Retiring Overseas? 3 Things You Need to Consider
For many people, the word ‘retirement’ conjures visions of their favorite vacation destination or embarking on the adventure of a lifetime. However, retiring abroad need not be an impossible dream.
According to statistics published by MarketWatch, approximately 413,000 retired US workers receive Social Security benefits in a foreign country. Nevertheless, for anyone considering retirement overseas, there are numerous aspects to consider.
In this article, we identify three of the most important issues for overseas retirees.
1. Cost of Living
Cost of living is perhaps the most important priority. For individuals considering retirement abroad, conducting sufficient research, covering all aspects of expenditure, is vital.
Cynthia Staton retired to Ecuador with her husband Edd. The couple now run a website advising retirees who are interested in planning a new life abroad. Staton cautions clients that while the desire for a lower cost of living motivates many, you may find the reality to be somewhat different than what you envisioned. She recommends that prospective overseas retirees consider a variety of factors, including the following:
- Ideal climate.
- Required level of healthcare.
- Proximity to family.
- Location. Do you dream of living off-the-grid or in the urban life? Are you seeking a home by the beach or life in the mountains?
- Deal breakers. Do you have mobility issues? Do you have any ongoing medical needs?
It is vital to visit the intended destination numerous times, or better still, live there for a trial period. An inviting destination for a week’s vacation may prove a rather different proposition 24/7, particularly in a geographically isolated location.
2. Taxes
Some host countries require foreign nationals to file and pay taxes. At the same time, US retirees will still be responsible for filing a federal return in their home country. Even individuals from the US who renounce their citizenship do not automatically forego US tax obligations. The good news is that US retirees abroad can often avoid double taxation by filing for Foreign Tax Credit in the US.
3. Generating and Managing an Income Stream
For many Americans retirees, Social Security is a valuable source of income. On their own, benefits are unlikely to be sufficient for a comfortable retirement, either at home or abroad. This is particularly true given the ever-increasing healthcare costs that typically come with retirement. However, since US taxpayers can continue to receive Social Security benefits while residing abroad, these benefits provide an important income source for many American retirees who are living abroad.
In addition to Social Security benefits, many retirees rely on private pensions. Malta Pension Plans are becoming increasingly popular with high-net-worth US taxpayers because of the significant tax deferral opportunities associated with them. With a Malta Pension Plan, contributions and distributions are effectively tax-free. In addition, unlike with a Roth IRA, contributions to a Malta Pension Plan may be made in non-cash form, avoiding the need to liquidate assets, and avoiding subsequent capital gains tax liabilities.
Enabling investors to draw an income from the age of 50 without a tax penalty, Malta Pension Plans are rapidly becoming the investment vehicle of choice for retirement savers, both at home and abroad, thanks to their considerable tax incentives and enhanced flexibility.
