Planning to Retire Abroad - First Steps
The idea of retiring abroad is a dream to many for various reasons.
We all have such a great time on vacation - and retirement is going to be one long vacation, so some people think, "why not spend it in my favourite vacation spot?"
Alternatively, you may be worried about how your money will last in retirement and be tempted by tales of cheaper living costs in other countries, so you can live more comfortably in your old age.
Many people think of "planning the move" as booking flights and packing up - but before you do any of that, it's vital to do a “sanity check”. That means checking your motivation is valid, and working out the practical implications of your move.
Tempted to skip this exercise? Don't!
If you're resisting the idea of analysing your plans, then it's even more essential to do the exercise. Resistance means that deep down, you know there are snags, and you'd rather not think about them for fear of ruining your dream.
Ignoring them will not make them go away – in fact, it makes them even more likely to sabotage you! The only way to overcome obstacles is to face them – that way, there's a much better chance you'll find a way around them.
Every year, many thousands of Brits move to Europe - it's easier for them, because Europe is so close and it's easier for them to get residency. It may surprise you to learn that of those thousands, two-thirds come home within three years. Likewise, thousands of English people move to Australia - and half of them return.
All those thousands of people are like you – looking forward to a new life in another country, full of hope and enthusiasm. So why do so many of them return home, disillusioned?
Because they don't analyse their motives and work out the practical aspects of their move, that's why. They set off to live a dream, and the reality didn't live up to that dream. Reality rarely does! Don't let that happen to you.
It's very, very unlikely that your retirement location will be perfect - nothing in life ever is. But it can still be the best choice you ever made, IF you choose carefully and relocate with your eyes wide open!
What is "The Dream"?
These questions are designed to make you think. Take three blank pages, write one of the questions at the top of each one, and try to fill the page with as long a reply as you can manage! Write down whatever occurs to you, even if it's not entirely relevant. Take your time.
Why do you want to move overseas?
- Describe a typical day in your new life at your new location.
- Do you imagine making new friends? If so, how? How social do you expect to be? What kind of activities will you do with friends?
- How will you keep in touch with family and friends in your home country? How often do you expect to visit them/have them visit you?
There are no right or wrong answers to these questions, they are unique to you. These questions are simply designed to make sure you know what your expectations are. And if you're a couple, it gives you a chance to check that you both agree!
For instance, many a retirement dream has foundered because one partner expects to fly home to see the family once a month, whereas the other partner knows they can't afford a visit more than twice a year.
I haven't been impressed with most of the general "how to retire abroad" books - you'll get much better information by buying a book that's about retiring in the specific country of your choice. If you're not sure of your destination yet and need a general introduction to expat living, this would be my pick.
Have You Done Your Research?
- How many times have you visited your destination city/village/rural area?
- Have you visited in the off-season/worst time of year?
- What's the longest stretch of time you've spent in that location on a single visit?
- What kind of accommodation did you stay in?
- How long have you stayed in your destination country in total?
- Do you have existing friends or family in your destination country?
- Do you speak the language?
The answers to these questions give you some insight into how prepared you are for the move.
First, Walk the Talk
If you've spent less than two months in your destination country in total, and if you've always stayed in hotels - face it, you have absolutely no idea what it's like to live there. You need a trial run!
Book a self-catering apartment or house for at least two weeks, preferably more. It must be in the area where you're planning to live - if you can afford to buy in a luxury beach resort, fine, but if your budget means you'll have to live further inland, or you hanker after a secluded mountaintop villa, then find a place there. If it's not a tourist destination, try AirBnB or contact local estate agents, who may have contacts who can help you.
It's also a good idea to book your trial run at the time of year when the weather is at its worst...
On your trial stay, live like a local. On vacation, it's tempting to eat out every night and spend your days sightseeing - but once you're living there, you can't go and see the same sights again and again, and you probably can't afford restaurant meals every day. Buy your groceries at the local store, cook your own meals and think about how you'll live day to day. You may be surprised how different it feels from what you imagined.
If you don't speak the language or have local friends, a try-out is even more vital - you need to find out if you can manage shopping, travelling on public transport etc. Have you considered how you'll cope with getting electricity and phone connected, getting medical care, opening a bank account etc?
Can You Afford It?
The big question for many people is "Can I afford it?" But don't base your decision on what you spend on vacation!
You also have to consider costs you don't see while on a short stay - buying a car, running a car, groceries, medical care, insurances, tax, etc etc. It will take some time to research all those costs, but it is an essential exercise.
Next you'll need to compare those figures with what your lifestyle costs now. Remember that your lifestyle will change when you move and you may be able to live more cheaply in retirement - for instance if you're giving up work, you'll save money on work clothes (and maybe expensive hairdressers?) and commuting expenses.
Finally, don't forget to work out your income! If you're entitled to a pension, will you still get it if you leave the country? Some countries will cut back or stop your pension if you move overseas, or tax it more harshly.
Some retirees plan to continue earning after they move, and that needs careful consideration, too.
Starting a Business Overseas
It’s part of the baby boomer dream: making a seachange and downshifting from a stressful job to your own little business. The reality can be very different!
Ask anyone (of any age) who has started a new business, and they’ll tell you they had to work much longer hours than they ever expected. And yes, that applies even if you're thinking of buying that little vineyard in Tuscany. If you were hoping to throttle back in retirement (either for health reasons or just because you’ve earned it), you may be in for a nasty surprise.
That’s why, for every baby boomer who successfully moves from corporate executive to vineyard owner (or whatever), there are several others who try the idea and give up – sometimes having lost a fair chunk of their retirement nest-egg in the process.
Let’s face it, anyone who is over 50 is all too aware that health can become an issue as we get older. In fact, those beginning-to-creak bones may be the very reason we’re thinking of a sea change! So it’s important to remember that businesses don’t become successful overnight. In fact, a typical small business makes very little, if any, genuine profit in the first year or even two.
Of course you can bypass that setup period by buying an established enterprise - but that will consume several thousand dollars of your nest egg, so the result is the same.
Another aspect of entrepreneurship which is often overlooked, especially by baby boomers, is the fact that independence means working alone – and alone can equal lonely. It’s well known that many retirees find it hard to adjust to spending most of their time alone or with their partner, instead of spending their days in a busy office full of people. We often underestimate the important role business colleagues and acquaintances play in keeping us in touch with the world, even though they are not close friends. Of course we all yearn for our own space, but are you going to be happy when you’re in it 100% of the time? If your business involves a lot of interaction with people this may not be a problem, but remember there is a difference between interacting with customers – a constantly changing population – and a regular group of co-workers.
Remember, you will be in a new country where you don't know anyone, and being tied up with your business may mean you don't have the time to make new friends.
Finally, make sure you research the bureaucracy in your proposed new country. Registration and taxation rules vary widely across the globe and as a business owner, you won't be able to avoid them.