Retiring Overseas? 3 Financial Considerations For Relocating Abroad In Retirement

By Puai Wichman 
08/18/23 AT 3:51 AM EDT

America Should Diversify Its Approach To Retirement
America Should Diversify Its Approach To Retirement Planning, Says Ironhawk Financial’s Joseph Lombardi Pixabay

With the allure of new experiences, an exotic lifestyle and a safer place to live, moving abroad is a dream of many retirees and can often become a deeply rewarding reality. However, relocating to a new country requires careful planning to avoid financial pitfalls amid an unfamiliar fiscal and legal landscape.

While expatriates can often grasp the basics of living overseas quickly, relocating to a new country presents unfamiliar financial matters that can pose serious risks if not planned for, particularly for retirees on a fixed income.

The following topics should be given earnest consideration if you are thinking about an overseas retirement so that you can relocate without facing outsized risks to your life savings. These considerations encompass safeguarding assets through strategic planning, ongoing management of your assets and understanding the potential healthcare expenses you may face overseas.

Safeguard Your Assets

When retirees consider moving abroad, safeguarding assets should be the first priority to ensure financial security within a new jurisdiction. Legal considerations, estate planning and insurance provisions all should be thoroughly vetted prior to relocation.

Different countries have varying legal frameworks that can impact the way asset ownership is treated. Further, those frameworks can change over time, particularly in countries with political instability, weaker rule of law and financial regulation or currency instability. Cross-border or “offshore” planning is an essential part of any strategy to retire overseas. Most people often only think about what assets they should own. Moving offshore requires you to also consider how you own your assets.

This means moving abroad should prompt a reevaluation of estate planning. Retirees should ensure that their will and other estate planning documents are up-to-date and valid in their new country of residence as inheritance laws vary significantly from country to country. Some countries have laws that will dictate how assets are distributed, and those distributions may potentially conflict with your wishes. Creating a comprehensive estate plan in consultation with legal experts, who understand both your home and destination country’s applicable laws, is vital to ensure your assets are protected and ultimately distributed as you intend.

As an example, the Cook Islands is a jurisdiction where its laws are designed specifically around the preservation of assets. The cornerstone of asset protection is often a trust, a versatile legal instrument that can hold and manage assets on behalf of beneficiaries. Trusts can offer privacy and legal protection, and they can be established in jurisdictions with robust regulatory systems promoting high financial stability, reducing any risks associated with both your origin country and retirement destination. Offshore trusts will usually offer the most robust protection for retirees moving to a new country.

Before relocating, retirees should also seek the appropriate insurance coverage to protect assets. Property and liability insurance requirements can differ substantially from those in your home country. Retirees should research and obtain insurance policies that align with the laws and risks of their new country.

Lastly, engage professionals with overseas estate planning and asset protection experience to guide you through the legal and financial intricacies. These experts can provide guidance that aligns with your new circumstances to help you make informed decisions.

Manage Your Portfolio Abroad

Transitioning to an overseas lifestyle introduces distinct dynamics in asset management that often necessitate a change in investment strategy. There are similarities to the fundamentals of domestic asset management — such as diversification, risk considerations and proper asset allocation — but the key differences warrant attention.

Keeping your tax bill as low as possible is always advantageous, especially in retirement. Moving overseas can present some tax pitfalls that retirees will certainly want to avoid. To aid in tax management, retirees should consider their residency status when moving to a new country. Each sovereignty has its own criteria for determining tax residency, which can drastically change your tax obligations. It can impact the taxation of your pensions, annuities and government retirement benefits, which may necessitate a new draw-down strategy.

Double taxation treaties between your home country and new destination may exist to help prevent your hard-earned nest egg from being taxed twice. Working with a tax advisor who is knowledgeable about foreign assets and income can help you avoid being taxed twice on the same asset or being hit with a surprise tax bill.

Retirees should also reconsider their asset allocation and add additional hedges to specific risks that arise with their new location. The amount of cash or low-risk securities may need to be adjusted based on their new expense base, the economic volatility in their new country, and changes to their risk tolerance. Greater emphasis on currency diversification may be appropriate, particularly if retirees want to hold some assets in their home currency, or if their new country’s currency is subject to greater fluctuations. Digital currency may even be appropriate in some circumstances.

A move abroad often dictates adopting a new investment strategy, but the fundamentals of asset management remain. Evaluating how your taxation and risk profile changes while sticking with the basics of sound investing will help keep your portfolio on track to meet your income and liquidity needs.

Find Affordable Health Care and Long-Term Care 

When planning to retire abroad, addressing health care and long-term care needs becomes a critical aspect of the transition to ensure your retirement remains comfortable, both financially and personally. The health care landscape varies widely from one country to another, and understanding your options is paramount.

Research the health care system of your destination country thoroughly. Understand its structure, accessibility and quality of care. Determine whether the country offers a public health care system, private insurance options or a combination of both. It’s also a good idea to evaluate the country’s health care facilities, medical technology and expertise to ensure they meet your needs and can care for any preexisting conditions.

Some countries require expatriates to have health insurance coverage, while others might offer government-sponsored plans or private insurance options. Assess the comprehensiveness of the plans, including coverage for routine medical care, emergencies, hospitalizatio and prescription medications.

Mexico, for instance, is a popular choice for expatriates from the United States due to its proximity to the U.S. and its well-developed health care system. Major cities like Mexico City and Guadalajara have modern hospitals and clinics that provide high-quality care at a fraction of the cost in the U.S. Private health care insurance is widely available and affordable, offering coverage for a range of medical services.

Other popular options for retirees based on cost and quality of care include New Zealand, Spain, Malaysia, Thailand, Portugal, Costa Rica and Panama. For a more exotic location that is off the beaten track, you may like to consider a place like the Cook Islands.

In contrast, Switzerland, Sweden and Australia all have high-quality health care systems, but care can be quite expensive for expatriates. Japan’s system can also be cost-prohibitive, and the system is quite complex to navigate. Other countries that may put you at financial risk for medical care in your retirement years include the United States, India, Philippines and Indonesia.

Potential long-term care is another crucial consideration as you age. Research whether your destination country has established long-term care facilities or home care services. Understand the availability, quality and cost of these services. Some countries might have government-supported long-term care programs, while others rely more heavily on family caregiving. And don’t overlook mental health and dental care provisions. These aspects are often integral to maintaining overall well-being.

Work with Top Professionals When Retiring Abroad

Important matters of asset protection and wealth management can be complicated enough for retirees who have no designs for moving. When relocating to a whole new country, the financial considerations become much more complex but you don’t need to put your retirement in jeopardy, and you certainly don’t need to cancel your plans to live out your retirement abroad. Work with experienced professionals in law, investment, tax and emerging technologies who can help keep your assets safe so you can fully enjoy the freedom and adventures that await in retirement.

Puai Wichman is the founder and chairman of Ora Partners, an international trustee and wealth solutions firm. In this role, he plays an integral part leading the firm’s services and serving as a trusted resource for high-net-worth individuals and their families to implement estate and wealth preservation plans.

(Opinions expressed in this article are the author’s own.)