Retirement planning raises many questions: When can I retire? How much should I save? Will I continue to work and/or volunteer? What will I do to stay active? One thing that can greatly influence the outcome of these questions is where you plan on retiring: either at home in the United States or someplace abroad.
While most Americans spend their retirements in the U.S., a growing number are opting to retire overseas. Here, we take a quick look at the pros and cons of staying in the U.S. during retirement or leaving to live overseas.
Retiring in the U.S.
The vast majority of retirees either stay in their existing homes or make in-state moves, with very few leaving their state or relocating out of the country.
- Established professional connections – they'll help you secure part-time or less stressful full-time work during retirement.
- Established social networks – these enable you to remain physically and mentally active without needing to find new friends.
- Family – it's easier to spend time with children, grandkids and other family.
- Support – you're not among strangers if anything goes wrong.
- Trusted providers – you can stay with familiar doctors and hospitals, car mechanics, hairdressers, etc.
- Stability and convenience – you can depend on a certain level of predictability, for everything from infrastructure to the brand of toothpaste at your local grocery store.
- Comfort zone – you can maintain your “normal” routine.
- Expense – the cost of living in the U.S. is much higher than you could find in many parts of the world (see What Does Retirement Abroad Cost?).
- Rising healthcare costs – while the standard of care is excellent, healthcare costs are huge: A couple retiring in 2016 is expected to spend $260,000 on healthcare during retirement, according to Fidelity's Retiree Health Care Cost Estimate.
- Routine – although considered a plus by many, staying in a routine greatly limits your opportunity for new experiences.
Moving out of the country is certainly an adventure, and can be more or less so depending on the destination. From quiet beaches in Vietnam to hip cities in South America, retirees can choose a place that matches their comfort level in terms of modern conveniences, access, climate, activities, cuisine, healthcare, culture and customs. See Retirement Abroad: 5 Unexpected Foreign Cities.
- New experiences – you'll have fun, which is linked to healthy aging, providing physical, cognitive and social benefits.
- Realize dreams – you will fulfill your dreams to travel, pick up a new sport or enjoy a special hobby.
- Lower cost of living – it’s possible to retire abroad comfortably for a fraction of the cost of retiring in the U.S.
- Access to affordable healthcare – you may find public healthcare systems providing good healthcare at a reasonable cost; private coverage is available in many countries for significantly less than comparable plans stateside.
- Retiree Incentives – many countries offer incentives to retirees, such as Panama’s Pensionado program, open to retirees who meet modest minimum income standards.
- Weather – pick your paradise, whether it’s a warm, sunny beach or a tropical rainforest.
- Distance – depending on where you go, a long, expensive flight could be between you and your friends and family.
- Double taxation – again, depending on where you retire, you could end up paying taxes on your income both in the U.S. and abroad.
- Language and cultural difference - are you up for learning a new language and immersing yourself in a new culture?
- Instability – not all countries enjoy the same level of political and economic stability that the U.S. does.
- Daily challenges – the goods, services and conveniences you are used to may not be readily available, or available at all.
- Reality of vacation versus living – your piece of paradise could be a great place to visit, but not so great for living.
- Support – you are among strangers if something goes wrong.
The Bottom Line: Stay or Go?
Many retirees would never consider moving abroad, while others know for sure that’s what they want to do. For these people, deciding where to live in retirement is easy. Retirees and near-retirees on the fence, however, are faced with a tough decision that will require soul searching, research, and weighing the pros and cons of retiring at home or living abroad. As you start costing it out, see The Retired Person's Guide to Managing Expenses.