Unforeseen Costs of Retiring Overseas
Moving abroad for retirement seems to be on the forefront of many expat’s minds. It’s an understandably tempting proposition: low cost of living, affordable healthcare, permanent summer, exotic surroundings. But understanding the full potential cost of retiring abroad is necessary before packing your bags and hoping for the best once you hit the ground.
While it’s a novel idea to think that you won’t need to maintain any ties with your country of origin, think again. Depending on your financial situation, it’s possible that you’ll want to have a lawyer and an accountant available to handle any situations that may arise back home. Also, if you want to maintain a residence, you’ll have to deal with a house sitter or a property management company to perform the upkeep. Of course, keeping your house will incur many, many other expenses as well.
No matter how cheap your retirement country is, one cost that can completely throw off that low cost of living is when you factor in trips back home. While it might not seem that expensive since you’ll probably be staying with friends or at your own home, take a moment to look at the hypothetical math. The conservative average trip for anyone going international is $2,000 per person for a week, including their flight. If you only return home twice a year, that puts you at $4,000 a year that you need to factor into your annual budget. If you have a spouse, double this amount. You’re now at potentially $8,000 a year just to go back where you came from, which on a monthly basis, adds about $600 per month to your expenditures.
Another cost to consider is how foreign currency exchange will affect your money and investments. Currency values can slide and rise at the drop of a hat, particularly in less stable countries. This means that your U.S. Dollar or Euro can quickly become devalued if you’ve bought property or have money sitting in account overseas. One way to help combat the effects of currency risk is to diversify your accounts and what currency they’re in. Experts recommend that you have at least six months of living expenses in the local currency.
Financially, retiring abroad can be a smart decision if you organize your assets well and have a comprehensive understanding how factors such as inflation can affect you. Talk with others who have made a similar move before you or consult with an international accountant who can help you have a stress-free and lucrative retirement.