Retire/Semi-Retire Overseas

[BigBangWeary]

Anyone here thinking of retiring/semi-retiring to a more affordable location overseas when they hit their magic number? I am particularly interested in hearing from younger forum members in the 30s-40s range.

We have been expats for 10 years, so we are well aware of issues that come up in regards to cultural differences, distance from family, taxes, etc. But with the cost of living rising so fast in Western countries, and with large promises being made to the Boomers, we are starting to think that this might be an important cornerstone in our retirement plan.

I realize that things are NEVER as they are advertised on blogs and forums linked to companies and real estate pushers, but places like Panama, Ecuador, Thailand, etc. are making more and more sense. A lot of countries offer incentives to people with their own means to come and live/retire. We also see investment potential in some more youthful, developing countries compared to aging populations in Canada, UK, etc. which are only likely to lean on the younger generations that much harder.

We don't aim to be kings, or live the life of a multimillionaire, but sometimes it feels like we need to do some lateral thinking if we hope to have a comfortable life where time with children, time for interests, and time with family/friends does not need to be sacrificed just to pay the bills.

At this stage we are thinking of saving as much as possible over the next 2-5 years and then possibly testing the waters in a country where we could semi-retire early and spend time following some areas of interest. Ideally, we would like to find a location that is one direct flight from home (and that is warmer than Winters in the northeast).

Any other like-minded 'Young Dreamers' on here?

 

[kramer]

I retired at age 41 and have lived in four different countries (Colombia, Mexico, Thailand, Philippines) and I am currently retired in the Philippines. One piece of advice I would offer, if you are making a real commitment to living in a country, be sure that you can get some kind of residency visa there.

If you are just on a tourist visa, have to make border runs, have restrictions on how long you can stay, then it is not really your home. And you might run into other problems with apartment leases, bank accounts, etc. Here in the Philippines, I will never have to visit the immigration department or do a border run again.

Also, if you are the type of couple that likes to own your property, that is something to look into ahead of time. I am not the property owner type, and so living in the Philippines or Thailand, where property ownership by foreigners is partially or totally prohibited, was not an issue for me but I have seen others take risks here in order to fulfill that desire. In Colombia and Mexico owning property was generally pretty safe and open to foreigners.

So this are things worth investigating in advance.

You mentioned "investment potential" in growing countries. I certainly would not advise you to haul your money overseas and make local investments. And you can invest in index funds from the USA, usually cheaper than you could ever do locally in a developing country. Also, if you look at academic studies on the subject, long term returns on emerging markets are (surprisingly) not higher than developed markets.

The only way I have let where I live affect my investment strategy is:

* Having more invested in non-dollar investments than I would if retired in the USA, especially since my social security checks will be denominated in dollars when I start taking them in 22 years (higher % foreign stocks, higher % inflation-protected dollar investments).

* Since I plan to be based in the Philippines long term, I have about 4% of my net worth in the US-based ishares ETF index fund for the country. This is to help guard against currency movements and long term service inflation. But the economy is just too small to justify investing more than that.

A final note, some of my expat friends have been lazy about filing their FBAR which is required for all Americans with over $10,000 overseas, and now they are in arrears and effectively hiding money even though their intention was not to evade taxes as they were not aware of the requirements or just too lazy to file. Please don't let this happen to you. It is just foolish and jeopardizes your life abroad.

 

[kcowan]

We experimented with France, Italy, Croatia, Florida and Mexico, finally settling on Mexico after 5 years of retirement. You will find every place offering totally different experiences and only you can decide where to settle. Kramer did it right.

Check out this site to gain a visceral feeling for the places:
Expat Forum For People Moving Overseas And Living Abroad

There are also cost-of-living sites so you can plan much better than we did:
Vancouver is 71% more expensive than Puerto Vallarta. Cost of Living Apr 2014.

 

[Ed_The_Gypsy]

In answer to the OP, I have been investigating moving out of the country for maybe 15 years. There was a time when I thought that would be our only option to avoid destitution in retirement in the 'States.

I have followed Kramer's experiences closely. I have ruled out many places that initially sounded interesting. Almost all of them, in fact. There are a few places in Mexico that I want to visit experimentally.

DW is not on board with this, so I expect we will only do visits/vacations (hopefully long ones). If one of us requires continuous care eventually, I hope we can find a good place in Mexico so as to not break the bank.

I, too, have worked and lived outside the US (and am now). I am also far past 30 or 40,

 

[daylatedollarshort]

We experimented with France, Italy, Croatia, Florida and Mexico, finally settling on Mexico after 5 years of retirement.

^^^^ This is our plan. Right now we are focused on getting the kids though college, implementing sustainable living ideas, learning the frequent flyer games for free travel, decluttering and downsizing the house. Next we want to buy a smaller lock and go condo along the California coast and then slow travel and check out some of the same places on kcowan's list.

We have part-time lap top jobs plus pensions / Social Security (future) / investments for income. I am looking forward to a change of pace from U.S. suburbia living plus maybe a lower cost of living. I want to check out places like Spain where real estate prices have crashed since none of our income would be dependent on the local economy.

We're too old to be young dreamers but we are having fun realizing we can make this all happen.

 

[mpeirce]

Do you folks moving all around the world take your pets with you? Or are you pet free?

 

[FIREd]

If I were to retire abroad, it would be somewhere in Western Europe. For me it would be going back home, so I would not expect many surprises.

 

[FUEGO]

We have certainly thought about it. Right now the main constraint is our kids (between age 2 and age 9). I'm not sure if I want to uproot them and deal with other education systems when we have a multilingual school here in our neighborhood in a moderate cost of living area of the US.

We are FI in our 30's right now (with me retired and DW still working for ~1 more year) and could easily afford Mexico, Thailand, or a similar cost of living place. We are also fortunate to have enough fluency in Thai and Spanish to get by in Thailand or anywhere in Latin America.

Our compromise for the next few years at least will be a longish summer vacation, and possibly taking a whole year off and homeschooling the kids while we travel the world. This summer we head to Canada (mostly the French speaking part) for a bit over a month. Other destinations that eventually got crossed off (because of the 2 year old mostly): Thailand, southern Spain, Guatemala/Belize/El Salvador. We'll probably head to one or more of those places in 2-3 years.

I guess I also like home a lot and we have a good mix of international residents in the area that our kids play with, so they get some of that foreign cultural experience without leaving the neighborhood.

 

[BigBangWeary]

Thank you for your replies everyone. Kramer, you are right about residency being an issue. This is part of the reason that Panama and Ecuador are on our radar, especially considering we would be interested in establishing permanent residency somewhere. We live in the Gulf at the moment and you are either a visitor or on a work visa, and we would like to create a more permanent tie somewhere.

To clarify, we are both Canadians citizens but left over a decade ago with no real intentions of returning full time. We would love to visit family when possible, but with the high cost of living (property prices are insane in most major centers and wages have been flat lining for years), weather, etc. we do not see it as a permanent home for ourselves going forward.

All of our investments are already offshore and we have long positioned ourselves for life as perennial expats. When I mentioned ‘investing’ in our future location, I meant along the lines of a small scale land purchase, starting a small business that we already have the cash for, etc. Such investments may not pan out, but they have a lot more upside potential in some of these emerging economies then in overly saturated ones ... in our opinion. Again, we are talking small scale here, not our retirement savings.

Mpeirce we have a small dog and have not been held back from travelling, moving overseas. Some places would not be on our list due to pet restrictions (ie. Brunei).

FUEGO, congrats on FI in your 30s, inspirational! We have also considered taking a year off. It might be hard for us to replicate our income level if we leave our current positions, so this is holding us back, but part of us doesn’t want to wait until sickness/schooling/mortgage keeps us tied down. More and more people seem to be doing this with young kids (we personally see it as an education). We are also both trained teachers so the homeschooling thing is realistic, especially for a year. Our son is only a few months old though so this is not something we will be doing just yet.

 

[FUEGO]

FUEGO, congrats on FI in your 30s, inspirational! We have also considered taking a year off. It might be hard for us to replicate our income level if we leave our current positions, so this is holding us back, but part of us doesn’t want to wait until sickness/schooling/mortgage keeps us tied down. More and more people seem to be doing this with young kids (we personally see it as an education). We are also both trained teachers so the homeschooling thing is realistic, especially for a year. Our son is only a few months old though so this is not something we will be doing just yet.

I've never taught any kids younger than college freshmen, so taking on the education of my own little minions is a daunting task (they can be stubborn and I have no clue from whom they inherited that trait!).

Part of the reason for staying put for us with the kids is to have a sense of stability. Growing up with friends, seeing family frequently, holidays together. Although I've heard from perpetual travelers (like military families) that moving every year or two gets kids comfortable with change from an early age. So I guess our kids would be fine either way.

 

[kcowan]

Do you folks moving all around the world take your pets with you? Or are you pet free?

Each of our look see trips were limited to less than 2 months and so we had a pet sitter.

We also visited the Costa del Sol in Spain. The weather was great but we ruled it out because the coast in inhabited by Brits and most of them are seasonal visitors so it is lonesome for full-timers. Our friends from Monterey CA moved to Antequara to avoid that problem.

 

[Ed_The_Gypsy]

I want to check out places like Spain where real estate prices have crashed since none of our income would be dependent on the local economy.

You check it out, but you may find that it is not as cheap as advertised. Cheap for Spaniards, maybe. And there is a lot of resentment by the displaced people who lost their homes. Good luck.

 

[FIREd]

This may be of limited use for Americans, since you guy are taxed by the motherland no matter where you live, but Portugal has started to offers big tax breaks for foreign retirees taking up residency in the country.

 

[bmcgonig]

Do people consider the lack of Medicare when retiring aboard ? That's the one thing that makes me pause every time I feel the itch to retire to a warm country.

 

[kevink]

Do people consider the lack of Medicare when retiring aboard ? That's the one thing that makes me pause every time I feel the itch to retire to a warm country.

We've been ER'd here in México for a few years and the Medicare issue is certainly a major decision point for expats here. We're nowhere near that age yet, but have seen plenty of others wrestle with the issues involved. It forces the decision as to whether the U.S. or your chosen country of residence is "home" should you need serious medical care.

Some folks we know choose to pay for Part B just in case and do the minimum check-ins/check ups required on visits to the U.S. Others opt out and have insurance here, more than a few "go naked" paying out-of-pocket and accumulating a reserve fund in case of serious illness. The latter choice is not as crazy as it might seem, as $30-40K can cover really serious conditions (e.g. bypass surgery and recovery, cancer treatment) due to far lower costs here.

In my opinion even having this option is purely a consequence of México being so close to the U.S. Panama and Ecuador, let alone Thailand or the Phillipines, are much too far away. That's why it's important to make visits early and get a real sense from experienced expat residents of what costs are, and what insurance coverage if any is available. You'll be amazed how inexpensive insurance is once you start excluding the U.S. from your coverage!

Kramer has done all of this stuff the right way and is someone whose posts about expat life are all worth reading closely, by the way. I've learned and continue to learn a lot from him.

Here'a a post I did recently on the related topic of ACA/Obamacare and expat ER's:

Caffeinated Calm: ACA and expat retirement

 

[Refresher]

Here'a a post I did recently on the related topic of ACA/Obamacare and expat ER's:

Caffeinated Calm: ACA and expat retirement

In the post it makes mention MAGI of under $20,000.
If an expat couple is in a situation like that why not enroll in the ACA assuming one has a US address.
Some HMO policies are $0. per month.

 

[Aus_E_Expat]

I have been a long term expat (27 years) and I am now actually considering "retiring" to my country of citizenship (Australia).

At this point in time, I see my non full time working stage of life in 3 phases;

Phase One - I stop full time work and return to Australia. This is because I have children in high school and university. I see Australia as being a better environment for them and it will give them more choices/opportunities to make their own way in life. During this phase, will still do some travelling. This phase may last for 6-8 years until children are fully independent.

Phase Two - Move back overseas to a tropical place while I am still young and fit enough to enjoy it. Enjoy outdoor activities, sports etc. Hopefully this phase is 15 years.

Phase Three - Return to Australia for access to good quality affordable health care and (in case I have blown all my money), access to social security. Would also hopefully give access to grand children, etc.

That is the broad plan.

 

[kevink]

In the post it makes mention MAGI of under $20,000.
If an expat couple is in a situation like that why not enroll in the ACA assuming one has a US address.
Some HMO policies are $0. per month.

Because an income that is 138% of Federal Poverty Level or less entitles you only to Medicaid in states that have signed on to expansion - or nothing in states that haven't. The subsidies for the various Silver, Bronze and Gold plans are credits against taxable income that a person in this situation of course doesn't have.

Also, one of the tests for bona fide expat status is that the address listed on your tax returns is your foreign place of full-time residence.

 

[Refresher]

Because an income that is 138% of Federal Poverty Level or less entitles you only to Medicaid in states that have signed on to expansion - or nothing in states that haven't. The subsidies for the various Silver, Bronze and Gold plans are credits against taxable income that a person in this situation of course doesn't have.

Also, one of the tests for bona fide expat status is that the address listed on your tax returns is your foreign place of full-time residence.

I speaking of a couple with $20,000 MAGI and has a US address.
In non Medicaid states the exchange will provide a subsidy for that income that will make the monthly premium $0.

 

[BigBangWeary]

Again, not being American, I cannot comment on the issue of Medicare directly, but as a general observation we have found that affordable, quality health care is often easier to find and more affordable than one might think.

Many countries have private hospitals, staffed with western-trained professionals that are targeted at the upper-middle class of said country. These services can often be equal to or superior to what I have experienced in the West, and at a lower cost. There is also a growing trend of medical tourism that has created some very affordable options. Add this to the fact that some of the countries actively trying to attract Western retirees are offering medical discounts and even discounted medication.

I would certainly do your homework, and would imagine that serious, ongoing medical problems would make living overseas less appealing, but don't let it keep you from taking a close look.

 

[kevink]

I speaking of a couple with $20,000 MAGI and has a US address.
In non Medicaid states the exchange will provide a subsidy for that income that will make the monthly premium $0.

This is not true. If you live in a state that hasn't signed on to the Medicaid expansion you don't get subsidies - you have no coverage:

"The ACA envisioned people below 138% of poverty receiving Medicaid and thus does not provide premium tax credits for the lowest income. As a result, individuals below poverty are not eligible for Marketplace tax credits, even if Medicaid coverage is not available to them. Individuals with incomes above 100% of poverty in states that do not expand may be eligible to purchase subsidized coverage through the Marketplaces; however, only about a third of uninsured adults (3 million people) who could have been eligible for Medicaid if their state expanded fall into this income range. Thus, there will be a large gap in coverage for adults in states that do not expand Medicaid (Figure 3)."

This is from this report by Kaiser:

The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid | The Henry J. Kaiser Family Foundation

 

[Refresher]

This is not true. If you live in a state that hasn't signed on to the Medicaid expansion you don't get subsidies - you have no coverage:

"The ACA envisioned people below 138% of poverty receiving Medicaid and thus does not provide premium tax credits for the lowest income. As a result, individuals below poverty are not eligible for Marketplace tax credits, even if Medicaid coverage is not available to them. Individuals with incomes above 100% of poverty in states that do not expand may be eligible to purchase subsidized coverage through the Marketplaces; however, only about a third of uninsured adults (3 million people) who could have been eligible for Medicaid if their state expanded fall into this income range. Thus, there will be a large gap in coverage for adults in states that do not expand Medicaid (Figure 3)."

This is from this report by Kaiser:

The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid | The Henry J. Kaiser Family Foundation

MAGI of $20,000 for 2 is above 100% of poverty level and entitles the couple to buy a plan with subsidies if the state does not expand Medicaid.
I am getting that MAGI from the link Caffeinated Calm attached to the previous post.
With these subsidies plans are available for $0 per month.
Healthcare.gov has quite a few plans available for $0.

 

[kramer]

Hi Kevin,

Kramer has done all of this stuff the right way and is someone whose posts about expat life are all worth reading closely, by the way. I've learned and continue to learn a lot from him.

Thanks for your kind words. I read your linked articles, very helpful!

You mentioned that you are not spending over 35 days per year in the USA so as to qualify for the "expat exemption" for the ACA. May I ask, is that because you are in Mexico on a tourist visa? I know Mexico is very generous to Americans on a tourist visa and allows 180 day stays upon entry and easy to renew with border runs.

My position is that I am a "bona-fide resident" of the Philippines and that I can spend more than 35 days per year in the USA. I go to the USA to visit friends and family and probably spend an average of 6 to 7 weeks per year there. But I have a resident visa in the Philippines. I have no residence in the USA. And all my stuff and nexus of existence is in the Philippines. I am strictly a tourist in the USA. As near as I can tell, I am a "permanent resident" of the Philippines and the Philippines is my "tax home" even though I don't pay them any taxes (except on my local bank interest) because I have no earned income. The "tax home" part seems to apply to people who are, say, living in Tijuana and commuting daily to work in San Diego, their tax home is San Diego. "Bona-Fide residence" also requires completion of at least a full tax year as a resident of a place.

If I were living here in the Philippines on a tourist visa (which is probably easier to do than even in Mexico), then I think I would have to tow the line on the maximum 35 days in the USA. Same goes if I maintained an actual home in the USA.

Also, do you guys ask to get your passport stamped out of the USA? I have never gotten an exit stamp from the USA and I don't know if they are even available? I am asking because I will be taking a short trip to Mexico City during my USA trip this year -- with proper precautions my USA time might be exactly 35 days.

 

[kevink]

Hi Kevin,

Thanks for your kind words. I read your linked articles, very helpful!

You mentioned that you are not spending over 35 days per year in the USA so as to qualify for the "expat exemption" for the ACA. May I ask, is that because you are in Mexico on a tourist visa? I know Mexico is very generous to Americans on a tourist visa and allows 180 day stays upon entry and easy to renew with border runs.

My position is that I am a "bona-fide resident" of the Philippines and that I can spend more than 35 days per year in the USA. I go to the USA to visit friends and family and probably spend an average of 6 to 7 weeks per year there. But I have a resident visa in the Philippines. I have no residence in the USA. And all my stuff and nexus of existence is in the Philippines. I am strictly a tourist in the USA. As near as I can tell, I am a "permanent resident" of the Philippines and the Philippines is my "tax home" even though I don't pay them any taxes (except on my local bank interest) because I have no earned income. The "tax home" part seems to apply to people who are, say, living in Tijuana and commuting daily to work in San Diego, their tax home is San Diego. "Bona-Fide residence" also requires completion of at least a full tax year as a resident of a place.

If I were living here in the Philippines on a tourist visa (which is probably easier to do than even in Mexico), then I think I would have to tow the line on the maximum 35 days in the USA. Same goes if I maintained an actual home in the USA.

Also, do you guys ask to get your passport stamped out of the USA? I have never gotten an exit stamp from the USA and I don't know if they are even available? I am asking because I will be taking a short trip to Mexico City during my USA trip this year -- with proper precautions my USA time might be exactly 35 days.

Hi Kramer,

The article in Yucalandia that I provided the link in my blog has this to say about proving expat residence:

ACA – Obamacare’s Effects on American Expats Living Abroad | Surviving Yucatan

From what you tell me, it looks like for you, as for us, the only way you can meet this standard is to not exceed 35 days in the U.S. in a year.

We have long-term Mexico residency visas (temporal and are planning on going permanente). Initially we only did this because you have to have such visas to apply for health insurance here, but now with ACA there's a lot more incentive. Otherwise we would much prefer to just have tourist visas, which as you say are genereous here (180 days). The bad news is they are continuing to raise the income requirements for longer term visas and they have also just banned applying on the basis of assets alone. You have to have a $2600 per month pension or pay for 4 years of temporal before going permanente now.

I don't think we've ever had our passports stamped when leaving the U.S.

 

[Travelwanted]

Ok, so how do you "prove" you have been out of the country for 330+ days? Thanks.