By Suzanne McGee
As more Americans move to destinations farther flung than Florida and Arizona, they may find unexpected trouble in paradise.
Two months ago, in the midst of a miserable, rainy east coast winter, my editor, at the end of her rope, gave in and bought a ticket to somewhere warm and dry. A day later, she was on the beach, sharing photos of sun-dappled kayaks and breezy rain forests.
If only retirement could be so easy. Imagine finding a town in Panama or Ecuador with reasonable hospital facilities and reliable internet access – not to mention those warm beaches – where your dollar will stretch a hell of a lot further than it will in the U.S.
For those of us in large swaths of the lower 48, last winter and the muggy summer that preceded it reminds us of another allure of retiring abroad. This sort of weather is testimonial in support of the idea of spending one’s golden years running a beach bar in, say, Belize. Or a pottery workshop in San Miguel de Allende in Mexico., or a bookstore in Cuenca, Ecuador.
This is just the kind of economy that fosters dreams like this. Nationwide, many of us are staring at our 401k plan statements and realizing just how many more decades we might have to work to afford a comfortable retirement if we want to continue living as we are, where we are. In some cases, the math doesn’t even make sense: retiring at 125? Nah.
Feeding the dream are Suzan Haskins and Dan Prescher, former marketing executives who’ve been writing about living overseas for more than a dozen years and who now are based in Quito, Ecuador.
Their book “The International Living Guide to Retiring Overseas on a Budget” includes a subtitle sure to catch the attention of many prospective exapts: “How to Live Well on $25,000 a Year.”
The mere idea of living well on $25,000 a year is something that hasn’t really been possible for most of us in the urban middle class since – well, since we graduated from college and started trying to juggle stuff like paying off student loans, buying a home, raising kids and so on. The idea of doing it overseas has a certain kind of appeal, too, and a growing number of Americans are bypassing traditional retirement havens like Florida and Arizona for cheaper alternatives like Mexico, Costa Rica, Ecuador or Belize.
When you’re feeling stressed out by the seemingly inevitable tradeoffs that lie ahead if you retire at home, and size of the gap between your retirement nest egg and your needs, retiring abroad and saving big bucks can seem like a dream come true.
To avoid it turning into a nightmare, ask yourself whether you really understand what it means to live abroad; to treat another country as your home and not just a place to hang out for a few weeks on vacation or a few months in winter.
Having lived in six countries on three continents thus far, I can assure you that exotic and enticing doesn’t remain an asset for long, especially when you’re trying to figure out how to use that oddly-constructed oven or figure out where to buy meat that isn’t chicken or goat. Are you used to seeing your friends and family two or three times a week? How good are you at forming new relationships? Remember, the further you venture, the harder and more costly it will be to jaunt back and forth (and for friends to visit).
Living abroad will likely require getting used to a different language being the “norm”; to different social and cultural rules and assumptions about correct behavior. (For instance, asking your neighbors to turn down the music at 3 a.m. may simply earn you a look of amused pity.)
Local holidays will be different – forget the Fourth of July or Thanksgiving; in Ecuador, you’ll be celebrating the birthday of Simon Bolivar (24 July), in Panama, May Day.
Latin America is largely Catholic; if you go further afield, religious differences may become more significant: Malaysia is a Muslim nation, while Chiang Mai, Thailand is in a Buddhist nation.
Things that you now consider staples – favorite foodstuffs, English-language magazines or DVDs – might not be available or be very expensive. (Expats in Paris have trouble finding peanut butter, and Metamucil is not as widely distributed in the world as you might think).
It has been decades since my mother baked a pie in Japan using a root that she was convinced was rhubarb. It wasn’t. The stench of whatever it was (we still don’t know) finally left the apartment a week later, but lingers on in my memory to this day. Halloween? No pumpkins around. We drew smiley faces on small orange persimmons.
The less flexible you are, the more isolated you’ll feel and the more likely you are to wonder whether the whole foreign-retirement thing was such a great tradeoff after all.
On the other hand, the more you are able to live like a local – and to be happy while doing so – or to find a new home overseas within a large community of expats such as that in cities like San Miguel de Allende, or Cuenca, Ecuador, the more likely you are to make it work.
If these aren’t concerns, and you’re ready to forge ahead with your new life abroad, there is one area on which you can’t afford to skimp: getting professional advice.
It’s far too easy to run afoul of tax or estate planning rules when you retire abroad. For instance, some kinds of annuity income are tax-advantaged for U.S. residents, and if you buy a property in, say, Mexico, you might be unwittingly forfeiting that advantage.
If you decide to work overseas, be aware that the IRS requires you to pay taxes on your worldwide income, even if you’re no longer a resident. As a general rule, it’s not a good idea to buy a property or write a will overseas without consulting an accountant or attorney in the United States who is familiar with the kind of cross-border issues you might encounter.
Within the last year, new foreign bank account reporting rules have made some banks leery of signing up U.S. citizens to new accounts.
It’s also worth pondering what you’ll do when you reach your late 80s or your 90s, and hit the point where you need 24-hour nursing care. Is that available in the destination you’ve chosen, and how will you finance it? (Medicare doesn’t travel.)
If, after pondering all these questions, you’re wondering what all the fuss is about, then off you go. Two tickets to paradise, please.