What Should I Consider Financially If I Want to Retire Abroad? 

What Should I Consider Financially If I Want to Retire Abroad? 

Retiring abroad is an increasingly popular choice for many individuals, with more than 443,000 retired workers choosing to spend their golden years outside of the United States as of 2021. The appeal of new experiences, a different lifestyle and often a lower cost of living can be enticing. However, it’s essential to consider the financial implications of such a decision thoroughly. At Prosper Financial, we are committed to helping you navigate through these considerations so your retirement dreams become a reality without unnecessary financial complications.

Assessing the Impact on Your Taxes

One of the primary financial considerations when retiring abroad is the potential impact on your taxes. Moving to a country with a lower cost of living might seem appealing, but it could lead to increased tax liability. It’s crucial to consult with a U.S. tax professional before moving and find a local tax advisor in your destination country as well.

Countries like Costa Rica, Panama, Portugal, Malta, and Ecuador offer attractive tax breaks for retirees. However, most Americans will continue to have a tax reporting obligation. For individuals planning to work or freelance during retirement, the foreign-earned income exclusion could allow you to exclude up to $120,000 from your taxable income in 2023.

Understanding Retirement Distributions and Income Tax

If you plan to tap into your stateside 401(k) or traditional IRA, expect to be taxed on that income unless there’s a tax treaty in place. Taxes may also apply to Social Security income and U.S. rental income. It’s important to understand these complexities and learn how retirement distributions will be taxed abroad.

Planning for Healthcare Costs

Access to quality healthcare is a significant factor in retirement planning. Medicare doesn’t always cover foreign medical services, so it’s vital to plan for healthcare costs and services abroad. Countries like Portugal and Costa Rica are known for their excellent healthcare systems, but it’s essential to research your destination country thoroughly.

Estate Planning

Before moving out of the country, updating your will, health care proxies, trusts and powers of attorney is necessary. Partnering with a professional who understands local laws in your new country can plan so that your wishes are carried out if you pass away outside of the U.S.

The Role of Prosper Financial

Careful financial planning is crucial for your desired retirement abroad. While retiring overseas can offer exciting opportunities, it also presents complex financial challenges. At Prosper Financial, we believe that money is a tool that can lead to new opportunities. We are dedicated to helping our clients plan for their financial goals at every stage of life, including retirement. With our years of experience in financial services, we are equipped to address your needs today and in the future. From wealth management to estate planning, we can help you organize your financial planning options before you retire abroad.

We are ready to help you navigate these challenges and pursue your retirement dreams. Contact us today to start planning your financial future.