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Thinking of retiring abroad? ‘Do your homework first!’ experts say

22 August 2019

As we get older, we invariably give more thought to the place we hope to live out our retirement years. For expats who have spent much of their working lives abroad, this may involve choosing to stay in their current location; or it could mean returning to their country of origin. For others, it might be somewhere completely new.


Image 1- Retiring abroad

The choices for most of us have never been more numerous – or varied. 


Which is one reason why experts warn that we do our homework early on, as retiring overseas typically involves myriad issues that retiring in our home country doesn’t. 


What’s more, articles about retirement destinations don’t always cover the downsides of individual countries and regions as well as they possibly should. 


And finally, mistakes in the choice of our retirement destination can be hugely costly. 


Every year, typically in the first few months, various expat-focused organisations and media outlets publish lists of the ten or more jurisdictions around the world that their research has deemed to be the “best” places to retire. 


Such rankings are usually based on a generally-accepted idea of what constitutes a good quality of life for the price. 


This is normally thought to involve a fairly unsurprising combination of an agreeable climate, stable and safe political environment, healthcare options that are both high quality and good value, and a local currency that is cheap relative to the soon-to-retire-individual’s own currency. 


In fact, we at RL360 have prepared a list of the Top 10 best places to retire, plus an additional 5 that are worth considering


Such lists should, however, only ever be regarded as a starting point for anyone considering moving overseas, experts, such as financial advisers who look after retirees in popular retirement destinations, say. 


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'The pension gap' 


This is because these days people need to plan on supporting themselves in retirement for at least 30 years, or even longer. This is normally a daunting prospect even for those with a good defined benefit pension plan and a sizeable savings pot – let alone the average person. 


Earlier this month, the World Economic Forum, a Switzerland-based think tank, issued a sobering report about retirement savings that warned workers from the US, Europe, Japan and even Australia are not saving nearly enough. 


“The retirement savings gap is quite large in some countries already, and on a global scale is projected to grow significantly larger by the year 2050,” the report says. 


What’s more, even with the best laid plans, a lot can go wrong over 10, 20 or even 30 years, as a result of unexpected occurrences, including political upheavals; problems with investments that turn out to have been a bad idea; unexpected currency fluctuations; corporate pension schemes that turn out to be under-funded; and regulatory changes that target expats in the jurisdictions where they live. 


Of course, your hard earned pension pot will go further in some locations than others, so make sure you understand the cost of living in your chosen destination in comparison to where you currently live. 


So the fundamental first question those planning for retirement need to consider is: Do I have enough money to maintain the retirement lifestyle I envisage, for 30 or more years, in the place I am planning to retire to? (see our Retirement Calculator to estimate the income required to maintain the current lifestyle in retirement) 


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Staying in good health 

Healthcare quality and costs is another consideration. And as we get older, we are more likely to need access to high quality medical services. 


A growing number of countries are introducing mandatory health insurance requirements for foreigners who wish to become resident, or introducing new charges for foreigners that locals don’t have to pay. 


Many Brits used to free health care through the National Health Service tend to underestimate the level of health insurance they could require. It’s also important to consider what the standard of healthcare provision is in your chosen retirement destination and how easy is it for expats to access those services. 


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Attitudes towards expats 

Resentment towards those seen to be wealthy foreigners who are helping to keep house prices high and displacing locals can sometimes be an issue, and one that those considering an overseas retirement also need to bear in mind. 


At the same time, though, some others, such as Malaysia and Italy, have recently introduced programmes aimed at encouraging foreigners to retire within their borders. Malaysia’s My Second Home Programme, for example, (MM2H) is a residency scheme that offers certain tax advantages for expats, such as exempting all foreign-sourced income from Malaysian taxes. 


Particularly if you’re considering a non-English-speaking country – such as Thailand, long a popular retirement destination for Brits – you will want to research the situation in the specific area you’re thinking about moving to, and whether you’ll be willing to learn at least the basics of a new language, (which is always a good idea). 


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Brexit uncertainty for UK expats 

At this moment, an estimated 190,000 British citizens who retired to Europe are waiting for the final word as to how the UK’s planned exit from the European Union will end up affecting the government-provided healthcare provision in the countries in which they now live and, in some cases, whether they’ll be able to remain in those countries at all. 


Some healthcare experts in the UK are warning that many British retirees may be forced back to Blighty, if the “S1” reciprocal health benefits they currently enjoy come to an end, as a result of a no-deal Brexit. 


Another issue that Britons contemplating an EU retirement may need to consider is whether UK state pensions – which now rise in line with inflation for those retirees living in Europe, the way they do for British citizens who remain at home – will start to be “frozen”. This is already the (highly controversial) case for British pensioners resident in Canada, Australia New Zealand and some 45 of the other 54 British Commonwealth countries. 


Migration Watch has pointed out that post-Brexit, restrictions on dual nationality in some EU Member States – including some with relatively large UK-citizen populations – may force many current British residents of these countries, including non-retirees, to have to choose between giving up their British citizenship in order to remain where they are, or return to the UK. 


Currency swings can also be difficult to predict. Thousands of British investors were hit some years ago, for example, when properties they bought in Cyprus, with the intention of retiring to one day, became a financial nightmare, after the Swiss franc mortgages they had been advised to take out to pay for them suddenly became unaffordable, after an unexpected leap in the relative value of the Swiss franc to the pound. 


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‘The unexpected pull of a grandchild’ and homesickness 


Grandchildren, who may not have even been thought a possibility when individuals move overseas to retire, are another not-uncommon factor in introducing an unexpected pull on individuals or couples who have put down their retirement roots. 


Homesickness for your home town and/or culture is apparently another unexpected issue for some retirees, often manifesting itself well into an individual’s overseas retirement sojourn. This can arise unexpectedly when an expat retiree’s spouse or partner dies first. 


While many people long to say goodbye to working and long hours, it’s also true that our jobs provide a routine and structure to our lives. Retiring to a new country, where you don’t immediately have a close circle of friends or activities, can be a difficult transition and can lead some retirees to feel lonely and isolated. So researching activities and local social groups that you can tap into when you move is also a good idea.


Summary: plan your retirement carefully, get expert advice


In closing, we stress again how important it is to do your homework on the business of retiring overseas well before you put down a deposit on a house, or even choose your location. 


And it’s worth considering renting a home first before you decide to buy – the reality of living in a new country can be very different to what you had imagined. 


For the last word here, we’ll turn to Noel Coward, who, possibly without meaning to, made an elegantly-reasoned case for retirement planning in 1956: “How foolish to think that one can ever slam the door in the face of age,” he said. 


“Much wiser to be polite and gracious, and ask him to lunch in advance.”