8 Tips to Prepare Financially for Retiring Abroad

Many citizens of the world find that living abroad as an expatriate (or expat) is a comfortable way to spend their retirement. One of the primary reasons for this decision is the ability to make hard-earned pensions and retirement funds stretch.

Many of these retirees find that their dollars cover more needs and wants in less-expensive countries than their home countries. While there are many benefits to retiring abroad, some preparatory financial steps are crucial.

The Complexity of International Finances

Retiring individuals and couples must realize that life as expats complicates finances, especially considering taxes and investments.

Once retirees take time to research, anticipate and plan for changes in handling finances and banking, managing money internationally becomes familiar and less overwhelming.

One of the most common solutions to this move is setting up an international bank account. This solution enables retirees to make payments conveniently, to continue saving, and to enjoy traveling while living abroad.

Read also: How This Couple Saved Enough to Retire in Their 30s

Taxation in Two Countries

One very common financial mistake made by individuals and couples who choose to retire abroad is not paying taxes to their country of origin.

As long as the retiree is a citizen of the country of origin, the retiree must pay taxes to the country. For U.S. citizens, state taxes may also be required.

This does mean that expats will probably pay taxes in two countries. The best way for expats to be sure taxes are filed correctly is to hire tax accountants in the country of origin and the country of residence.

The good news is that there may be tax breaks available because of treaties made between countries.  

Checking Accounts in the Country of Residence

There are clear advantages to opening an account in the new country of residence. These include practical issues of paying rent and setting up utilities.

A local account is also the most convenient way to pay for local services, including necessities such as groceries.

A good way to choose a local bank is to ask some of the other expats in the area for recommendations. It is often possible to find a bank that offers assistance and mobile apps in the language of origin of the retiree.

Accounts in the Country of Origin

Many retirees choose to maintain an account in their home country. This account may be used when traveling back to visit with family and friends.

This home-based account is also useful for paying taxes or maintaining retirement and similar deposits. The fees to transfer money from a bank in one country to another can be expensive, so financial planners often recommend making large transfers on a quarterly basis rather than a monthly basis.

Another method of making transfers it to monitor exchange rates and make transfers when the rates are favorable to the retiree.

Legal Complications When Retiring Abroad

It’s also important that expats pay attention to laws pertaining to oversea banking.

For example, in the United States, the Foreign Account Tax Compliance Act requires that banks report foreign assets to the Internal Revenue Service. Some banks won’t accept customers from the U.S. because of this inconvenience.

The best way to avoid legal entanglements is to work with a financial planner who understands international finances. Banks in the country of residence, such as the Guyana Bank for Trade and Industry Limited, located in the beautiful Caribbean, may also offer advice.

Banking Across Country Borders

People retiring abroad also need to watch out for banks in their home countries that won’t work with customers who live out of the country. These banks may go to great lengths to make sure customers aren’t using family addresses, such as tracking the IP addresses patrons use to access online accounts.

Some countries, including the United States, offer solutions to this situation with a State Department credit union. Of course, a certified financial planner can also help retirees make a decision about the best route for local and international banking accounts.

Credit Card Use

Managing a checking account isn’t the only thing to consider while living and retiring abroad. Many expats enjoy using a credit card, and many of these retirees continue to use credit card accounts from their home country.

This is a helpful strategy when individuals and couples return to their home country and when they want to maintain a positive credit profile.

If retirees choose to hold onto credit cards from their home country for use in their new country of residence, they should check for foreign-transaction fees which can be significant. Travel-specific cards usually don’t charge those fees.

Investment Maintenance

Caring for investments is a significant concern for retirees and especially for those who rely on retirement investments to fund their lifestyles.

When investment accounts exist in multiple countries, expats need to watch out for investment firms that don’t consider them eligible for investing when they live out of the country, especially when it comes to mutual funds.

One of the most common complaints from expatriates is that their financial firms won’t work with them anymore. It’s important that retiring individuals and couples find out if this will be a problem before they move to another country.

Although working out the finances can be a challenging part of retiring abroad, it can be done with help from qualified certified financial planners. A bit of preparation is key to maintaining a smooth financial transition from living in one country to living in another.

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