If you’re hoping to stretch your retirement dollars further, a move abroad may be the answer. Living in a foreign land offers a chance to see more of the world and can offer a lower cost of living. As of January 2018 more than 674,700 Social Security benefit payments were made to Americans living outside the United States.
But which are the best countries for retirees? International Living’s Annual Global Retirement Index highlights the best countries for retirees each year, and this year’s top 10 list features eight Spanish-speaking countries, seven of them in Central and South America (the other is Spain itself). If you’re planning a foreign retirement, it may make sense to add learning Spanish to your to-do list.
Best Countries for Retirees in 2018
To determine which countries are the best for retirees, International Living uses a scoring system that measures a variety of factors, including:
- ease of buying and owning property and the value of property investments
- cost of renting
- benefits and discounts on things such as health care and entertainment
- visa and residency requirements
- cost of living
- fitting in and how easy it is to make friends
- entertainment and amenities
- healthy living
- development and infrastructure
- stability of the country’s political situation
The countries with the highest cumulative average score across all those categories ranked in the top 10, and here they are:
1. Costa Rica
Costa Rica is an ideal choice if you value a healthy, active lifestyle. It earned the highest scores in the health care, amenities and healthy living categories, and there’s no shortage of things to do and see. The cost of living makes Costa Rica highly affordable, even on the smallest retirement budget. Consumer prices are 24% lower than the U.S. on average, with rent prices averaging 54% lower. If you’d prefer to buy, you can find homes as low as $50,000, with property tax rates that are a fraction of what you’d pay in the U.S. (For more, see What Does It Cost to Retire in Costa Rica?)
Mexico combines modern amenities with a rustic feel, and it’s well suited to retirees who prefer a balmy climate and close proximity to the U.S. It earned its highest ratings on International Living’s list for both entertainment and amenities and the ease of establishing residency. Retirees can get a temporary resident visa, which is good for up to four years, by meeting minimum monthly income or asset requirements or by owning property in Mexico. If you plan to stay long term, you can apply for a permanent resident visa, which has higher income and asset requirements (see How Much Money Do You Need to Retire in Mexico?). Note that five states in Mexico have been singled out for U.S. State Dept. travel warnings, so be careful where in Mexico you choose to relocate.
Between majestic mountains and bustling beaches, Panama offers the best of both worlds for retirees. Locals have a reputation for being welcoming and friendly, and from a cost-of-living perspective it’s highly affordable. Virtually everything is less expensive compared to the U.S., including groceries, restaurants and rents, which are approximately 46% lower. Expats who get a retirement visa enjoy numerous benefits, including deep discounts on entertainment, airfare, local transportation and hotel stays, as well as a one-time duty-tax exemption for household goods up to a total of $10,000 and a 100% duty exemption on the purchase or importation of a vehicle every two years. (For more, see Retiring in Panama: The Pros & Cons)
Ecuador has something for everyone, whether you prefer the beach to the mountains or the country to the city. It earned its highest score for its climate, which boasts an average annual temperature of 67 degrees. Housing is a bargain, with rental prices notching 70% lower compared to the U.S. Overall, consumer prices, excluding rent, are around 40% lower, allowing you to squeeze more value out of your retirement dollars. Like Panama, Ecuador extends a long list of money-saving benefits to expats, including discounts on your electric and water bills, discounts on entertainment and public transportation, and reductions of certain taxes. (For more, see How to Plan Retirement in Ecuador.)
Malaysia is one of three countries included in the top 10 that’s not in South or Central America. Aside from the beautiful landscape, expats are attracted to this Asian locale because of the low cost of living and abundance of amenities. Consumer prices, including rent, are nearly 50% lower than in the U.S., with a one-bedroom apartment renting for less than $400 a month. There are hundreds of islands to visit, and the low cost and wide variety of restaurants make it a foodie’s paradise. (Learn more in 5 Reasons Why Americans Retire in Malaysia.)
Rounding Out the Top 10
The remaining countries in the top 10 all offer a combination of low costs, great amenities and good weather. All but one are Spanish speaking, and two require a European move. In descending order, they are Colombia, Portugal, Nicaragua, Spain and Peru.
Some More Popular Places to Retire
In addition to International Living's list, there are lots of sources advising retirees where they should go if they decide to relocate abroad. But where are retirees actually flocking, based on where they collect their Social Security checks? The answers just might surprise you. Here, in order of popularity, are the five countries that are seeing the biggest influx of Social Security recipients who prefer retirement on foreign shores.
- United Kingdom
We've already discussed Mexico's advantages. As for the others: while life in capitals like Tokyo or London can be quite pricey, housing and other fundamental aspects of the cost-of-living in smaller towns and in the countryside is often lower than in the U.S. – especially when you factor in the universal healthcare many of these countries offer. Familiarity also explains the popularity of some countries: large numbers of U.S. military personnel are stationed in several of these lands, and many often have a desire to "stay on" after their active service has ended.
How to Plan Your Retirement Abroad
1. Check Visa and Residency Requirements
Immigration and residency laws vary from country to country. You can review the Department of State’s country specific information to find out if you’ll need a visa to enter and reside in the country to which you’re hoping to move. Other useful information is listed on the website as well, including passport validity, recommended and required vaccinations, and currency restrictions for entry and exit.
2. Research Safety and Political Stability
The U.S. State Department website provides up-to-date information about how safe and stable various countries are. At times, there will be travel warnings and alerts about specific locations – or, rarely, the U.S. may restrict citizens from traveling to or within certain countries. The information is updated regularly, as needed.
As a foreign national, you may encounter travel restrictions in certain countries. Remember that while in a foreign country, you are subject to its laws.
3. Determine Rules of Foreign Ownership
Many countries have rules and regulations as to who is permitted to own property, and how the property can be used (some countries restrict foreign ownership altogether). Before you decide on moving to a country, investigate its restrictions in detail and make sure they work with your finances and plans. Your best information source is a local real estate agent. You can find such agents through the International Consortium of Real Estate Associations (ICREA).
Even if a country does not restrict who buys real estate, it may control what happens when non-citizens sell property. Foreigners are permitted to buy property in Malaysia, for example, but if the property is sold, the proceeds have to be kept in a Malaysian bank account.
Also, be sure that your property rights are protected. In the U.S., homebuyers generally receive a clear title to property when they buy it. Rules may be less clear in other countries. Be sure you hire a qualified real estate agent and local attorney to ensure that you know what you've bought, and that all paperwork is handled according to local requirements.
4. Visit Before Moving, Rent Before Buying
Living in a country is very different from being a tourist. Try to stay in neighborhoods and areas you are considering to see what it's like to live as a local. And visit in more than one season. In fact, try to visit once during the least-pleasant weather your prospective home endures – hot, dry desert winds; monsoon rains; dreary winter days when there's no sun for weeks. You won't always be able to escape once you're actually living there. Also, see whether there is a local American or international association or club you can join to learn more about living in that country or region.
Once you move, start the transition by renting first to make sure the locale is compatible with your vision for retirement. If it works out, let the house-hunting begin.
5. Consider an All-Cash Purchase
Locating a U.S.-based bank or other lender that will fund a mortgage for overseas property is exceedingly difficult. Some local banks abroad do make loans to foreigners, but you could be asked for a massive down payment.
Try to find a property you can afford to buy outright, for cash. You'll have more negotiating power, a less complicated transaction and, in many cases, you may end up with a better deal.
6. Organize Your Assets (and Taxes)
You may be retiring abroad, but your assets don’t have to move with you. Stocks, bonds, annuities, IRAs and the like can remain in the U.S. where the economy and political situation are known factors.
Unless you renounce your U.S. citizenship (thereby giving up Social Security), you will be subject to the same income tax requirements as if you lived back home. You will still have to file an income tax return with the IRS, and will have to declare any money withdrawn from your retirement accounts. Be sure to consult with a tax attorney or tax advisor before you move, and plan on keeping in touch while abroad to make sure you are in compliance with tax laws at home and abroad. If you decide to move your assets abroad, work with your accountant or attorney to find out if and how they will be taxed.
To cover day-to-day expenses, you can open a local bank account to accept regular transfers from your U.S. account and pay bills. For more information, see Should You Open A Foreign Savings Account?
Online banking and brokerage accounts make it easier than ever to manage money while abroad, but be aware there are restrictions on transfers to certain countries. If your Social Security check is mailed abroad, keep in mind that the local bank may hold the check for up to four weeks before it’s cleared.
Major credit cards (Visa, MasterCard and American Express) are accepted in locations around the world and provide another option for covering daily living expenses and purchases. Contact your credit card company about an auto-pay option.
7. Settle Your Healthcare
Most U.S. health insurance policies will not cover you while living abroad. And even though Social Security will follow you as you travel, Medicare coverage does not extend outside of the U.S. Depending on your retirement destination, you may find that healthcare is so affordable that you don’t need insurance. If the country offers subsidized care for citizens, for example, make sure foreign residents have access to the same care and costs. If not, find out what coverage you will have as a visitor and plan accordingly. Depending on where you plan to live, you may find American or international companies that sell health insurance to Americans living abroad.
In some countries, the healthcare may be affordable but not up to the standards you are used to. If that’s the case, your plan could include adding X amount of dollars to your annual budget for health-related travel and care – either back to the U.S. or to a larger city abroad than where you're living. (See Where Can Americans Go For Cheaper Healthcare?)
If you are currently under the care of a physician at home, ask if he or she can recommended a colleague in your new destination. Having this connection can make it much easier to deal with existing medical conditions and ensure you receive the appropriate care.
8. Get a Driver’s License
Depending on where you go, your new country may not recognize your U.S. driver’s license. Many countries will accept an International Driver’s Permit (IDP) issued by the American Automobile Association or the National Automobile Club. These permits, which usually have to be accompanied by a regular driver’s license, typically expire in a year. If you plan on driving abroad, you need to get a local driver’s license as soon as you can.
9. Think About Working During Retirement
For some, retirement doesn’t mean not working. Many retirees enjoy volunteer opportunities and part-time jobs. Others are more entrepreneurial, interested in starting a business abroad.
If you plan on working, check ahead of time to make sure the country has no restrictions that could prevent you from either finding a job or starting your own business.
10. Plan to Stay Connected
Many people – whether or not they’re retired – find the most difficult part of living abroad is missing friends and family. Have a plan in place to keep in touch with the people you care about. Modern technology – smart phones and online video-conferencing software (such as Skype) makes it easy to stay in touch virtually – but having a strong, reliable connection is crucial. Having a connection where you live is preferable, but if that’s not an option, nowadays you can access the Internet in most public libraries and cafés.
You also need an emergency plan: Leave your contract information and a copy of your passport with family, and carry contact information for your family back home with you when you travel. Also, know how to reach the closest U.S. embassy or consulate and give that information to your friends and family.
Citizen or Resident?
Almost any country that you would want to live in welcomes American retirees, as long as they can prove that they have a certain minimum income from some combination of Social Security, a pension and investment income. It varies, and, reasonably enough, countries with a higher cost of living require a higher income.
Generally, there’s a three-stage process, from tourist to resident to citizen, though the wait time and red tape differ in every country. The U.S. State Department keeps track of the specifics regarding short-term visits. The website of each nation’s U.S. consulate is the best source for facts on residency and citizenship requirements.
Here’s how it works for most countries:
- An American with just a passport typically can stay in a foreign country for up to 90 days. Some expats residing in Canada or Mexico stay on for years, taking a bus across the border and back again every three months to restart the clock.
- Long-term stays generally require a residency visa, which may need to be renewed yearly for several years before permanent residency can be applied for and awarded.
- A citizenship application, in most countries, requires a longer period of residency, varying from as little as two years to as long as 10 years. Some have fast-track programs that cut the wait for people who make a substantial investment in the country.
All of the above is relatively straightforward in most countries for retirees, assuming they don’t want to take a job and can prove they have a steady income. “Relatively” meaning that some countries make it tougher than others, with onerous requirements and plenty of paperwork.
And that raises the question whether you want to be a permanent resident or a citizen of your adopted country. The benefits and drawbacks vary for each country. Note that citizenship in any European country gains you certain rights as a citizen of a European Union member nation. (See also: Developed Countries For Easy Residency/Citizenship.)
The more common choice for a retiree expat is between permanent residency and dual citizenship. Remember that neither dual citizenship nor residency gets you out of filing a U.S. tax return every year. It is both unusual and burdensome, but Americans have to pay income taxes wherever they live, and they owe it no matter where their income was earned. You may also have to file an income tax return in your country of residence, although most deduct the amount American residents pay to the U.S. (See How To Pay Taxes If You're Overseas.)
In case you’re wondering, you can relinquish your U.S. citizenship – and with them, your U.S. tax bill – but that step is irrevocable and uncommon. In 2014, a whopping 3,415 people did so, and that is an all-time record. According to Forbes.com, some were very wealthy Americans who found they could no longer hide assets in foreign bank accounts. Since a new U.S. law requires those deposits to be reported to the IRS, the banks either do so, or flatly refuse to do business with Americans. For the rest, the sheer aggravation of filing in two countries every year was a likely factor in their renunciation of U.S. citizenship.