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Making the move to
international retirement
By Jenny
C. McCune • Bankrate.com
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.
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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