Living Abroad Could Maximize Your Retirement Dollars

Thu, Aug 22, 2019 - 1:19pm

Interest rates in the U.S. could be heading lower and anxiety around having enough income in retirement is building for many approaching this stage. On the Lifetime Income program, we often discuss making smart financial decisions to build a nest egg, but another approach that helps maximize spending power in retirement can be relocating to another country that has a lower cost of living.

Dan Prescher with International Living spoke with Financial Sense Newshour about his own experiences retiring abroad.

For audio, see How to Cut Your Cost of Living in Half Without Cutting Your Lifestyle.

Many Reasons to Move

As former residents of Omaha, Nebraska, Prescher and his wife decided to move in 2000 after they’d had enough of the winter weather. Their first ex-pat experience was in Ecuador and since 2001 they’ve been living abroad full-time.

Prescher now has experience in seven Latin American communities within four countries and he said they’ve all been less expensive than living in the U.S. He noted that he and his wife haven't given up their quality of life. They have access to quality health care, food, low rent and low taxes. The weather is better, as well.

In many cases, ex-pats can relocate somewhere with a cost of living that is half that of their hometown in the U.S. Prescher explained.

“One of our favorite places to live was Cotacachi, Ecuador, which is a village up in the Andes of about 7,000 people,” Prescher said. “You can walk from one end of town to the other in 20 minutes. That has been by far one of nicest places that we've ever lived. And the cost of living bang-for-your-buck is remarkably good up there.”

Leaning to Assimilate

While there are dangers abroad, these aren’t necessarily greater than in the U.S., Prescher noted, and taking care of yourself is part of the process anywhere you live. It comes down to being aware of your surroundings, he added. Risks may be different in various countries but choosing the right spot for you is part of mitigating those risks.

Taking time to become accustomed to the language helps, though full immersion is challenging, and language courses are unlikely to fully prepare you, Prescher added.

“The speed at which people speak, the idioms are different, the accents are different, all of these present challenges,” he said. “We pretty much got thrown in the deep end and we really quickly learned restaurant and taxi Spanish. We learned how to get where we wanted to go and eat what we wanted to eat, and everything outside of that was icing on the cake. That didn't take long at all, and it served us well.”

Logistics

Legal and logistical issues change from country to country, Prescher noted. For example, every Latin American country has a visa program that retirees can join to get a permanent residency visa, and you can visit almost any country from a month to three months on a tourist visa.

In every country Prescher has experience in, national banks allow direct deposit of Social Security payments from the U.S. This allows you to avoid using your ATM card to access a U.S. bank account, Prescher stated.

Many countries now require a full criminal background check, Prescher stated. Many also require proof of some sort of income to establish a residency visa, he added. Finding qualified legal advice in the country you plan to inhabit puts you way ahead in terms of figuring out what you need in place before you move.

You also need to figure out how to address other issues, such as accessing healthcare, but these are issues even for those moving between U.S. states. Healthcare presents its own challenges, as Medicare can only be used in the U.S., but Prescher found that these costs abroad are always substantially cheaper. While living abroad can make addressing certain issues more challenging— with unfamiliar legal systems and language barriers adding a layer of difficulty— they are not insurmountable.

“Our number one piece of advice is to try before you buy,” Prescher said. “You've got to get your boots on the ground in a place that sounds interesting to you. See what kind of a gut feeling you get from it. See if it interests you at all. Stay as long as you want to be comfortable with it. … Almost any place that you're likely to go, there will be an expat community there of some kind to tap into. Talk to people. Find out how they do things.”

Listen to the interview here

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