Okay, so with the Baby Boomer generation facing retirement, you are going to start seeing a great deal of advertisements and articles proclaiming the perfect retirement solution: Retire to the developing world! In the scenario being touted, you will live like a king in your beachfront property, eat out at a restaurant four days a week, and have your live in cook make up the rest of the meals. Plus you’ll have super cheap health care, a maid, and experience near perfect weather all year long. All this for less than US$1500 dollars per month.
The truth is quite different. Retiring abroad is filled with possibilities, and filled with risks. It is certainly possible to move abroad and save money in retirement. It is certainly possible to have an upper middle class lifestyle abroad living only on social security. However, you have to make some significant choices, and be prepared for any number of eventualities. Below is a list of some basic discussion points about retiring abroad to get you thinking about the move. It’s not something to do on the spur of the moment; it takes considerable thought and preparation.
1.Choose a country with a cost of living you can handle. If you are retiring on just social security, you most likely will not be able to move anywhere you want. Europe is out of the question, and the developing world is your only real choice. But don’t let that get you down. Western Europe, Australia and New Zealand might be out of the question, but there are still dozens of other possibilities.
2.Living abroad is not necessarily cheaper. There are many places in rural America that are very, very cheap. Combine that with the fact that you get inexpensive subsidized health care in the form of Medicare, and you can see how retirement abroad can get expensive. Remember, if you live abroad, you usually must purchase your own private plan. While health care abroad tends to be very cheap, it is an added expense to any budget.
3.The cheaper the country, the poorer the country. And the poorer the country, the more dangerous the country. You know the old saying: “You get what you pay for”? It applies to countries as well. If you are looking for bargain basement living, expect to have to deal with more poverty, more government incompetence, more crime, and more instability. I’m not saying you can’t have a great time in an extremely impoverished country like Belize or Nicaragua, I’m just saying you won’t have the comforts you’re used to necessarily.
4.You must adapt to the country, the country will not adapt to you. If you cannot live without a two car garage, cable television, air conditioner on 24/7 and weekly buffets at the local rib house, retiring abroad may not be for you. Moving abroad means fitting in and not standing out. You’ll need to eat what the locals eat, often dress like they do, and certainly live in similar accommodations to what they live in. To do otherwise will mean spending a lot of money. When I was an expat in Dubai, the most expensive supermarket in town was the American supermarket that had all the hard-to-get-air shipped American products like Rice Krispies. Of course they all sold for 100% markup, and the store made a killing on homesick Yank expats.
5.Remember, you are an immigrant. As a retiree living abroad, you are an immigrant in the eyes of the government of your new country. That means you may have less rights than your fellow citizens. You can be deported, you can have laws and regulations regarding you arbitrarily changed, and you may have to deal with massive government bureaucracies in regards to your status at times. It’s all part of the adventure and the challenge.
I haven’t even touched on crime, health care, political instability, currency devaluations and other subjects that I think a well prepared expat retiree should at least have some knowledge of in regards to their new country. If you are thinking about retiring abroad, do it because you want to, not because you have to. I don’t consider it the solution to the massive looming problem of impoverished retirees in the United States, I consider it an alternative and possibly flawed solution. It can be done, however, but it is not without difficulties. Of course some might say, what isn’t?
Rick Todd writes at Expat Investing (www.expatinvesting.org), a blog about living, working and retiring overseas from a financial perspective.
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