by Rick Pendykoski
(Goodyear, AZ, USA)
The trend of retiring abroad has grown considerably over the last few years. Several foreign countries have exotic locales, a low cost of living as compared to the USA and offer more affordable high-quality medical services even to expats.
If you too wish to retire abroad, the first and the most important thing you need to do is learn how to manage your money. This is important to strengthen your retirement planning so that you can fully enjoy your retired life in a foreign country of your dreams.
Here’s a checklist for US citizens to help you prepare for a financially-healthy retired life abroad:
Taxes – You need to continue paying your taxes even if you no longer live or earn in the U.S. You still owe taxes on your worldwide income which includes your retirement savings accounts such as traditional IRA and self-directed 401k.
Consult a tax professional who can help you understand state and international tax issues. You also need to ensure that you aren’t taxed twice. The USA has treaties with more than 65 countries which can help you avoid double taxation.
Medicare Benefits – In case you have medical insurance and travel abroad continuously for more than six months, you are likely to get dis-enrolled from your medical plan’s benefits. You can choose to continue paying premiums for your Medicare plan to avoid a break in your eligibility.
You can also get healthcare coverage in the country you choose to live in after retirement. Most of the countries have more affordable yet high-quality Medicare plans. An ideal option would be to purchase an international health plan from an American insurer or a private insurance company which has an extensive global coverage.
Banking – It can be difficult to obtain a foreign credit card. Your best option is to choose a foreign-based branch of a U.S. bank for all your banking needs. Research well in advance to protect your money overseas. During financial transactions and while holding money in banks of foreign organizations, your dollars aren’t protected by the SEC rules or FDIC insurance.
Even with their foreign equivalents, the protection may not be the same. So, find out about the legal implications associated with the banking transactions in that country beforehand.
Investments – Ideally, you should keep most of your investment accounts in the U.S. For instance, if you are shifting to a foreign country post-retirement, leave your IRAs in the U.S. as transferring retirement accounts involves some hassles. This gives you more investment choices, enables efficient tax reporting and offers other advantages as well.
Currency risk is also an important reason to leave your investment accounts in the U.S. You can hold a cash reserve sufficient to cover your expenses for a few years in the foreign country where you choose to reside.
Find reliable insurance specialists, attorneys and tax professionals in the foreign country of your choice to help you deal with tax and legal matters which come with living abroad. If possible, visit the country you want to move to after retirement, during its harshest season.
All of these tips will help you make an informed decision. Remember, solid research and certain precautions can help you live a financially-sound retired life in the foreign land of your dreams.
Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as Business.com, SAP, MoneyForLunch, Biggerpocket, SocialMediaToday and NuWireInvestor. If you need help and guidance with traditional or alternative investments, email him at [email protected]