Things To Consider Before Retiring Abroad

Retirement – or to rechristen it more positively, "freedom" - is even more satisfying when that freedom includes the ability to roam. Not that the United States isn't the greatest country on Earth, but if you've worked hard for decades and have the wherewithal to live elsewhere, why not at least try it? If life is about loading up on as many enriching experiences as possible, a decade in Portugal or Malta certainly qualifies. There are 194 other nations on this big old planet, at least a few of which could prove agreeable to the adventuresome retiree.

One of the biggest reasons most expatriates have for moving to another country is purchasing power parity. There really are parts of the world where your U.S. dollar can go as much as five times as far as it can in its homeland. In Papua New Guinea or Ecuador, the difference can be profound.

It's important to mention that purchasing power parity can work to your disadvantage too, depending on the circumstances and the location. There are some nations, albeit not many, where a basket of all-purpose generic goods costs considerably more than it does in the U.S. You'll find the world's most prohibitive prices in Japan and Scandinavia, assuming you were planning on avoiding the tropics in your golden years.

Say you do decide to put down roots in a country where you can live like royalty for the price of a modest American lifestyle. You can understand at least a little bit of the language, the climate is comfortable, the food is palatable and the national police don't make it a habit of shaking down the moneyed immigrants. What about that forced savings scheme that you paid into all those years, Social Security? Is there any chance you'd have to forfeit your government-sponsored retirement checks?

There is a chance, but you'd really have to go out of your way to create a scenario in which you'd be ineligible for benefits. For instance, you'd have to retire to a sworn enemy of the United States (e.g. Cuba or North Korea.) But there are other, less hostile countries – Vietnam and Kazakhstan, for instance – which the Social Security Administration refuses to send benefits to. Those countries are the minority, but better to find out earlier rather than later if you'll be covered. For almost all other countries, from France to St. Vincent and the Grenadines, receiving the U.S. Social Security payments you're entitled to is not a problem.

What about healthcare? It's hard to find detailed data, but we're safe in assuming that the average retiree is more likely than the average wage-earner to need a hip replacement, ulcer medication or prostate cancer treatment. However, living overseas with an older, more fragile body doesn't necessarily mean your life's savings have to be compromised as well.

It's well-documented that healthcare costs have rapidly outpaced inflation in the U.S. over the last few years. (What's mentioned less often is that treatments have improved drastically, too. 20 years ago, LASIK surgery and breast enlargements were essentially unheard of, or at least extremely uncommon.) For ordinary, non-cosmetic medical treatment, bargains for expat retirees abound. Depending on the country, the quality of the care is comparable to anything you'd find in New York or Los Angeles.

Don't forget that it's a big world, not a homogeneous one. Do your research. If you've heard that healthcare in "Central America" is excellent and assumed that that applies up and down the entire isthmus, you might be unpleasantly surprised at the difference in quality between a full-service hospital in downtown San José, Costa Rica and a neighborhood clinic in rural Nicaragua. There are plenty of resources to let you know where you'll find qualified doctors working in pristine facilities, and where you'd be better off carrying your own bottle of hydrogen peroxide and hoping for the best.

There is one international constant, however. Understandably, Medicare stops at the Canadian and Mexican borders. The idea of social insurance covering geriatric treatment is so enticing that most Americans shriek at the prospect of surrendering it, but that's just one trade off you have to make when you choose to live somewhere unfamiliar. You can always buy private insurance, and fly back to the U.S., should you ever want to take advantage of Medicare treatment.

One more thing, and it's critical. Figure out where you're going to bank before you do so. When President Obama signed the HIRE Act of 2010, a bill ostensibly written to give payroll tax breaks to companies looking to hire unemployed workers, it also enacted a subsection called FATCA – the Foreign Account Tax Compliance Act. Created to catch tax cheats, the act uses an ICBM to kill mosquitoes with. FATCA orders every foreign bank to track down its U.S. account holders, and then share those account holders' balances and receipts with the IRS.

There's a little thing called sovereignty, and the financial institutions based in most independent nations have little desire to comply with an arrogant and time-consuming demand from the U.S. government. Anticipating that, Congress included a provision that subjects disobedient banks to a punitive 30% withholding tax. The unintended consequences of FATCA were easy to predict here: foreign banks are solving this predicament by simply refusing to take on American customers.

Understand that if you really do plan on retiring abroad, you have to obey the laws of your new home country. Only then can you consider whether it's worth your while to obey American banking regulations as well.