Retiring overseas is a dream shared across generations. The thought of aging peacefully beneath the shade of an island palm, far away from any worries or concerns back home is an irresistible fantasy. But now that millennials are starting to make up the majority, this generation’s unique financial challenges are coming into clearer focus – particularly in regards to retirement.
Members of the millennial generation face unique hurdles when it comes to planning and saving for their retirement. And as more millennials travel abroad to build their careers, the number of people looking to retire overseas has gone up as well. This means more competition for basic requirements like jobs and housing, as well as additional unforeseen complications along the way. But even so, it’s more than possible to plan a comfortable retirement abroad, well in advance, with the right strategies. Keep these logistics in mind as you begin to save, strategize, and plan for the move of a lifetime!
Health care systems vary significantly from one country to the next, so it is important to plan for all your health care expenses early on. In some cases, you may need to budget to receive health care in your home country, which will involve some traveling back and forth. Plane fare can be expensive, so strategic planning is the key to keeping travel costs low. In other cases, you may need to purchase private insurance if your overseas employer does not offer the coverage you need. Depending on your status in your retirement destination, you may or may not qualify for all of the health care benefits that native citizens receive.
If you currently use Medicare benefits, remember that you cannot transfer those benefits to a foreign country. Local insurance in your retirement destination may be much less than it is in your home country, but the coverage may be limited to a given region. This means that investing in an international insurance policy is often the best option for international retirees, since it allows you to travel for care.
Work and Income
There is a trend among modern retirees to continue working throughout their retirement, and millennials are no exception. When you are planning to work overseas as a retiree, it is important to remember that you are still required to meet local employment regulations. Ensure that you have the proper permits and licenses to work in your chosen field in your new country and region. You may also have to continue paying taxes in the United States if you earn over $99,200 as an individual, or over $198,400 as a couple. Taxes vary significantly depending on which country you live in, so it is important to plan for that expense early on.
Most millennials understand how important credit is, but many are unprepared for the challenges of using credit internationally. In some cases, your United States credit cards may not be usable overseas at all, and the last thing you want is to find out while experiencing a financial emergency in a foreign country. The good news is that most American credit card companies have updated their consumers to “the chip,” a security measure that has been popular in European countries for years. This feature helps prevent credit card fraud by adding an extra step of authentication when making a purchase. While many credit cards without the chip are still accepted by European vendors, they may not be accepted everywhere, so it is important to know before you travel.
Managing your finances from afar poses unique obstacles. Many retired expatriates keep investment and banking accounts in the United States and rely on ATMs and online banking transfers to access their assets. However, these are not always reliable services around the globe. Before you move and attempt to transfer your assets, make sure that your bank is accessible overseas. A local account may provide you with more convenient access, but the interest rates could be dramatically different. It is also important to remember that your American credit score may not directly transfer to similar loans and interest rates overseas.
It is common for millennials planning an overseas retirement to expect that their 401(k) plans will cover their living expenses. However, this is only possible if you are saving diligently throughout your career. The good news is that the new generation of 401(k) plans millennials have access to make it easier to invest with generous contribution limits.
Cost of Living
Before you move overseas, carefully plan for how much money you will need to maintain a positive cash flow with the local cost of living. While food and housing may be cheaper in your chosen area, it is possible that health care costs and taxes are much higher. Adjusting your budget to live below your means will help your American dollars stretch further, and any local currency you earn will last longer as well. Keeping an emergency fund is the best way to deal with unexpected expenses on top of your standard cost of living. If you plan to use your United States credit cards for daily expenses, factor in any international usage fees that may apply as well.
Retiring abroad can be a rewarding and exciting way to live, but millennials should keep each of these factors in mind before making this major lifestyle change. Each country varies in terms of its currency, tax policy, laws for foreign residents, and international banking access. Proper planning begins with saving early and investing frequently in your retirement account of choice. Without taking the fundamentals of your overseas move seriously, you could end up in a foreign country without the financial stability necessary to make your retirement enjoyable.
Maricel Tabalba is a freelance contributor for Credit.com who is interested in writing about personal finance advice for millennials and college students. She earned her Bachelor of Arts in English with a minor in Communication from the University of Illinois at Chicago.