The following is a guest post from Jon Dela Cruz. Jon is a researcher with iCompareFX where he looks at how the world’s leading overseas money transfer companies operate. Outside of work, Jon likes bicycling around town.
Statistics show that of all the American expats who live overseas, around 23% are retired. In addition, about 44% of all American expats would like to spend the rest of their lives in foreign countries. While the reasons to retire overseas vary, paying attention to finances before the move remains all too important.
Contents
Determine Cost of Living
A significant number of people who retire overseas do so with the hope of living a good life, especially when they move to countries where the cost of living is low. However, moving to a foreign country can backfire if the cost of living is higher than what you’re used to or what you expect. To get an indication of what you might be up against, you may turn to online resources such as WorldData and Numbeo.
Set Aside Enough Cash
You need to set aside cash to take care of at least six to 12 months of your living expenses before you make the move. While you might look forward to a lower cost of living, you need to account for other expenses such as rental deposits, the cost of setting up a new home, legal fees, shipping fees, and emergency medical situations.
What About Your Savings?
It makes sense to keep your savings in your existing American bank account, with the federal protection providing adequate peace of mind. If you plan to use an American bank account to access your money when overseas, look for an account that comes with rebates on international ATM fees. Sign up for online banking, if you haven’t already, so you may access your accounts from anywhere.
Do You Need a Local Bank Account?
Opening a bank account in some countries involves considerable paperwork and might take more time than you expect. However, this is not the case everywhere. In some instances, you might benefit by opening a local bank account through reduced fees or higher interest rates. What also helps is that American retirees may choose to receive their Social Security payments directly into their overseas bank accounts.
Transferring Funds
If you need to transfer funds across borders at any time, you might be tempted to use the services of your bank. However, you might be better of turning to specialist overseas money transfer companies, because they tend to offer better exchange rates and charge lower fees. While companies such as TransferWise, WorldFirst, and OFX give you easy means to transfer funds directly to bank accounts, ones such as Western Union and MoneyGram give you the ability to transfer money to cash pick up locations as well.
Renting or Buying
One of the most crucial financial decisions you need to make is choosing between renting or buying a home. Bear in mind that you might not be able to get a mortgage as a foreigner in several countries. In addition, renting is usually a simpler and more cost-effective way to go. If you do decide to buy a home, make sure you hire a local attorney with experience in real estate to guide you through the process.
Conclusion
Retiring in a country outside of the United States can come with its share of pros and cons. For instance, while you might benefit through a lower cost of living, you might have trouble finding an American health insurance provider that covers foreign residents. As a result, it is imperative that you have your groundwork in place and make a decision accordingly. If you are in the process of preparing for retirement we have a retirement page with additional information.