800 average Social Security benefit for a retired worker and spouse, and you’re looking at just over $38k a year or $3,170 a month.

If you pay the average rent of about $1,702, you’re extremely housing burdened, with housing taking over 53 percent of your income!

Possible Solutions

The best time to plant a tree, as the saying goes, is 20 years ago.

Similarly, the best solution to the retirement deficit problem is to save and invest significant amounts over your working lifetime.

If you invest $300 a month from age 22 to age 67 (increasing that amount by inflation each year) with an inflation-adjusted annual return of 7 percent, your portfolio will be worth over $1 million in today’s dollars.

Of course, setting aside $300 a month for 45 years is no mean feat, and many simply don’t make enough to be able to do it.

If you’re already in your 60s and have a median net worth of $131,460, reaching $1 million in the next decade is unlikely.

If you can’t increase your monthly income, the obvious solution is to cut expenses.

One way of doing that without suffering abject poverty is through “geoarbitrage.”

This means using a relatively high income from a First World country such as the US to pay for a nice lifestyle in a lower-cost country, a.k.a. retiring abroad.

And while I haven’t yet retired, in the US or elsewhere, I have moved around quite a bit, including living in France for a year during grad school and moving from my native Israel to the US just over 31 years ago, so much of the following draws on those experiences.

Expert Tips for Retiring Abroad

Not every country is an ideal target for retirement, and many that are ideal for other people may not be ideal for you. 

The following are some tips for Americans looking to retire abroad in 7 steps.

1. Define Your Non-negotiables, Goals, and Preferences

First, figure out what you’re looking for.

Are you looking for a tropical island paradise, a friendly Mediterranean country, or somewhere with deep historical and cultural roots?

What sort of views do you prefer? Oceanfront, lake, river, mountains, urban, or maybe a combination?

Think about what you can’t live without, what you’d like your retired life to look like, and what your deal-breakers may be. 

Consider these through a long-term lens rather than a tourist’s viewpoint. One example may be the need for and availability of a/c and/or heating that may only be needed during the off-season, and their year-round costs.

2. Identify and Research Possible Destinations

Next, identify a set of possible locations you expect to enjoy. 

Create your shortlist of candidate countries and research what they’re like for year-round residents. 

A good place to start is International Living’s Best Places to Retire, with the top 3 recommendations for 2024 being Mexico (3^rd), Portugal (2^nd), and Costa Rica (1^st).

Alternatively, you could look at the Social Security Administration’s report on what countries boast the highest number of American retirees. As of December 2022, 450,156 retired workers received their retirement checks abroad, with top honors going to Mexico (33,919), Japan (55,924), and Canada (71,335).

Some factors to consider:

• The climate
• Political stability
• Economic stability (including, e.g., inflation)
• The language – do you already speak the language? If not, how likely are you to be able to learn it well enough to feel at least moderately comfortable shopping for groceries, let alone dealing with the authorities (some places require you to register with the local government to live there); if you don’t speak the local language well, it could also be socially isolating
• Crime rates and security – some countries have significant risks of being robbed or even kidnapped, especially if you’re a US citizen
• Availability of visas and/or permanent residence status for American retirees – in some countries, you might qualify for citizenship based on your parents or grandparents having been born there and potentially having fled due to persecution – for example, if your grandfather was born in Germany and fled the Nazis, you may be able to establish German citizenship, which in turn could qualify you for a European Union passport; however, if you’re considering applying for a foreign passport, check if the US and that foreign government allow multiple citizenships
• Availability and cost of electronic infrastructure (e.g., high-speed broadband, streaming, etc.)
• The annual cost of living assuming your desired lifestyle and standard of living; for example, if you move someplace that’s walkable, you can save on the cost of owning and maintaining a car! make a budget and compare it to a similar one for staying in the US (to see how much you’d save) and to your expected annual income including what you can safely draw from your investment portfolio
• The cost and hassle level of travel to visit family and/or tour around, for example, the cost of living in the Far East is very affordable on an American income, but travel to visit friends and family is expensive, which also makes it expensive for people to visit you
• The locals’ attitude toward expats and foreigners, especially Americans
• The presence of irritants, e.g., mosquitoes, ticks, etc.

3. Once You’ve Narrowed Down Your List and Picked Your Target Destination, Try It Out

Before making an irrevocable decision, see what it’s like to live there as a retiree for at least a year. This has several implications.

Most importantly, rather than selling your US home and buying a place in your foreign destination right away, start by renting a place in a location that fits your new budget and that checks your other boxes. Jeff Hall, Partner & Senior Advisor, Rather & Kittrell, says, “Don’t sell your primary residence until you’ve lived somewhere else for at least 6 months.”

When renting, don’t assume the rental will necessarily come with the kitchen appliances you’d expect of any US rental, let alone furniture (king-size beds, especially, may be rare) – verify what’s included before signing a lease.

A local realtor and/or relocation expert can be a great resource for finding the right rental and helping you understand the lease before you sign it.

Note that some countries restrict or ban foreigners from buying real estate. Even if you’re allowed to buy a home, don’t expect your US bank to necessarily offer a mortgage for overseas properties, and a local bank may not be eager to lend to you and/or may have unusual requirements, such as buying life insurance with the bank listed as your beneficiary. 

Once you decide to buy, consider hiring a local attorney and/or realtor with experience helping foreigners buy real estate.

When considering specific locales, balance what will be new vs. familiar to you. 

Having a Starbucks or a McDonald’s near you may seem like a boon to some, but many would find these American icons jarring when looking to immerse in a foreign culture. However, even if you want such immersion and look to reinvent yourself in retirement, having to deal with too many new things at once, especially late in life, can be stressful.

Some factors to consider here:

• Amenities in your building, development, and/or neighborhood, including, e.g., fishing, boating, golf, dining, movie theaters, shopping, tennis, bridge, etc.
• Safety and security – for example, in some countries, you’ll want to live in a gated community for personal safety
• Walkability of the neighborhood and town
• Access to fresh produce
• Access to good healthcare facilities
• Free and/or reasonably priced entertainment nearby

Bonus points if you can visit the town you pick several times over the course of a few years. Make sure to visit during different seasons so you experience what it’s like during the cold, hot, and/or rainy seasons, and especially during the low season for tourism to get a better sense of what it might be like when you aren’t surrounded by English-speaking tourists.

4. Preparing for the Move

You’ve picked the country you’ll move to.

You’ve found the ideal town.

You’ve located the right home to rent and even signed the lease.

Now it’s time to get the nitty-gritty details in place, including:

• Make sure your passport expiration is at least 3-6 months past the end of your lease period
• If you need a visa, get it (if you’re not certain, the State Department website may help); if you need a visa, make sure you know when you’ll need to renew it, and whether at some point you may qualify for permanent residency
• Check what civil and political rights you may have as a retiree, whether under a visa or permanent resident status
• If you need to learn the language, take the necessary courses and/or buy the right app and use it
• Buy health and dental insurance (with few exceptions, Medicare won’t cover you outside the US), be it local or international coverage, reviewing what the policy covers, exclusions, costs, etc.; the good news is that healthcare costs are significantly lower in comparable countries relative to the US so you’ll likely save thousands of dollars annually; in fact, costs may be low enough to pay out of pocket and forgo insurance or buy catastrophic coverage that only kicks in if your costs exceed a high threshold; consider if you want insurance that covers medical evacuation to the US if needed
• Check if local hospitals have Joint Commission International (JCI) accreditation, indicating they meet high standards
• Verify your prescriptions are available locally, and if not, check what limitations if any apply to having them shipped to you or bringing them with you from the US
• If you’ll be overseas when you turn 65, don’t forget to register for Medicare to avoid penalties
• Make arrangements to continue paying Medicare premiums (even if you can’t enjoy the benefits overseas, you’ll want to retain the coverage should you move back to the US, for example, if you need a major medical intervention and prefer a US hospital)
• Identify retiree and/or senior benefits you may be eligible for where you’re going – many places offer discounted or even free admissions to venues, reduced cost on public transportation, and perhaps even waivers on import duties for bringing things with you
• If you’re planning to drive, find out if your US driver’s license is sufficient or if you need to get a local license; also, learn the local driving laws and regulations so you don’t get blindsided by things being different than in the US
• Find and consider hiring a financial advisor specializing in helping expats
• Unless you’re fluent in the language of the country you’re moving to, find English-speaking professionals where you’ll be living (e.g., attorney, insurance agent, family doctor, real estate agent, translator, etc.)
• Set up a bank account with a US bank that serves expats (this could be a brick-and-mortar bank or an online one, in either case you need a bank willing to accept a foreign address) and identify a convenient location and/or method to access your cash
• Consider setting up an account with a local bank near where you’ll live
• Arrange to have your Social Security and/or pension benefits deposited to your US bank or to your foreign account if the Social Security Administration offers that service in your new country
• Decide how much of your assets you want to move with you to your new country, which may be informed by the type of visa you’re getting (at least during this initial “test year,” you don’t want to convert more of your money than likely needed to your new country’s currency); maintaining most of your assets in US accounts will streamline your annual tax reporting process, avoid punitive taxation on certain foreign assets, and reduce many investment risks due to more lax investment regulations in many countries and the lack of FIDC and SIPC coverage there
• Educate yourself about federal income taxation of US citizens living overseas; even if you don’t owe taxes, you’re required to file tax returns and report ownership of foreign accounts; some countries have tax treaties with the US, so you won’t be doubly taxed on your foreign income
• Educate yourself also about the taxes you’ll need to pay in your new country and keep in mind that, e.g., not all countries will recognize the tax-free nature of Roth accounts.
• Update your legal documents (e.g., estate plan, will, power of attorney, do-not-resuscitate or DNR, living will, etc.) if and as needed (e.g., US trusts may not protect you from the foreign country’s probate process) and ask your local attorney in your new country of residence to draft that country’s version of the same if and as needed
• If you want to work part-time in your new country, find out what you’ll be legally allowed to do along those lines (e.g., remote work for US companies, online work or business, etc.)
• If you have a long-term-care policy, check with the carrier if the policy covers you overseas; if not, find out what coverage options you may have there, and if there aren’t any then find out the typical out-of-pocket costs to make sure you can afford those
• Depending on your situation, you may want to rent out your US home while you’re taking your new country for a test run; alternatively, you could find someone trustworthy who’ll house-sit for you; a third option is to shut down your current home for at least your first year abroad; whether now or later, decide if you need and/or want to sell your US home
• Depending on your budget, decide what you want to bring with you (e.g., small familiar things that help make a house feel like home and small and light things that would be expensive to replace in your new hometown); next, of those things you’ll take, choose what will join you on your flight (or drive), what you’ll post to yourself, and what you’ll ship
• Decide what you’ll leave in the home (if you’re renting it out, these may be things you don’t mind the renter or house-sitter using)
• Educate yourself on how to vote remotely from overseas (if you’re a US citizen 18 or older you should be able to submit absentee ballots)

As you can see, there are lots of things, big and small, you need to take care of. 

Make a list and keep detailed records of your decisions, why you made them, and what arrangements you made.

Chris Chen, CFP®, CDFA®, Insight Financial Strategists offers several thoughts, “In general, you’ll be taxed in your adopted country first and then in the US. Taxes you pay overseas can be credited to your US taxes. If subject to a bilateral treaty, it will probably be subject to US taxation first. Other countries have different taxation structures. For example, some countries don’t tax dividends, suggesting you should opt for a dividend-heavy portfolio. Other countries do tax dividends, so check with a professional. Roth IRA distributions are tax-free in the US but may be taxable in your adopted country. If you have financial accounts or property in your adopted country, you’ll need to disclose those annually to Uncle Sam. Forgetting to disclose these could be very expensive so don’t.

“Keep your US retirement accounts. If you have brokerage accounts, keep those in the US too. Investing in the US is more convenient, more diverse, and less expensive than possibly anywhere else in the world.

“In many places, there’s a two-tier healthcare system, one financed by the country and the other financed privately. You’ll usually want the private one but check the costs. Medicare doesn’t pay for overseas care. However, keep it. You might need to come back and need insurance in the US.”

Jorey Bernstein, Executive Director, Wealth Manager, and Founder, Bernstein Investment Consultants also offers several suggestions, “Research how your Social Security benefits will be impacted by retiring outside the US. In some countries, your benefits may be taxed. Understand how retiring abroad will impact your US tax reporting requirements and tax liability. If you own property in the US, research the foreign tax implications of renting it.

“Check if your pension, 401k, or other retirement accounts can be accessed abroad. Some have residency requirements. Make a plan for your US-based assets and accounts if you relocate. Give someone power of attorney or set up automatic payments.

“Look into expat health insurance plans that will cover you globally if you give up US health insurance. Research visa/residency requirements for your desired country in advance. It can be a lengthy process. Once you move, notify financial institutions, government agencies, etc., of your overseas address. To avoid issues with benefits, accounts, etc. Review your life, health, and other insurance policies to understand coverage when living abroad. Make adjustments as needed.”

5. Making the Move

As a first step in making the move, arrange for all the “stuff” – e.g.:

• If needed, arrange for storage of things you’ll leave behind that you don’t want to sell and don’t want your renter/house-sitter to use
• Pack the things you’re taking with you appropriate to how they’re going
• Post the things you’re sending by post
• Arrange for a shipper to (pack and) pick up from your home those things that will go by freight

Then, move yourself and whatever you’re taking with you.

Leave your emergency contact info, a copy of the biographic data page of your passport, and the contact info of the nearest US consulate or embassy with family and/or a trusted friend. 

Take with you their emergency contact info and that of the US embassy or consulate.

Enroll in the State Department’s Smart Traveler Enrollment Program (STEP), a free way to register your trip or stay with the nearest US embassy or consulate. This will also let you allow the State Department to contact you, your family, and trusted friends in an emergency.

The local embassy or consulate website should also offer a list of local English-speaking attorneys.

6. Your First Day There

You’ve arrived at your new home.

Breathe.

Introduce yourself to your new neighbors. At the least, you want to avoid making enemies. At best, these will soon become friends.

Once you arrive, let your friends and family back home know you’re safely there. 

If and when there’s civil unrest and/or a natural disaster where you’re staying, let your loved ones know you’re ok as soon as you can. This will set their minds at ease and reduce the flow of unneeded inquiries to the US embassy or consulate.

Unpack only what you expect to need right away and try to keep the mess of everything else as localized as possible, ideally in one room or space that you can do without for a week or two.

Make a list of what you need to buy right away and a separate list of what you want to buy soon but can do without for a while.

Go out and buy the things from your first list.

7. The Next 364 Days

Gradually unpack the rest of your stuff and put it away.

Go shopping for the things on your second shopping list.

Set up a regular schedule of staying in touch with friends and family back home, be it by phone, WhatsApp or Signal calls, Zoom, Google Meet, or FaceTime.

Next, start exploring your new hometown and its surrounding region. It’s time to enjoy your new home.

Keep track of expenses and make sure you’re not spending more than you budgeted, or at least not more than your retirement income and portfolio can support. 

Over time, consider if you love your new location or want to move. That may be moving to a different home, neighborhood, town, or even country.

Or you may come to realize you miss the US too much and decide to move back.

The Bottom Line

Retiring abroad can be an exciting new chapter in your life. However, as you can see in the above, doing it right is anything but straightforward.

There are many helpful resources, but don’t overlook these.

• The State Department’s page on retiring abroad
• The State Department’s page on healthcare abroad
• The State Department’s page on international scams
• The State Department’s Smart Traveler Enrollment Program
• The Centers for Disease Control and Prevention (CDC) travelers’ health page
• The Social Security Administration’s Office of Earnings & International Operations page
• The IRS page for citizens and resident aliens living abroad
• The Federal Voting Assistance Program’s page
• American Citizens Abroad

Beyond all these, expats living where you want to move (or try expats.com) will be an especially valuable resource since they’ve likely come across all of what you’re about to experience and know how to navigate most issues.

Perhaps the most important thing is to manage your expectations. 

While foreign countries offer new and exotic opportunities, they’re unlikely to be as convenient as the US, where life seems to be designed around convenience (albeit often at a cost, financial and/or other). 

If you expect everything and everyone to help you get things as quickly and effortlessly as back home, you’re in for a lot of frustration and will often be too upset to enjoy the experience.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.