Retiring abroad: what Americans need to know 

Summary 

Why are more Americans retiring abroad? 

Retiring abroad has become an increasingly popular option for Americans seeking new opportunities and experiences in their golden years. For many retirees, the prospect of a lower cost of living in countries with favorable exchange rates is attractive.  

A modest retirement income can also stretch further in destinations like Latin America, Southeast Asia, or parts of Europe, allowing for a comfortable lifestyle at a fraction of the cost in the United States. 

Another motivator is the desire for a change in environment — whether it’s better weather, exposure to vibrant new cultures, or the appeal of a slower, more relaxed pace of life.  

For boomers retiring abroad, destinations offering sunny climates or proximity to the sea often top the list. Many countries now have thriving expatriate communities, making it easier for retirees to connect and enjoy a sense of belonging. 

How do you prepare your finances before moving abroad? 

As an American retiring abroad, you need to ensure your finances are in good order before you emigrate.  

You can do this by: 

Assessing your retirement budget 

Careful planning is essential before retiring abroad from the USA.  

Start by calculating your retirement budget, factoring in your chosen destination's expected expenses, such as housing, healthcare, and daily living costs.  

Research average expenses and account for unfamiliar costs, such as hiring local assistance or paying for private health insurance.  

It’s also important to consider exchange rates and fluctuations; even small changes can significantly impact your spending power. 

Managing retirement income 

US citizens retiring abroad can usually receive Social Security benefits, but eligibility depends on the destination country.  

The Social Security Administration (SSA) provides a Payments Abroad Screening Tool to verify if benefits will continue in a specific country.  

Understanding the payment delivery method — such as direct deposit to a US bank or a foreign financial institution — is essential for access to funds while living overseas.  

For 401(k) and IRA accounts, US citizens can generally withdraw funds while living abroad. However, taxation rules still apply, so understand any potential penalties or withholding requirements when managing these accounts from a foreign location.  

You may encounter limitations with US-based banking services, particularly if you need to transfer funds internationally. Setting up a bank account in your destination country can simplify day-to-day transactions. 

Retiring abroad and taxes: what are the key considerations? 

Retiring abroad and taxes go hand in hand, and you need to ensure you understand your liabilities when doing so. 

Filing taxes as an expat 

Even after retiring abroad, Americans must file a US tax return.  

The United States requires citizens to report worldwide income, regardless of residency. This includes Social Security payments, pensions, and other sources of income.  

Fortunately, tax treaties between the US and certain countries can help prevent double taxation. 

Foreign account reporting 

Expats must comply with foreign account reporting laws, including the FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act).  

The FBAR requires individuals to report foreign financial accounts that exceed $10,000 at any time during the year. FATCA requires reporting foreign assets exceeding specific thresholds on IRS Form 8938. 

Failure to comply can result in severe penalties, including hefty fines and potential legal action.  

It’s important to regularly check the IRS official site for changes in thresholds, deadlines, or reporting requirements. 

Retiring abroad and Medicare: what are the key considerations? 

As you get older, medical care often becomes more essential.  

When retiring abroad, you need to consider: 

Does Medicare cover you abroad? 

Medicare generally does not provide coverage outside the United States.  

This means that an American retiring abroad must explore alternative healthcare options.  

Exceptions exist for emergencies near US borders, but relying on Medicare abroad is not practical for the long term. 

Alternative healthcare options 

Researching the healthcare system in your destination country is critical.  

Many retirees opt to purchase international or expat health insurance plans that offer comprehensive coverage for medical care overseas. 

What are the legal considerations for retiring abroad? 

To ensure you stay on the right side of the law when retiring abroad, you need to address the following legal considerations:  

Residency and visa requirements 

Before retiring abroad, thoroughly research the residency requirements of your chosen country. Many nations offer retiree visas, which often require proof of income, savings, or specific financial thresholds to qualify.  

Understanding the rules for obtaining and maintaining these visas is essential to ensure legal residency.  

Pay close attention to renewal timelines and permit conditions, as failing to comply can lead to disruptions or legal complications. 

Estate planning 

Estate planning should be updated to reflect local laws in your new country of residence. Inheritance laws and tax structures can differ significantly, so ensure that your will aligns with local regulations. 

Choosing the right destination for retirement abroad 

Your destination plays a major role in your quality of life in your senior years.  

When retiring abroad, consider: 

Cost of living 

The cost of living is a major factor when choosing where to retire. Countries with lower housing, food, and healthcare costs can significantly enhance your quality of life on a fixed income. 

Safety & healthcare quality 

Safety and healthcare quality should also play a central role in your decision. Research crime rates and access to hospitals to ensure your chosen destination supports a healthy retirement. 

Language barriers & expat communities 

Language barriers can impact daily life abroad; choosing destinations with established expat communities can help bridge these challenges. 

What are the common mistakes to avoid when retiring abroad? 

Here are some common mistakes to avoid when planning your retirement abroad: 

How can a financial advisor help you retire abroad? 

A financial advisor plays a vital role in navigating the complexities of retiring abroad. They can provide expertise in understanding tax obligations and strategies to minimize liabilities and help structure your retirement income efficiently for long-term financial stability. 

Healthcare planning is often a significant concern. A financial advisor can help you budget for international health insurance and unexpected medical expenses critical to a secure retirement abroad.  

For tailored guidance, consider using Unbiased to find a qualified financial advisor who understands the unique challenges of retiring abroad. 

Get expert financial advice 

Retiring abroad offers exciting opportunities, but careful planning is essential to navigate finances, taxes, healthcare, and legal requirements.  

With the right preparation, you can enjoy a smooth transition and a secure, fulfilling retirement overseas. 

Let Unbiased match you with a financial advisor for expert financial advice tailored to your retirement abroad, ensuring a secure and stress-free transition.