If things go well for you, retirement can last for decades. But your retirement savings might not, especially if you live in a high-cost area. Households with a resident aged 65 or older have a median income of just $38,515, according to the U.S. Census Bureau. It’s no wonder that the number of Americans retiring abroad grew 17 percent between 2010 and 2015, now numbering some 400,000, according to the Social Security Administration. (See also: 5 Countries Where You Can Retire for $1,000 a Month)
But retiring abroad isn’t as simple as going on vacation. How will you access your savings or benefits from overseas? Can you buy property? What about medical care? All these questions can be addressed with some pre-takeoff financial planning. (See also: 9 Things to Know Before Retiring Abroad)
1. Find a retiree-friendly destination
Some places have incentives like tax breaks and visa offers to attract American retirees, such as Panama and Costa Rica’s pensionado programs. You may also qualify for senior citizen benefits established for locals, such as Ecuador’s senior discount program, which offers savings on airfare, utilities, and sporting events.
In addition, it’s a good idea to consult the State Department’s country-specific information about visa laws, health and safety conditions, and how much money you’d be allowed to bring into the country with you. (See also: 5 Countries That Welcome American Retirees)
2. Find out if you can get Social Security payments there
Six in 10 retirees rely on Social Security for at least half their income, according to the Social Security Administration, making this a pretty important consideration. Fortunately, the SSA can send you your check if you move abroad to most countries, with the notable exceptions of Cuba and Cambodia. For certain other countries, including Ukraine, you can get your payments, but only if you meet certain conditions such as appearing at a U.S. embassy or consulate every six months.
The Social Security Administration offers the Payments Abroad Screening Tool to help you figure out if you’ll be able to collect payments overseas.
If you are a non-U.S. citizen receiving Social Security because you worked in the U.S. or are a dependent of someone who did, the rules on receiving payments overseas are more complicated. Consult the SSA booklet, Your Payments While You Are Outside the United States for the full story.
Many American embassies worldwide have a Federal Benefits Unit to help retirees with any Social Security issues.
3. Hire a new financial adviser
The wave of Americans retiring abroad has given rise to a new specialty in the financial industry: Cross-Border Planning. A cross-border specialist will help you understand local income tax laws so you don’t risk over- or underpaying. They can also help you safely move spending money from the U.S. to your new home, and guide you through many other issues you might never have considered.
It’s almost impossible to find someone who knows the laws of every country, so use the Cross-Border Financial Planning Alliance to find someone who specializes in your chosen country.
4. Figure out what to do with your bank accounts
You should keep your U.S. bank account open to handle any expenses and bills you have stateside, and open another one in your new home country. Ask your U.S. bank if they charge a fee for making withdrawals from foreign automatic teller machines; if they do, you might want to upgrade your account or change banks before you move.
For your foreign account, Expat Info Desk recommends choosing a large, well-known bank and transferring your money using an international currency exchange service. These are companies that transfer large amounts of money to an account in a foreign country, and they may offer a better conversion rate. Another option is to ask your home bank if they operate in your destination country.
If you have more than $10,000 worth of assets in foreign accounts, the IRS notes you must report this to the U.S. government every year by filing a Report of Foreign Bank and Financial Accounts (FBAR) or face penalties of up to $100,000.
5. Stay on good terms with the U.S. Department of Treasury
Even though you no longer live in the U.S., if you maintain citizenship, you need to pay any taxes you owe. The Internal Revenue Service offers guidance on how and when to file a tax return from overseas.
Don’t imagine that you’ll be out of sight, out of mind to the U.S. government. In fact, it’s actually more important for you to pay up than it is for citizens living at home, because if you owe more than $50,000 in delinquent payments, you could lose your passport.
6. Get online
Although mail service is unreliable in some parts of the world, internet connections are nearly ubiquitous. Even if you have always used paper statements and written checks before, now is a good time to embrace online banking to avoid delays and the cost of international postage.
7. Rent a home, then learn about buying
The Australian Expat Investor suggests renting at first, unless you have already been visiting your new country for years and are sure you’re there to stay. You’ll need to learn about the rules for tenancy in your new country. Don’t be surprised if you have to pay an entire year’s rent in advance. Even if you don’t actually sign a lease before you move abroad, you should put aside the money you’ll need and find out how to transfer it.
Once you’re established in your new country, look into whether purchasing a home might be a good financial move. It could cut your costs and serve as an investment if the local property market is on the upswing. (See also: How to Choose the Perfect Country to Retire In)
8. Tap your U.S. home for income or capital
If you’ll be leaving behind a home you own, you may not want to sell it at first. But you could consider renting out all or part of it. Some retirees use Airbnb to flexibly get income from their U.S. home, while reserving its availability for when they come back to visit. (See also: 5 Easy Ways to Make Good Money From Airbnb)
If you want to refinance your U.S. property to get money to buy a home overseas, look into doing that before you go. Homeowners who try to refinance from overseas may face a lot more confusing paperwork and hurdles.
9. Make an estate plan
If you have never made a will or considered putting assets in a revocable trust, talk to an estate attorney before you go, and get this taken care of. Find a lawyer who is knowledgeable about handling such things while living abroad, so they can advise you on whether your U.S. will can provide for distributing foreign assets, or if you’ll need a second will created in your new home country.
If you already have an estate plan, consult an attorney to see if any amendments will need to be made to cover assets located abroad.
10. Make a health care plan
Health care tends to be one of the greatest expenses in retirement. And unlike Social Security, you will not be able to use your Medicare benefits overseas. One decision to make is whether to enroll in Medicare anyway, so that it’s still available to you on visits home or if you need to return to the States unexpectedly.
Since most people don’t have to pay a premium for Medicare Part A, which covers domestic hospitalization, some nursing home care, and hospice care, keeping that is a no brainer. Should you also pay for Medicare Part B, which helps pay for doctor visits and some prescriptions, among other expenses? That depends on how likely it is that you will ever return to the United States. If you don’t carry Part B, and you must return because you become disabled and need help from your children, for example, you may have to go without coverage for months while waiting for the annual enrollment period, and you may also face premium penalties.
Since Medicare is off the table for any care you need while overseas, you’ll need to plan for financing that. Fortunately, health care in other countries is less expensive than it is in the United States. For example, the average per capita medical spending in Mexico is just over $1,000, compared just under $10,000 in the United States, according to the Organization for Economic Cooperation and Development. So paying for health care expenses out of pocket or buying local insurance or a hospital membership plan may be reasonable, with many expats saying they pay under $100 a month.
11. Buy insurance for everything else
Besides your health, you’ll also need to insure your property. Understanding what insurance local laws require may be a lot harder in other markets than it is in the United States. It’s a good idea to consult your local real estate agent about what insurance policy to get.
12. Get a financial power of attorney
You may need an adult son or daughter, or other representative, to make financial moves in your place while you are overseas. It’s a good idea to leave them with a financial power of attorney document so that they can sign for you, for example, while selling property or other investments. (See also: What Is Power of Attorney?)
13. Make an exit plan
Some retirees plan to enjoy their new home country while their health lasts, then return stateside if they become ill or disabled. If that’s you, you’ll want domestic long-term care insurance, and/or a nest egg in U.S. accounts to live off when you return. (See also: Is Long Term Care Insurance Worth It?)
Even if you plan to live in the new country for the rest of your life, if you want your remains returned to the U.S., you’ll need to plan for that. Look into emergency evacuation/repatriation insurance to help with medically equipped flights home or transportation of remains.