For Mark Roberts’ Use: Years ago, the idea of retiring in a foreign country may have sounded absurd or unthinkable to the average American. It may have even sounded too expensive and luxurious to contemplate. Nowadays, however, many American retirees have discovered the benefits of living abroad in retirement.
The change has come as a result of the recent downturn in our economy. During the housing crisis and recession, many older Americans saw their portfolios take huge losses. At the same time, their homes lost value, so they could no longer count on a large profit when selling it (or even selling it at all). Costs of living, on the other hand, have steadily risen due to the prices of gas and groceries. For most retirees, the pinch was felt at both ends: They couldn’t depend upon the monthly income they’d planned, and simultaneously it cost more to live.
Many of these retirees, thanks to the magic of the Internet and easy communication with friends in similar positions, discovered how simple it can be to retire abroad. The cost of living in many countries is so low that a much more comfortable lifestyle can be afforded once the initial cost of moving is out of the way.
Naturally, there are some practical matters to consider before retiring abroad. It’s recommended that retirees choose their ultimate destination based on several trips to visit first, to ensure the choice is a good fit. Remaining tax-compliant is another issue. Moving financial accounts to banks in another country can be a hassle, and requires careful research in order to avoid charges for tax evasion. Keeping the money in an American bank, on the other hand, makes it subject to currency fluctuations.
Ex-patriots are required by the Department of Treasury to fill out the Report of Foreign Bank and Financial Accounts form (FBAR), if they hold more than $10,000 in financial accounts outside the U.S. Failing to comply with this rule can result in large penalties. While retiring overseas can have its perks, it’s very important to be aware of all laws and regulations, and diligently comply with them.