Health & Well-Being in Retirement
May 29, 2018

What to Know About Retiring Abroad

Each year, thousands of retiring Americans settle down outside of the US, choosing to spend their later years somewhere new, exciting, and (hopefully) warmer. This adventurous trend shows no signs of stopping: In 2016, the Social Security Administration sent 400,000 retiree payments abroad. By 2017, that number had increased to over 500,000. For many oil, gas, and chemical professionals, travel is part of the job. It can put you in exotic locations all over the world — maybe even the location of your dream retirement. If you’re considering retirement abroad, there are a few things to think about before booking the flight out. Keep reading to get need-to-know information about this exciting retirement choice. Understand Your Financial Obligations First, get to know your new tax situation. The United States taxes according to citizenship rather than residency, so even individuals living outside the country will be obligated to pay taxes and file a tax return. There is a chance that where you move to may maintain a tax treaty with the US. This could impact how much the treaty country will tax Americans living on their soil. You should find out if the location you’re interested in is engaged in such a treaty, and whether it will impact you. If you’re selling your US residence you’ll probably pay less in US taxes than you had before, since property taxes and other expenses associated with living in the US won’t apply to you. If you decide to maintain a second residence in the US, you’ll pay taxes on that property as well. What you pay, however, may change due to your new living situation. Tax law for expatriates can vary heavily from place to place and rules can quickly get complex. It’s recommended that you talk to a financial advisor and get a clear picture of your tax environment. In addition to paying your taxes, retirees who at any point during the year have more than $10,000 in foreign assets will have to fill out a Report of Foreign Bank and Financial Accounts (FBAR) and submit it to the IRS. It’s important to complete an FBAR if you qualify. Not doing so can result in serious penalties of up to $10,000 per violation. Account Wisely You may be making a big move, but you can leave the bulk of your assets at home. Experts agree that the US financial system is among the safest and most reliable in the world, and with the global markets often hanging on the dollar, your assets will often be most secure in a home-side account. Retirees can instead set up routine transfers to an account they can use abroad, so they can have access to funds while still protecting their assets. If you’re like most retirees, some (if not much) of your retirement funds are held in an IRA, 401k or other company-sponsored retirement plan. Before you go abroad, make sure the administrator of your account will work with you. Due to guidelines set by the Patriot Act, some firms will close and cash out accounts if the owner of them isn’t living on US soil. If this happens to you, it would eliminate a valuable tax shelter and could negatively affect your retirement. As for Social Security, retirees can have their benefits deposited directly into their bank accounts, including some foreign bank accounts. These funds can be a valuable resource for a retiree living in an area with a lower cost-of-living, where getting by on just their payments is a real possibility. Mind Your Health Medicare won’t cover individuals that live outside of the US, so retirees must take healthcare into consideration when planning  life abroad. The US Bureau of Consular Affairs recommends expatriates purchase health insurance to cover private medical and dental costs, as well as medical evacuation to the US. Depending on where you settle, you may also be able to pay out-of-pocket or take advantage of government-run health care, if you’re eligible. All retirees should take a frank look at their wellness outlook, and it should play a real role in deciding where you choose to retire. If you or a spouse is at higher-than-normal risk for medical issues, make sure your new home can accommodate for that. A retirement specialist can help shed more light on the important things to consider.
Go Abroad Confidently Retiring abroad is possible, but it takes planning, research, and commitment. You’ll have plenty of questions, and there’s a good chance a lot of them won’t be so easy to answer. Having a retirement specialist by your side can make all the difference. Here at Baird Retirement Management, we’ve been helping oil, gas, and chemical professionals retire all over the world. No matter where you plan to go, we’re here to help you get there.

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