Retire Abroad. Who’s Right?
Scenario: Your spouse does not want to retire abroad. You want to go. What do you do?
Answer: If both spouses are not fully on board with retiring abroad take a beat before making that move. It’s best when both spouses can agree on major retirement goals to help achieve a secure, harmonious future. This is especially important if one of those goals involves moving to a new country.
According to the U.S. Census Bureau, Americans are moving to live in other countries at record numbers.
People choose to retire abroad for many reasons including, a lower cost of living, the excitement of a new experience, dissatisfaction with politics at home, or social, cultural, or religious interests. But preparing for such a move is involved. It may require obtaining visas, establishing residency, opening foreign bank accounts, and navigating unfamiliar legal and financial systems.
At one time you may have agreed on plans to relocate overseas. But if you are no longer seeing eye-to-eye, it’s wise to pause and seek thoughtful advice before taking the leap. This decision isn’t a matter of who’s right and who’s wrong. This is a life decision that requires agreement between both spouses to help ensure a successful transition.
The Financial Reality of Retiring in Europe
Retiring in Europe can be financially sound, but it requires careful planning. The cost of living varies significantly depending on where you choose to live. Major metropolitan areas such as Rome, Paris, or Amsterdam have high housing costs and limited availability. If you’re moving from a city like New York, European housing may feel comparable or even slightly less expensive. But if you’re coming from a smaller American community, housing could be substantially higher.
Some retirees choose smaller towns or villages to reduce housing costs or enjoy a quieter lifestyle. However, that decision may mean giving up convenient public transportation and needing a personal vehicle. If that’s the case, you generally cannot rely on your U.S. driver’s license indefinitely and may be required to obtain a local license within a year or less. In some countries, the process can be challenging and may not be offered in English.
Transportation costs may also increase. Gasoline prices in Europe are significantly higher than in the United States. On the other hand, daily expenses such as groceries and utilities may be lower depending on the country and region.
Tax Issues Often Overlooked
Taxes are one area you don’t want to overlook when preparing your plan to move abroad. As a U.S. citizen, you will still be required to file U.S. income taxes even if you retire abroad. In addition, you may have to file tax returns in your new country of residence. Not all European countries treat retirees the same way, and some may tax your worldwide income if you become a tax resident there.
Working with a qualified tax advisor can help ensure you remain compliant with both systems. Ideally, this advisor will collaborate with a counterpart in the country where you plan to live. Tax treaties between the U.S. and many European countries often reduce the risk of double taxation, but they do not eliminate it entirely.
If you own a business or hold assets such as a trust, LLC, 401(k), Roth IRA, or traditional IRA, the planning becomes even more important.
Social media and YouTube often make retiring abroad look effortless. The reality is more complicated than arriving at the border with a U.S. passport and a tourist visa. It isn’t necessarily difficult, but establishing residency in another country should be done thoughtfully and with preparation.
Build the Right Team
One of the best ways to protect yourself financially is to assemble a team of advisors with experience in cross-border planning. That team may include professionals in financial planning, taxation, immigration and law.
People who approach international moves with a “ready-fire-aim” mentality often encounter more difficulties than those who take the time to aim before firing. Intentional planning tailored to your specific goals is the best way to avoid costly mistakes, especially when it comes to taxes, residency rules, and real estate purchases.
If you and/or a spouse are serious about making a move abroad, let us help you talk through your options plus any potential roadblocks achieving your goals. Learn more about Global Financial Planning at Aspyre Wealth Partners and our Global Financial Planning Fellow (USA), Stewart Koesten.