Blueprint to Retiring Overseas: Is Retiring Overseas Right for You?

How about the City of Lights with the Eiffel Tower in the background? You can take weekend trips to the Louvre.

Thinking about the Eternal City? Visit the Colosseum or the Pantheon in your free time.

A smart bungalow in a quaint London neighborhood would be absolutely smashing. And you wouldn’t have to learn another language—other than British English. You can always tour the Tower of London or take a gander at Buckingham Palace whenever you feel like it.

Of course, if you’re looking to go completely off the beaten path, then how about Koh Rong Samloem, Cambodia, one of the Gulf of Thailand’s (and the world’s) most exotic locations?

No traffic. Very little development. A few rustic beach huts. But what about those midnight walks in a nearby rainforest or swinging on a hammock on Saracen Bay?

Ah, retiring overseas. That would be the life, at least for the more cosmopolitan minded.

But can you do it? Is it even possible? Even better, how do you do it? The short answer to the first two questions is yes. And here’s how to get started:

Retiring overseas may provide some wonderful opportunities to experience the cultures of the world and visit some amazing monuments to ancient civilizations.

Becoming a resident of a historic city envelops you in the passionate traditions and mindsets of a people with profoundly unique perspectives on living in a global community. You are no longer a mere tourist; you are submersed in the strange and wonderful ethos of your new home. That’s what it means to live life abroad.

But often the transition to overseas living is fraught with challenges. This is not just another life adventure. This is transformation.

First Stop, Accommodations.

Some travel experts point to the low cost of real estate in many foreign lands as a good reason to buy a home. But not so fast. Buying property abroad provides little long-range value and poses some unique and subtle challenges.

In many areas, you may not be able to get a mortgage as a foreigner. And if you have the money to buy a home, it might get complicated holding real estate as a noncitizen.

However, if you’re set on buying, consider renting first (for at least the first year) to get accustomed to the experience. If you do decide to buy a home, consider hiring an attorney to ensure your paperwork is done correctly and legally.

Keeping Your Money at Home—In the United States.

Finance and banking laws differ in other countries. Some are more cash-centric, which might require you to have secure access to your domestic accounts.

Your best bet might be retaining your U.S. bank accounts and getting money at an ATM. See if your bank provides fee rebates for using foreign ATMs.

On the other hand, some foreign banks do provide the same level of service you would get at your domestic institution.

“Establish a local bank account with a national bank that is a member of one of the major ATM networks,” said Dan Prescher, a writer at International Living.

“Also choose a bank with a branch in your neighborhood for easy access and establish a personal relationship with the bank manager as soon as possible. “Banking is still a very personal thing in many countries outside the U.S. and having a good relationship with your local banker can make banking abroad much, much easier.”

The Social Security Administration will direct deposit payments into foreign accounts. You may want to reconsider moving your IRA or 401(k) distributions into foreign plans. Transfers are not counted as qualified rollovers, which may trigger additional U.S. tax liabilities and 10% early withdrawal penalties.

Keeping Your Investments at Home.

Your best bet may be to keep your investments in your U.S. portfolio. The IRS classifies a foreign mutual fund as a Passive Foreign Investment Company or a Qualified Electing Fund. The U.S. tax code has stringent and draconian requirements for PFICs and other foreign funds.

In cash-centric countries or communities, it’s important to keep your investments working for you, which may require finding a qualified financial professional to help you. That may not be easy in a foreign country, but it’s important to protect your wealth. So, do the research.

Do Your Credit Cards Right.

Take a look to see if your credit cards charge foreign transaction fees, which can be 1-3% on all purchases. Some providers don’t assess those fees. Others let you earn bonus points for domestic and international flights. Call your credit card company to find out.

Check Your Health Insurance.

You’ll have to do some research and call your insurers to learn what services they provide overseas and how to be reimbursed if you do seek medical attention.

Medicare doesn’t extend coverage outside the U.S. The agency does provide some unusual coverage exemptions under Original Medicare Part A (hospital insurance) or Medicare Part B (medical insurance).

EXEMPTIONS INCLUDE:

1. You have an emergency in the U.S. but you’re closer to a foreign hospital.
2. You’re traveling through Canada on a direct route between Alaska and another U.S. state when you have a medical emergency and the nearest hospital is foreign.
3. You live in the U.S. and the closest hospital that provides the treatment you need is foreign. It doesn’t have to be an emergency.

Medicare only pays for covered services under those exemptions.

To fill coverage gaps, you could get travel insurance to help with potential medical expenses.

COMPLETE INSURANCE COVERAGE SHOULD INCLUDE THESE PROVISIONS:

• Trip cancellation in case of sickness or death.
• Trip interruption for the same reasons.
• Emergency medical coverage.
• Emergency medical evaluation.
• Emergency assistance.
• Baggage protection.

Check with the IRS About Taxes.

It doesn’t matter where you live or work, if you’re a U.S. citizen, you’ll have to pay taxes. (Many retirees don’t have to pay because of lower income levels.) The IRS does provide certain exemptions for expenses related to overseas work. The agency provides a calculator for determining what income you can deduct during tax filing.

Determine How Long You're Going to Stay.

Most countries require residency visas for stays longer than 30 to 90 days. The visa application process can be easy and welcoming or overly bureaucratic and complicated. The U.S. Department of State offers resources for U.S. travelers heading overseas.

Deciding to Make the Move

If you’re looking for the exotic life, with a splash of adventure, then retiring abroad might be for you.

Be prepared to do your homework and invest the time in researching your options. The payoff may be bigger than you expected.

Sources Available Upon Request

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.  

Published for the blog on February 27, 2019 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.