13 Things to Consider Before Deciding Whether to Retire in the U.S. or Abroad

Deciding where to retire involves more than just choosing a location. It requires careful consideration of financial, healthcare, and legal factors. It also forces you to think about some personal considerations, such as defining your well-being, willingness to step outside of your comfort zone or how important it is to be close to family.

Some Americans choose to retire abroad in places like Central America, Asia, or Europe, where a limited U.S. retirement income can stretch further than in many parts of the United States. However, the exact number of Americans who retire abroad annually is difficult to determine. The overall estimates of Americans living overseas vary, with figures ranging from 2 million to 7 million, but these numbers include all Americans abroad, not just retirees.

This guide provides essential insights and examples for those considering retirement in the US versus abroad, helping to navigate the complexities of this significant life transition.

Objective things to consider when deciding whether to retire in the U.S. or abroad

1. Understand the Cost of Living

• In the US: States like Mississippi, Oklahoma, and Arkansas are known for their low cost of living, making them attractive to retirees on a budget. However, states like California and New York can be significantly more expensive, especially in urban areas like San Francisco or Manhattan.
• Abroad: Countries like Mexico, Portugal, and Thailand are popular among American retirees for their lower cost of living. For example, in places like the Algarve region of Portugal or Chiang Mai in Thailand, retirees can enjoy a comfortable lifestyle at a fraction of the cost they would incur in the US.

2. Healthcare Considerations

• In the US: Medicare provides the foundation for retirees’ healthcare, but areas like long-term care, dental, and vision often require additional private insurance. It’s essential to budget for these extra costs.
• Abroad: Countries like Costa Rica and Portugal have gained popularity for their affordable, high-quality healthcare systems. In some cases, expatriates can pay into the national healthcare system or opt for private insurance at lower rates than in the US.

3. Legal and Immigration Issues

• In the US: State-specific laws can affect your retirement, from tax implications to healthcare directives and estate planning. For example, Florida and Texas are known for having no state income tax, which can be advantageous for retirees.
• Abroad: Countries like Panama and Ecuador offer retirement visas or “pensionado” programs, which require proof of a stable income from pensions or Social Security. These programs often come with benefits like tax exemptions and discounts on services.

4. Tax Implications

• In the US: Understanding how your retirement income will be taxed, including Social Security, pension, and investment income, is crucial. States like South Dakota and Nevada offer tax-friendly environments for retirees.
• Abroad: The Foreign Earned Income Exclusion allows qualifying US expats to exclude a certain amount of foreign-earned income from US taxes. However, retirees need to navigate the tax laws in their new country of residence, such as Portugal’s Non-Habitual Resident program, which offers tax advantages for expatriates.

5. Social and Cultural Integration

• In the US: Moving from a bustling city to a quiet rural area, or vice versa, can present significant lifestyle changes. Engaging in community activities and social groups can aid in the transition.
• Abroad: Learning the local language and customs can greatly enhance the experience of living in a new country. For example, retirees in Mexico often find that speaking some Spanish helps them integrate more fully into the community and enjoy the local culture.

6. Accessibility and Infrastructure

• In the US: Consider if the area is senior-friendly, offering accessible healthcare facilities, public transportation, and senior living communities. For example, Arizona’s Sun City is designed specifically for retirees, with numerous amenities and healthcare services.
• Abroad: The infrastructure in popular expat destinations like the south of France or certain parts of Costa Rica is well-suited for retirees, with good healthcare, public transport, and a community of fellow expatriates.

7. Long-term Stability and Safety

• In the US: Researching the safest places to retire, considering both crime rates and natural disaster risks, is important. States like New Hampshire and Maine are often cited for their low crime rates and overall safety.
• Abroad: Political stability can vary, so it’s essential to consider the long-term outlook of a country. France, Italy, Spain and other European countries are known for their stable democracy and peaceful society, making them an attractive destinations for retirees seeking safety and stability.

Subjective Things to Consider Before Deciding Whether to Retire Abroad

1. Desire for Adventure and New Experiences

If you have a strong desire to explore new cultures, learn new languages, and experience life in a different part of the world, retiring abroad might be an appealing option. This sense of adventure can make retirement a period of growth and discovery.

2. Willingness to Step Outside Your Comfort Zone

Living in a foreign country can be challenging and requires adaptability. You’ll encounter different ways of life, unfamiliar bureaucracies, and possibly a language barrier. Being open to these challenges and willing to navigate them is crucial for a successful transition.

3. Personal Well-Being and Lifestyle Preferences

Consider the climate, dietary habits, and general lifestyle of potential retirement destinations. If a warm climate and a relaxed pace of life are important for your well-being, certain countries may offer a more suitable environment than your current location in the U.S.

4. Social and Family Connections

Being far from family and friends can be one of the most significant drawbacks of retiring abroad. Consider how important it is for you to be near your social network and whether you’re willing to form new relationships in a new setting.

5. Cultural Fit

How well do you resonate with the culture of the countries you’re considering? Some people thrive in cultures that are vastly different from their own, while others prefer a more familiar cultural landscape.

6. Personal Growth and Fulfillment

Reflect on what brings you joy and fulfillment. For some, retiring abroad offers opportunities for personal growth, such as volunteering, engaging in new hobbies, or even starting a business.

Resources You Can Consult Before Deciding to Retire in the U.S. or Abroad

United States Retirement Planning

1. Social Security Administration (SSA): The SSA’s official website provides tools and calculators, as well as detailed information on Social Security benefits, eligibility, and how to apply.
   • Website: ssa.gov
2. Medicare: For healthcare considerations in retirement, the official Medicare site offers guidance on coverage options, enrollment periods, and costs.
   • Website: medicare.gov
3. Internal Revenue Service (IRS): The IRS provides information on tax implications for retirement income, including pensions, IRAs, and 401(k)s.
   • Website: irs.gov
4. U.S. Department of State – Bureau of Consular Affairs: For those considering retiring abroad, the Bureau offers information on living overseas, including legal and visa requirements.
   • Website: travel.state.gov

International Retirement Planning

1. International Social Security Association (ISSA): Provides information on social security programs worldwide, including retirement benefits.
   • Website: issa.int
2. Expat-Focused Websites and Forums: Websites such as Expat Exchange, Internations, and Expat.com offer insights into living abroad, including firsthand accounts of retirement in various countries.
3. Embassies and Consulates: Consulting the embassy or consulate of your potential retirement destination can provide specific information on visa requirements, residency permits, and other legalities.
4. International Living and AARP: Both organizations offer resources and articles on retiring abroad, including country-specific retirement guides and tips for expatriates.

Financial Planning

1. Certified Financial Planners (CFP): Consulting a CFP who specializes in international retirement can provide personalized advice based on your financial situation.
2. National Association of Personal Financial Advisors (NAPFA): A professional association offering resources to find fee-only financial planners, including those with expertise in international retirement planning.
   • Website: napfa.org

Deciding if retiring abroad is for you requires good planning and weighing in a multitude of objective factors, including cost of living, healthcare, legal issues, taxes, social integration, infrastructure, and safety, as well as some subjective ones, defining what makes you happy, desire to explore or learn new things, willingness to get outside of your comfort zone. By examining these aspects in detail and considering personal preferences and circumstances, retirees can make informed decisions that align with their retirement goals and ensure a fulfilling and secure retirement lifestyle.