Five Financial Things To Consider If You Plan To Retire Abroad

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Five Financial Things To Consider If You Plan To Retire Abroad

When retirement is around the corner US citizens may want to consider is whether you want to retire in the U.S or abroad. Here Rick Pendykoski of Self Directed Retirement Plans sets out the financial considerations you need to make before moving abroad.

Written exclusively for Expat Network by Rick Pendykoski of Self Directed Retirement Plans LLC

Some advantages of moving abroad include lower cost of living, experiencing new things, access to affordable healthcare and choosing a place whose weather you love. But, every coin has two sides as there are some disadvantages to moving abroad. This includes double taxation, language and culture differences, distance from your family, possible political instability, and lack of community support.

In this article, we will look at some financial considerations you need to make before moving abroad.

5 Financial Things to Consider Before Retiring Abroad

1. Understand Taxation

Before you decide to retire abroad, talk to a tax professional who can help you understand state and international tax laws. They will help you review tax treaties in the country you are planning to move to.

As an American citizen residing abroad, you will still be subject to the same rules for filing income, estate returns and paying taxes. You will still owe taxes on your worldwide income and this would include your retirement savings accounts like self-directed 401k and traditional IRA.

Keep a detailed record of the taxes you are paying in the foreign country. This will help you ensure you are not paying taxes twice.

2. Learn about Banking

Banking won’t be the same abroad as it is in your own country. Understand how banking works in the new country and what you need to do if you wish to open a foreign bank account.

It may difficult to obtain a foreign credit card, so choose a foreign-based branch of a U.S. bank for your banking needs.Most banks these days offer ATM services that refund foreign transaction fees. This allows you to use your bank abroad without requiring to open a new account, at no cost.

3. Live On a Trial-Basis

Before you move, take a short trial-run vacation in the country you are considering to retire in. Doing this will help you assess the daily expenses. Consider such vacations as investments that will help you understand the new culture.

Set aside finances for retirement and trial-run vacations to come to a final decision of where you want to move and if you want to move for sure.

4. Learn About Investing

Don’t invest your money in foreign markets just because you are moving to a new country. If you still want to go ahead, get a clear understanding of how the local financial advisors are registered there. Also, check if a reliable financial watchdog agency is functioning in the country you are moving to.

Leave your investment accounts like a self-directed 401K plan in the U.S. Keep investing in the U.S market if you are really keen on investing.

5. Rent, Don’t Buy

Buying a house wouldn’t be a good investment, in case you decide to move back home after a while. It would be wiser to rent first for a couple of months to get a feel of the country.

Even if you want to stay long-term, it would be cheaper to rent. It also gives you the flexibility to move back home or some other country in the future. Learn about the local rental customs of the country. For instance, in some countries, you may have to pay for a full year of rent upfront. This will give you a better idea of how it would be to live abroad.

Don’t make a hasty decision of retiring abroad. Plan a better life after retirement through the right investment policies and set aside finances for retirement abroad. Consult with financial planners from both your home country and country you wish to retire. This will help in a smoother transition.

Moving Abroad Checklist

Initial Considerations

Will your partner be travelling with you?

If so, what will they be giving up in your present home and will they be able to continue with their career in your new home? You will need to check whether a separate visa is required for your partner to work or if your visa gives that right. If they are unable to work you will need to decide on the effect on your finances and what alternatives are available to give a fulfilling life (home business, training, voluntary work).

Are you taking family with you?

Moving with family raises many exciting opportunities, but also can create challenges. The HSBC Expat Explorer survey indicates that expat kids can take six months to settle in to their new country (see article). Getting young or even older children to prepare to move and leave their friends and family behind can be a challenge and should be thought through.

The options for education is another area that needs to be thought through.

Moving your child to a new country with a different education system can be a great opportunity to broaden their experience, but if they are close to key exams the timing can make this inadvisable. If you do take your family with you, it is important to decide between joining the local school system or choosing an international school.

Where will you be living?

Whether you will be living in a house or apartment, furnished or unfurnished, these decisions will affect what you need to take with you. The time you are planning to live overseas will also affect whether you should leave your property at home empty, rent it out or sell it. See the article Sell, Store or Ship.