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.