Ready to hang up your work hat and explore parts unknown? Here’s what you need to know about the financial implications.
By: Janet Berry-Johnson
Millie, a content program about women and money, is licensed from Dotdash Meredith, publisher of Real Simple, InStyle, Investopedia, The Balance and more.
After years of clocking in and out, you’re on the cusp of a new adventure: retirement. And not just any retirement, but one that involves immersing yourself in a new environment, a new culture and maybe even a new language.
Living abroad is a dream for many retirees, but it comes with some financial and logistical challenges—how do you navigate health care? Taxes? Your financial accounts? Here, we dive into everything you need to know to enjoy the vibrant and fulfilling retirement you’ve always imagined.
Assess your retirement savings and cost of living by country or city
Retiring abroad isn’t just about choosing a destination; it’s about ensuring your finances can support your lifestyle in a new country. Start by assessing your retirement savings, pensions and other income sources.
Then, consider the cost of living in your chosen destination—such as housing, utilities, food and leisure activities. Online resources like the Economic Research Institute’s Cost of Living Calculator can help you understand how far your dollar will stretch in different countries.
Practical step: Create a detailed budget spreadsheet with all potential expenses, including housing, food, health care, utilities, transportation and taxes.
How do I pay my taxes abroad … and in the United States?
Unless you give up your U.S. citizenship, you’re still responsible for filing and paying taxes in the United States, regardless of where you live. You’ll typically have to file and pay taxes in your country of residence as well.
Fortunately, there are ways you can reduce the effects of any double taxation:
- Apply for the Foreign Earned Income Exclusion. If you earn income locally while living in a foreign country, the Foreign Earned Income Exclusion allows you to exclude it from your taxable income on your U.S. federal tax return. The amount you can exclude is capped, however. That cap changes each year, but for the 2024 tax year, it’s $126,500 per person.
- Claim the Foreign Tax Credit. The Foreign Tax Credit reduces your U.S. tax bill dollar-for-dollar by any taxes you pay to a foreign country. If you take the Foreign Earned Income Exclusion, you can’t take the Foreign Tax Credit for taxes paid on the excluded income. You can, however, use the income exclusion on the first $126,500 (for 2024) and take the tax credit for any income above that.
- Familiarize yourself with tax treaties. Tax treaties are agreements with foreign countries that address how citizens living in those countries will be taxed—by the United States, say, or that country. A tax treaty might exempt you from paying taxes in the United States while living abroad, although you will still need to file a U.S. federal tax return.
Practical step: Consult with a tax advisor specializing in expatriate taxes to ensure you comply with all federal, state and international tax laws.
International health insurance coverage
Health care is a paramount concern for retirees, especially when moving abroad.
Medicare typically doesn’t cover medical care outside the United States. and its territories. But you have other options:
- Buy expatriate health insurance. International expat health insurance can cover health care expenses wherever you are in the world. Most insurers charge a monthly fee that varies depending on your age, medical history, location and coverage options.
- Move to a country with national health insurance. Some countries offer universal health coverage for all residents. To qualify, you may need to live in the country for a minimum amount of time or become a permanent resident.
Countries vary widely in their health care systems, coverage and costs. So try to prioritize destinations with reputable, accessible and affordable health care when making your decision about where to retire.
Practical step: Connect with expat communities online to learn from others’ health care experiences in your chosen country. An international health care broker can also help you find the best insurance options for you.
Consider arranging a power of attorney
If you plan to keep property, bank accounts and other investments in the United States, you might want to complete a power of attorney (POA) that designates a trusted representative who won’t be relocating with you.
A POA is a legal document that lets you appoint one or more people to act on your behalf in financial and legal affairs. For example, your designated “attorney-in-fact” can open and close bank accounts, sell property, register a vehicle or hire contractors on your behalf, so you don’t have to return to the United States whenever something comes up.
Practical step: Select someone you trust, such as a family member, close friend or professional advisor, and work with your attorney to draft or revise your POA document. You can specify whether you're granting a general POA, which covers a wide range of actions, or a limited POA, which focuses on specific duties.
Janet Berry-Johnson is a freelance writer and certified public accountant.
Three things to do:
- Visit a Regions Bank brand and complete a Greenprint Personalized Financial Plan.
- Learn more about how a Roth IRA can provide tax-free income in retirement.
- Prepare for a debt-free retirement with tips for paying down debt.
