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Deciding to retire abroad

Who hasn't fantasized about retiring to a cottage in the Scottish Highlands, a hacienda in Mexico or a thatched-covered hut in Fiji? Retiring abroad may sound heavenly, but to pull it off requires down-to-earth planning.

Retiring abroad can help you maximize your nest egg, if you choose a country with a low cost of living. Roseanne Knorr, author of The Grown Up's Guide to Retiring Abroad, also reports that U.S. citizens abroad tend to spend less.

"You're not keeping up with the Joneses," says Knorr. "You're not worried about the latest car. If a couple is living in a small town in France, they may only need one car, not two."

Traveling becomes easier, too. Knorr divides her time between Florida and France. When in France, she can hop in her car, visit Switzerland or Italy and be back à la maison in time for dinner.

But spending your golden years outside of the United States also puts you at the mercy of local exchange rates. That's great while the dollar is strong. But if it dives, so does your spending power.

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And you're a long way from home, a reality that can cause problems if something goes wrong. Health care, for example, can be a big headache. Knorr's husband recently came down with a serious medical problem and since he's on Medicare, he has to be treated in the United States to receive coverage.

The complications are worth it, however, for those with wanderlust or a spirit of adventure. "If you have a feeling in your gut that you want to go and have an adventure, then you know it's right for you," says Knorr.

Not comfortable just going with your gut feeling? Here are six issues to contemplate before you renew your passport:

Look at your budget: Whatever the currency, money considerations don't change. Whether you're retiring in the United States or Uruguay, you and your spouse need to know how much disposable income you'll have to help you figure out where you can afford to live. You'll also need to include money for trips to and from the United States and your retirement haven.

Examine your priorities: What type of climate are you after? What activities do you like, and are they available in your list of possible countries to relocate to? Do you care more about a low cost of living or health care? What about safety? Are you prepared to be part of the next revolution in your adopted land? It doesn't cost much to live in Indonesia, but the political unrest there may remove it from your list.

Investigate tax ramifications: Before you choose your retirement locale, see what taxes you may have to pay in your new home. The United States has tax treaties with more than 50 countries. Under these agreements, U.S. citizens residing in foreign countries are taxed at a reduced rate or are exempt from U.S. income taxes on certain foreign earned income. Generally, the treaties call for each country crediting the amount of tax paid to the other country much the way some states allow residents to deduct federal income tax paid.

Find out visa requirements: Some countries welcome U.S. residents with open arms. Others, like New Zealand or nearby Canada, won't let you take up full-time residency so you can't live there year-round.

Get to know the country: Research carefully each place you're considering. Books, magazines and Web sites abound that can help. Many of them regularly publish articles listing the best places for retirees. AARP's member journal, Modern Maturity, last year chose its top 15 places for a home away from home. John Muir Publications puts out The World's Top Retirement Havens, while Globe Pequot Press produces a "Choose Retirement" series that highlights various domestic and foreign retirement spots.

Expatriate and living-abroad sites offer everything from bulletin boards where you can get the lowdown from other Americans about what it's like to live in a foreign country to available property listings. Some popular sites include The Association of Americans Resident Overseas, Living Abroad, International Living, Expat Exchange and Expat Forum.

Go there temporarily: Think you've found where you want to spend your retirement? Take a vacation there first. Try to visit the country in all seasons so you can get a feel for whether you'll be happy living there full-time.

Jenny C. McCune is a contributing editor based in Montana.

-- Posted: Sept. 3, 2002

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See Also
Plus: Making your international retirement move
Managing your money while living abroad
Paying for that European study trip
Financial advice glossary
More advice stories

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