Retiring Abroad? 7 Money Tasks To Add To Your Checklist
Retiring abroad is a dream for many, and an increasing number of Americans are deciding to make the leap to do so. Whether it’s to live in new pastures, to be adventurous or simply because of lower costs of living, there are numerous reasons for retirees to relocate for their golden years.
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According to the Social Security Administration, there were 443,546 retired Americans receiving Social Security benefits while living abroad in 2022. While the internet — and now, AI tools — can make such a move faster and easier, if you’re considering moving overseas there are still a few money tasks to add to your checklist to make the relocation smoother.
Managing Social Security and Medicare
It’s crucial to understand how your Social Security benefits and Medicare coverage work internationally, said Andrew Latham, certified financial planner and director of content at SuperMoney.com.
“While Social Security benefits can often be accessed abroad, Medicare generally doesn’t cover healthcare services outside the U.S.,” said Latham. “Therefore, you need to plan for your healthcare needs. One option could be to enroll in a health insurance plan in your new country or consider a policy specifically designed for expats.”
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Bank Accounts
Banking overseas can be tricky, but there are ways to make it easier and simplify the process.
“Research banks that offer international services and accounts, allowing you to easily transfer funds between your home country and your new abode,” said Ratepunk CEO Justin Albertynas.
Albertynas recommends looking for banks that have a presence in both countries or consider online banking options with international capabilities.
“It’s also wise to notify your current bank about your plans to retire abroad and inquire about any specific requirements or recommendations they may have,” he added.
Estate Planning
Another aspect to take into consideration when retiring abroad is your estate plan.
“You should revisit your current estate plan to see which law will control the distribution of your estate and appointment of representatives,” said Katie Charleston, founding partner at Katie Charleston Law.
Charleston explained that the laws abroad will be different than those in the states, so your documents may not be accepted nor your wishes followed.
“Administration of your estate will be required in your place of domicile and anywhere you own real property. If you will continue to own property in the states, you should consider having a local attorney in your new domicile review your current estate plan to see if it will control or will need to be added to by local documents reflecting local law,” she added. “To avoid multiple administrations, you can set up a Revocable Living Trust, which will allow for transfer of your assets without state.”
Health Insurance
Ryan Walker, CEO of travel and education platform Beyond Academy, explained that U.S. Medicare doesn’t usually cover costs for healthcare outside the U.S.
“Even if private health insurance is already held, it may not provide cover when resident in a different country,” said Walker. “It is worth checking what entitlements are for residents in the new country of residence. Private plans or insurance can then be taken out which complement any local arrangements of a suitable standard.”
Review Insurance Coverage
In addition to health insurance, you should review all your other insurances, including life, disability and property insurance.
“Will they cover you abroad, and to what extent? Also, take into account the health risks, crime rate and potential for natural disasters in your destination country,” said SuperMoney’s Latham. “You might need to adjust your coverage or find a new policy that specifically covers expats living abroad.”
Taxes
As H&R Block explains, even if you retire abroad you still may have to file a U.S. tax return. In addition, you’ll still have to report money in any foreign financial accounts on your Foreign Bank and Financial Accounts (FBAR) if you meet the requirements.
“Engaging the services of a legal advisor with connections to tax professionals in both countries should ensure requirements are met, and also that any applicable exemptions or benefits are considered,” said Walker.
401(k)s
H&R Block also notes that distributions from your 401(k) are still taxed as income, even though they’re treated as unearned income, which means that you won’t be able to claim them under the Foreign Earned Income Exclusion.
“If you’re wanting to transfer your 401(k) to an overseas plan, we recommend you consider all the implications first — transferring funds from a qualified plan won’t be tax-free and won’t count as a rollover. In the end, you may end up owing taxes on the transfers, getting hit with an early withdrawal penalty and unintentionally walking away with a foreign mutual fund (PFIC) you now have to report,” according to H&R Block.
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This article originally appeared on GOBankingRates.com: Retiring Abroad? 7 Money Tasks To Add To Your Checklist
