Retiring abroad, whether permanently or for just part of the year (so called 'seasonal retirement'), is an increasingly popular choice, particularly among retirees from countries with 'poor' (cold, wet, etc.) climates, high taxes or soaring property prices. For many people, the dream of spending their golden years in the sun has become an affordable option, although retiring abroad (even for part of the year) isn't without its pitfalls and shouldn't be attempted without careful consideration and planning. Before deciding where, when or indeed, whether to retire abroad, it's important to do your homework thoroughly and investigate the myriad implications and possibilities. Recognising and preparing for potential difficulties in advance is much easier than dealing with disappointment, or even a crisis, later.
However, if you do decide to take the plunge you will be in good company. Tens of millions of people have successfully retired abroad, including some two million Americans (around 400,000 in Mexico alone), over a million Britons, plus many thousands of Canadians and northern Europeans (notably Dutch, Germans and Scandinavians). Hundreds of thousands of British pensioners live in France, Italy and Spain, although countries such as Canada, Germany, Ireland, New Zealand and Portugal also have significant numbers of British retirees. Over four million Canadians, colloquially known as 'snowbirds', regularly spend the winter months in Arizona, Florida, the Caribbean or Latin America, returning to Canada for the warmer summer months.
As when making all major life decisions, it's never advisable to be in too much of a hurry. Many people make expensive (even catastrophic) errors when retiring abroad, often because they don't do sufficient research or take into account the circumstances of their partners and family members. It isn't unusual for people to uproot themselves after some time or wish they had chosen a different region or country - or even that they had stayed at home - and a significant number of people who retire abroad return home within a relatively short period!
If you aren't absolutely certain where you want to retire, rent for an extended period before buying a home and burning your bridges!
Why do you want to retire abroad?
The first question to ask yourself is exactly why you want to retire abroad. Do you wish to live abroad permanently or spend only part of the year abroad? For example, many retirees spend the winter abroad in a warmer country, returning to their home country for the summer. Do you enjoy good health? If you planning to retire abroad for health reasons, the climate will be an important consideration. Do you primarily wish to live somewhere with a lower cost of living? Do you want to make frequent return trips to your home country, to visit your family and friends? What does your family and friends think of your plans to live abroad? The fewer family ties you have, the wider your choice of countries and possibly the more difficult it will be to make a decision. Can you afford to retire abroad? What of the future? Is your income secure and protected against inflation?
You will need to take into account the availability and cost of accommodation, communications, travelling times (and cost), security, health facilities, leisure and sports opportunities, culture shock, the cost of living and local taxes, among other things. Many retirees wishing to retire abroad are North Americans or northern Europeans, who can often buy a home abroad for much less than the value of their family home. The difference between the money raised on the sale of your family home and the cost of a home abroad can be invested to supplement your pension, allowing you to live comfortably in retirement, particularly when a lower cost of living is taken into consideration. However, if you plan to buy a second home abroad, you will need to maintain two homes, although the running costs can usually be offset by letting your home(s) when you're absent.
Advantages & Disadvantages
Before planning to live abroad permanently, you must take into account many considerations. There are both advantages and disadvantages to retiring abroad, although for most people the benefits outweigh the pitfalls.
Climate: For most people, the main advantage of retiring abroad is a more moderate climate, which may include southern Europe, the southern states of the USA (e.g. Arizona, California and Florida), Central and South America, the Caribbean and the southern hemisphere in general (e.g. Australia, New Zealand and South Africa). For most people, one of the principal benefits is improved health as a result of living in a warmer climate and a more relaxing environment (provided you don't expect things to be done the same way as at home!). Your general sense of well-being will be greatly enhanced when you live in a warm and sunny climate. Those who suffer from arthritis, colds, influenza and other illnesses exacerbated by cold and damp, generally live longer and enjoy a better quality of life in a warm climate, while those who are prone to stress benefit from the relaxed lifestyle in most hot countries. However, if you're planning to retire abroad for health reasons, you should ask your doctor for his advice regarding suitable countries and locations.
The advantages of living in a warmer climate usually result in an improved quality of life and often an increased life expectancy for retirees. A better climate also provides ample opportunities to enjoy outdoor activities, such as gardening, golf, tennis or walking, during your increased leisure time. On the financial side, you'll save a considerable sum on heating bills, although you shouldn't automatically assume that because your retirement destination is hot in the summer it will also be warm in winter. For example, in many Mediterranean resorts it can be surprisingly cool in winter, when you will need some form of heating. On the other hand, countries that experience warm winters often have very hot and humid summers, when costly air-conditioning is essential. It's advisable to visit the country of your choice at different times of the year before making your decision, to find out exactly how cold and hot it really is in the winter and summer.
Make sure you aren't caught unawares by a country that turns out to be unbearably hot or cold at times, or which frequently suffers from natural disasters such as torrential rain, flooding or hurricanes.
Lower taxation: Some countries provide generous, tax-free concessions for retirees, while others have considerably lower tax bills than North America and northern European countries. Many popular retirement countries have low direct and indirect taxation, including property taxes, and no wealth or inheritance taxes. Note, however, that citizens and residents of some countries (e.g. the USA and South Africa) are subject to tax on their world-wide income, irrespective of its source, and residents of certain countries must declare their foreign assets (e.g. property) to the tax authorities in their country of origin.
Tax planning is a complex subject and all aspects should be carefully considered after consultation with an expert. However, you should bear in mind that, in general, retirees who consider only the financial benefits of retiring abroad are more likely to be dissatisfied than those whose main motivation is the lifestyle and other reasons!
Lower cost of living: Many popular retirement countries have a relatively low cost of living, often considerably lower than North America or northern Europe (although countries from these regions are also popular destinations!). This is particularly true as far as real estate is concerned and many goods also aren't subject to such high levels of duty or tax. The cost of fresh food (e.g. produce and meat) and locally-produced wine is generally reasonable in popular retirement countries, where dining out is also an affordable option.
Higher standard of living and better quality of life: If your retirement destination has favourable tax rates or concessions and a low cost of living, the chances are that your standard of living will rise proportionately. When this is added to the benefits of a warmer year-round climate, your quality of life will also improve significantly.
Lower property prices: Property prices in North America and northern Europe (and in most of the world's capital cities) have risen considerably in recent years, and many people find themselves caught in a spiralling property market, unable to buy a home that represents good value for money. In contrast, many popular retirement countries offer affordable homes and in some real bargains can be found. You may be surprised to discover that for the price of a small apartment in London or New York, you can buy a detached home with a swimming pool in many countries!
Increased leisure and sports options: The availability of a wide range of leisure and sports activities at an affordable cost is an added attraction of many popular retirement destinations. Most have excellent leisure facilities, such as golf and tennis clubs, with affordable membership prices.
As with all major life decisions, there are also disadvantages to retiring abroad and you should consider these and their implications carefully before making a decision. However, it's worth noting that the majority are avoidable or easily surmountable, provided you choose your destination carefully and do your homework before retiring abroad.
Communication problems: For many, the main disadvantage of retiring abroad is the separation from family and loved ones, particularly from grandchildren who have a habit of growing up fast. This barrier can be reduced by keeping in touch regularly by phone (many countries now offer inexpensive international calls), by e-mail (most countries provide widespread Internet access) or by choosing a country within easy travelling distance of your home country.
Culture shock and language problems: Many retirees underestimate the cultural isolation that you can feel living abroad, particularly if you're planning to move to a country with a different language where you will have few compatriots. Many people find that coping with retirement and the lack of structure to life without a daily work regime is made doubly stressful by the sense of isolation (and possible frustration) created by a new culture and language. Are you prepared to be in a minority and to be treated as a foreigner? Are you open to different ways of doing things? Do you make friends easily? Can you cope with a much slower pace of life and a high level of bureaucracy?
It's also generally accepted that the older you are, the more difficult it is to learn a new language. A new culture and language don't, however, have to make your life more frustrating and can do much to enrich it, although it's important to be aware of the potential difficulties. Culture shock can be significantly reduced if you retire to a country with an established expatriate community, as there is in most popular retirement destinations.
Boredom and isolation: Although most people look forward to retirement, many find the reality of not working difficult and the prospect of full-time leisure daunting. The question of 'what are you going to do all day?' can become difficult to answer - even more so abroad, where there may not be the same facilities and familiar leisure activities that you have in your home country. You may miss your social life back home and find it difficult to be accepted into (or to accept) your new expatriate or 'native' community. It's advisable to visit your prospective retirement destination a number of times at different times of the year and to rent a property before buying a home and making a long-term commitment.
Financial problems: Without careful planning, retirement abroad can involve financial problems, such as those caused by exchange rate fluctuations, poor investments and possible loss of pension indexation. Tax and cost of living benefits may also turn out to be lower than originally thought.
Bureaucracy and underdevelopment: Many countries (particularly those in southern Europe and Latin America) are notorious for their bureaucracy and red tape, which, if you aren't prepared for it, can be frustrating and daunting. Less-developed countries may look 'exotic' in tourist brochures, but many have relatively poor or non-existent services.
Immigration laws: Some countries have strict immigration laws regarding the status of foreigners and how long you can remain there at a time. You may find that you cannot stay longer than six months or that a retirement visa isn't indefinite, which can heighten your insecurity. Some countries impose high permit and visa fees or require that you meet certain, usually financial, criteria.
Health concerns: In some countries there are dangers of disease and infection, and local medical facilities may be poor or not be up to the standard you're used to. Private health insurance may also be necessary and is prohibitively expensive in some countries.
Old age & infirmity: Before planning to live abroad you should consider how you would cope if your mobility was restricted. Many countries have inadequate facilities and support for those with disabilities, and social services may provide little or no help for the elderly and infirm. Another consideration is the provision of retirement homes or sheltered accommodation, which are either non-existent or in their infancy in many countries, and even when available places may be in short supply.
The following points should also be taken into account when considering whether or where to retire abroad:
Location: One of the main considerations in choosing a retirement location should be the 'pleasantness' of the location. You should be aware that an area can change considerably over a period; for example a village may be quiet and undeveloped when you buy a property and retire there, but it could rapidly become a major tourist spot. This is particularly true of unspoilt and 'undiscovered' Mediterranean resorts and little-known parts of Central America and the Caribbean. Before committing yourself to a location, make sure that you're aware of the government's and local authorities' future plans for it.
Think carefully before choosing your favourite holiday destination as your place of retirement. Holiday memories tend to be recalled through rose-coloured spectacles, but the reality of daily life can be very different, and your perspective and requirements as a resident are quite different from those of a tourist. Before buying a home you should visit an area at different times of the year and rent a property for an extended period (up to six months) before taking the plunge.
Public Transport: Investigate local public transport thoroughly. This is particularly important if you're elderly, as you may not always be able (or wish) to drive. There's little point in choosing an isolated spot or somewhere with a limited public transport system, when in a few years time you may have to rely on local bus and train services to get about. You should also consider the terrain of your chosen home, as a location with lots of hills or steps can become an insurmountable problem if you have mobility problems or become disabled.
Research: Do as much research as possible on your prospective retirement destination, preferably by visiting a country or area several times before making a decision. If you're planning to retire abroad with a partner you should do the research together, so that both of you are aware of the benefits and drawbacks.