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Making the move to international retirement

You've decided an exotic locale is the perfect place to spend your golden years. You've found the ideal spot, ordered the Berlitz tapes and broken the news to your children (the grandkids are thrilled).

Now it's time to get down to the specifics of actually retiring abroad.

Renting vs. buying
Florida resident Roseanne Knorr spends part of each year in France. She and other experts on living abroad recommend that the newly relocated spend at least one year renting before taking the big step of buying a home.

Spending time in a rental unit can give you the lay of the land. You'll have time to learn what neighborhoods are the best and the worst. And it's easier to beat a hasty retreat back to the United States if you don't have to sell a property.

Even after you decide you want to put down foreign roots, Knorr warns against buying. The author of The Grown Up's Guide to Retiring Abroad says homeownership in another country can complicate things. Some countries won't allow foreigners to buy property. Others may, but some Americans have been swindled when their property rights weren't quite what they thought they were.

And eventually your heirs will have to worry about disposal of the property.

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Banking abroad
While you may want a local bank account, it should be an adjunct to your U.S.-based checking account. Keeping an account in the United States makes a lot of sense.

Access is easy: Just use your ATM card. In addition to being simple, it also affords you a great exchange rate, the same one your bank receives.

Deposits also are a snap. Arrange for automatic deposit of your Social Security benefits, monthly pension or 401(k) check. Similarly, use your U.S. bank's electronic withdrawal services to ensure that any domestic bills for which you remain responsible are paid on time.

Having your major account in the United States also can protect you from overseas currency fluctuations. The dollar tends to be more stable.

Juggling investments
Sure you can trade from anywhere, but if there's a large time difference between your host country and New York, you may want to reduce your portfolio's volatility since you'll have that much less time to respond.

Of course, if you're willing to be up at odd hours to monitor the stock market, then it doesn't matter how volatile or stable your investments are. As a retiree in an exotic land, you'll have plenty of time to assess investments and take action.

Opting to expatriate
Expatriates renounce their U.S. citizenship. Generally, they must also file for a ruling by the Internal Revenue Service on whether they can be considered a citizen trying to dodge taxes or a person who genuinely wants to renounce U.S. citizenship. Even if your case is considered legitimate, you may be paying some U.S. taxes for the next 10 years.

Expatriating is a big step and one that isn't done lightly. Ken Kingma, a tax and estate planning attorney with Warner Norcross & Judd LLP in Southfield, Mich., says only those in the upper-income brackets will find it necessary to take this step.

That said, anyone considering retirement abroad should consult a tax attorney over possible ramifications. To prepare for a meeting with your tax expert, review the instructions to IRS Publication 8854, Expatriation Information Statement.

Where there's a will
Regardless of whether you move to a foreign land for forever or just a couple of years, Kingma urges retirees to be sure to have their estates in order. Estate law varies by country, so have a local attorney, as well as your U.S. lawyer, review your options.

Finally, be sure your address book is up-to-date. Everyone will expect regular reports on your new international life of leisure.

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

-- Posted: Sept. 3, 2002

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See Also
Main: Deciding to retire abroad
Managing your money while living abroad
Paying for that European study trip
Financial advice glossary
More advice stories

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