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The Hidden Costs of Retiring Abroad

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6 Unexpected Expenses for U.S. Expat Retirees

Many Americans dream of retiring abroad to experience new adventures, new cultures and a different way of life. Another benefit of retiring overseas is that the cost of living is often less than in the U.S. However, U.S. expat retirees are sometimes surprised to learn their expenses are higher than anticipated. Following are six lesser-known costs of retiring abroad.

#1 – Property requirements

Some countries require non-citizens to own property in the country. For example, Portugal offers a fast-track to citizenship through its Golden Visa program. This program can be a great benefit for Americans wishing to make the country their retirement home. However, in order to qualify, you must either purchase a property worth at least €500,000 or invest at least €500,000 in a qualifying investment fund.

Just as in the U.S., overseas home ownership comes with added costs, such as property taxes, maintenance fees and potential legal fees. These expenses may catch you off guard if not properly planned for.

#2 – Healthcare expenses

Medicare typically doesn’t cover American citizens living overseas. That means you’ll likely need to purchase private insurance or go without insurance and pay out of pocket for healthcare expenses. Either option can add significant costs to your retirement budget, which is why it’s important to plan for them in advance.

#3 – Currency fluctuations

Fluctuating exchange rates can have a major impact on your finances in retirement, especially if you rely on U.S.-based income to fund your daily living expenses. Converting U.S. dollars to a different currency can greatly impact the purchasing power of your funds, potentially raising your cost of living.

Also, if you’re not careful, an investment made in foreign currencies can be viewed by the U.S. as a passive foreign investment company (PFIC), which is a type of investment that’s heavily taxed. Work with an international wealth advisor to ensure your investment strategy meets your needs in a tax-efficient manner.

#4 – Residency and visa fees

Many countries require non-citizens to obtain special visas or residency permits to live in the country long term. These visas often come with fees and renewal costs, and the requirements could change over time. Before moving, it’s important to understand any visa and residency requirements as well as their associated costs.

#5 – Tax complexities

Americans living overseas often face complex tax reporting requirements. All American citizens are required to file U.S. income taxes, regardless of where they live, and your new country of residence will likely require you to file there as well. The interaction of two tax jurisdictions can be difficult and costly to navigate.

It’s wise to work with a tax professional who has experience navigating the unique complexities of your country of residence in order to avoid any costly mistakes.

#6 – Travel

Whether you’re exploring a new continent or flying back to the U.S. to visit family, travel costs can quickly add up. Make sure your financial plan accounts for any anticipated travel expenses.

Before making the decision to retire abroad, it’s crucial to conduct thorough research and financial planning to ensure you’re ready for the expense of living overseas.

Could you use some help navigating the financial aspects of your move abroad? Creative Planning International is here for you. We specialize in helping U.S. expats and cross-border families maximize their wealth and avoid costly mistakes. We understand the complex interactions of multi-jurisdictional tax and regulatory regimes and help clients develop operationally and financially efficient retirement and wealth management strategies. Because we serve in a fiduciary capacity, you can be confident we’re acting solely in your best interests.

For more information, request a meeting with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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