5 Ways to Prepare Your Finances for Life as an Expat Retiree
Life as an expat retiree awaits, and you’re ready to make the move!
Going from idea to reality is a long road, and it requires careful planning and an eye for strategy. After all, even in a world more interconnected than ever, moving from one country to another is still a major transition.
These 5 financial planning tips will help you get started. Just remember that these tips don’t cover everything you need to know –check out the rest of our series on life as an expat retiree to learn more!
First: Prepare for the vagaries of property ownership
Buying property abroad is rarely as simple as it is here at home.
While you may already be an experienced home owner and buyer, it is vital to remember that building standards, ownership restrictions, contracts, and even the simple task of home shopping can be very different in another country.
Before you decide on a new home, determine the following:
- Are there any restrictions on the type and amount of property that a foreigner can own?
- How stable and well-enforced are property rights, particularly where foreign owners are involved?
- What are the contractual steps and obligations involved in buying property?
- What can you find out about building standards and safety?
- What is the cost and process of home buying?
By checking some of the administrative aspects of home ownership in your new country before making any decisions, you can decide whether it’s worth it – or whether it would be better to rent or even move somewhere else.
Two: Budget for emergencies
Emergencies can strike anywhere and anytime, and when you’re living in a foreign country it’s important to have a game plan in place should the need arise.
You’ll need to decide:
- What you’ll do and where you’ll go in a medical emergency or natural disaster.
- How much it would cost to get the care you need – or to get back to the US.
- What kind of insurance coverage or asset base you’ll need to cover repairs, medical costs, and other expenses.
The cost of seeing a great specialist at a regional hospital or getting back to the US to see a doctor should be part of your budget, and should preferably be prepared so that it’s quick and easy to access.
After all, emergencies are not a good time to be selling investments to finance a trip or transferring fund from one account to another.
Three: Budget for healthcare expenses
We’ve talked about healthcare planning for expat retirees before, but because it’s such a crucial part of planning we want to include it here, too.
You have a number of options when it comes to planning for medical expenses. The best course of action will depend on the cost and care options available in your new home country, as well as your individual healthcare needs and preferences.
You’ll need to decide:
- What to do about Medicare. Medicare won’t cover healthcare expenses abroad, but for each year you don’t sign up, you’ll see a 10% increase in Part B premiums if you come back and enroll.
- How much you’re willing to spend in your new home country on private insurance or out-of-pocket care.
- Whether you have the option and desire to sign up for a local national health plan or purchase a high-deductible American plan that can help cover emergencies abroad.
Four: Prepare for currency fluctuations
Lower living costs can be one of the major benefits of life as an expat retiree. Whether it’s real estate or tropical fruit, your everyday bills could be significantly reduced by the change.
But don’t get complacent: even when they remain advantageous, exchange rates can fluctuate – and sometimes, they can fluctuate a lot.
You can prepare by:
- Exchanging a bit more than you need when you feel the rate is particularly good – something you’ll get a feel for over time. Some currencies are more volatile, which you can use to your advantage.
- Keeping cash in a local bank account for everyday use.
- Budgeting for exchange rate fluctuations so you don’t get caught by surprise – or find that your pension check isn’t stretching quite far enough.
Five: Be ready for taxes
Unfortunately, even living as an expat in a remote location won’t exempt you from paying taxes in the US.
The Internal Revenue Service requires that you file every year no matter where you live, though you may be eligible for a deduction based on the taxes you pay in your new home country.
That means you may very well have to file two sets of taxes every year.
Prepare ahead of time: find out what the tax situation will be in your new home, and if you’re concerned about complexity speak to an accountant or advisor who’s familiar with multi-country tax filings.
If you prefer to prepare on your own, take some time to familiarize yourself with local tax law prior to the move. You’ll want to find out:
- What kind of filing you need to submit
- What the due date is
- Some of the common pitfalls, deductions, and credits you might be eligible for
While there’s always more to learn when it comes to taxes, having a basic understanding of the filing situation will go a long way towards helping you manage the process.
All in all, moving abroad is an exciting and invigorating change for many retirees, but it’s critical not to overlook the details that can make it a financial success – or an ordeal.
Preparing yourself and your finances is the best thing you can do to smooth the road ahead. As you plan your escape, don’t forget to look at our other articles covering expat retirement, including some of the common myths and mistakes people make and how to navigate healthcare coverage decisions.