Retire Abroad Planning Guide

If you think you might like to retire abroad and would like to learn more about what you should be thinking about, then this planning guide is for you.

If you found your way here, then I already know a few things about you:

1. You have a sense of adventure, and are willing to think outside the box when envisioning your retirement.
2. You probably hear at lot of people tell you that you’re nuts. (just own it)
3. Like me, you likely feel overwhelmed by the number of factors and considerations involved in planning for retiring abroad.^*

It can be a lot, but it is manageable if you take it one at a time. In this article, I will review the things you should consider if you want to retire abroad, and I will use my goal to retire in Portugal to provide specific examples.

^* Check out our retirement-planning guide for even more help with planning your retirement.

Considerations if you Plan to Retire Abroad

• Safety
• Healthcare
• Cost of Living
• Climate
• Quality of Life
• Language
• Culture/Community
• Travel Opportunities
• Moving
• Taxes
• Currency Risk

As Americans, many of us were brought up with the notion that the United States leads the world in most or all of these categories. As we have grown older, more educated, and better traveled, we have learned that although America is a great country, there are always trade offs to living in any country. Knowing this, it is helpful to take a pragmatic approach to planning in which you decide what considerations are most important to you in order to maximize your individual goals.

Safety Considerations for Retiring Abroad

One of the most important considerations to retire overseas is personal safety. For many, there is an assumption that if you retire abroad you are inherently less safe than staying in America. It might surprise you to learn that the United States is not among the safest countries in the world.  According to the Global Peace Index, it is not even in the top 100. By contrast, if you were living in Portugal as an expat, you would be residing in one of the ten safest countries in the world.

It is important to research and understand the overall safety of any country you might be considering settling in.  The OECD Better Life Index can also be a useful tool for evaluating this important factor.

Healthcare Considerations when you Retire Abroad

Another critical consideration for people who retire internationally is access to, cost, and quality of healthcare.  In the United States one of the primary concerns is the rising cost of healthcare.

Outside of the United States, many countries have high-quality healthcare systems with care available at a fraction of the cost. In many cases (including Portugal), an American expat with residency in a given country will gain access to nationally-funded medical services. American expats who retire abroad often choose to purchase affordable private health insurance as well. Numbeo provides a health-care index which you can use to evaluate the cost and quality of healthcare in different countries.^*

* Look for future posts discussing detailed healthcare options for American expats in Portugal, and refer to our retirement-planning guide for posts about Medicare and U.S. healthcare.

Cost of Living

One of the primary drivers for many Americans wanting to retire in another country is the cost of living. You have likely read about the American “retirement crisis” stemming from many retirees having insufficient savings to cover retirement^*, combined with rising inflation, housing costs, and other negative factors. For many Americans, living in a country with a lower cost of living can provide a potential solution to these challenges.

Numbeo is a great resource for evaluating the cost of living in a given country, incorporating costs for consumer goods, rent, groceries, and restaurants. They also provide a comparison tool which can help you compare the cost of living between two places (ex. your city in America, and your target city abroad).

^*Check out our retirement-planning guide for help with planning your retirement budget.

Climate

Whether you like sun or snow, or even rainy days, the climate at your target retirement spot is likely an important factor to you. WorldData.info is a great resource for understanding the climate in your target country. Here is the climate data from WorldData.info for Portugal:

Quality of Life

Overall quality of life is a somewhat nebulous consideration. It is influenced by factors that we discuss in this article, and it also means different things to different people. Nevertheless, there are some resources which can help you evaluate the potential overall quality of life in a given country.

• Numbeo maintains a quality-of-life index by country which incorporates factors like purchasing power, house price to income ratio, cost of living, pollution, safety, healthcare, climate, and even traffic commute time. Portugal currently occupies the 20th position on this list.
• The OECD Better Life Index takes a unique approach in which you rate the factors that are most important to you (housing, income, jobs, community, education, environment, civic engagement, health, life satisfaction, safety, work-life balance) which it then incorporates to provide overall rankings by country.
• A partnership between Gallup, Oxford, and the UN produces the annual World Happiness Report which provides a “happiness score” for each country. Keep in mind that your “happiness” as a retired expat may be influenced more strongly by different factors (ex. climate) than a native resident may find most important (ex. wages).

Language

One of the key considerations for those who retire abroad is overcoming the language barrier. Learning a new language can seem like a daunting challenge. Fortunately, there are many great options for dealing with this challenge.

• Many countries (Portugal included) offer government-sponsored language classes which can help ease your transition into your new community.
• Technology can help you get by while you are learning your new language. For a dedicated device, try the Timekettle T1 Language Translator which is the 2023 #1 pick of Travel and Leisure Magazine. Alternatively, try out Google Translate on your phone. iPhone users can also try the new Apple Translate released with iOS 14. Technology can also help you learn your new language. I researched language-learning apps, and I’m currently using Babbel to learn Portuguese.*
• Many foreign destinations have such large English-speaking communities that you can actually get by with just speaking English initially, which can help take the immediate pressure off and give you time to learn. But don’t cop out on learning the language; studies have shown that speaking a second language can help delay or lessen the symptoms of Alzheimer’s and other forms of dementia.

* Look for an upcoming post with more detailed reviews of language translators and language-learning apps.

Culture/Community

It is always a challenge to move someplace new. For me, moving years ago from the western part of the U.S. to the eastern brought different foods (steamed hamburgers, really?), new lingo (what the heck is a ‘package store’), and a different culture (what do you mean I can’t wear shorts to work anymore?). Retiring overseas can amplify those cultural challenges. You might have trouble adapting to your new culture, feel like you don’t fit in, or even that the local population looks down on you. The more you can learn and embrace your new culture, the easier your transition will be. Finding other English-speaking expats through Facebook groups or local meetups can also help you integrate into your new community. It is critical to visit and spend time in your target country to learn and understand the culture and people. Stay tuned for upcoming articles in this guide on how to do scouting trips to your target country.

Retire Abroad for More Travel Opportunities

This is my favorite consideration, and a leading reason that I decided to retire internationally. Many of us dream of traveling when we retire, but retirees are often limited in the amount of travel they can afford. Flights between the U.S. and Europe can be quite expensive. If you want to do a lot of European travel in retirement, those costs can quickly add up and limit the number of trips you can afford to take in a year. By contrast, if you are living in Europe you can fly between most major European hubs for a great deal less.

Within Europe, you can also take trains or just drive which can be especially great options for families. Combine this with all the exciting local exploration you can do in your new home, and you have endless travel opportunities which can be much more budget-friendly to your retirement.

Moving Considerations

“Moving is fun” said not one person, ever. The process of moving is difficult, stressful, and expensive. Moving abroad, as you might imagine, brings with it its own set of challenges. The good news is that there are companies and infrastructure in place that can make moving between countries not all that different from moving across the U.S. (aside from cost obviously). William Russell provides a useful relocation calculator that can help you get an idea of what you are looking at. Reading through Facebook groups about approaches that other American expats have used can also be helpful in planning and executing the big move.^*

* Look for upcoming posts in this guide with additional moving resources as I get closer to the planning stage of my own big move.

Tax Considerations for those Who Retire Abroad

Taxes are complicated. Taxes for a retiree abroad are, well… even more complicated. As a U.S. citizen you are required to pay U.S. income tax even if you live full-time abroad. Depending what country to settle in, you are likely subject to additional tax rules specific to your country of residence. The IRS provides information about U.S. tax rules for citizens living abroad. Taxes for Expats is a great resource for a high-level understanding of specific tax rules for your target country. These resources are not a substitute for consulting with a tax expert.

Currency Risk

One of the important considerations for those who decide to retire in another country is to understand how exchange rates between the U.S. dollar and the currency in your target country may impact your finances. You can find more information about managing currency risk here. This is also an important topic to discuss with your tax expert and financial advisor.

Summary

Whew, that’s a lot of things to consider. And that doesn’t even take into account more fundamental things like moving away from family and friends, and potential homesickness and loneliness as you adjust to your new home. But don’t forget, for every downside there are also corresponding positives such as the opportunity to meet new people, have new adventures, and a lot of personal growth. Hopefully this review of some of the key considerations for retiring abroad was helpful to you, and I hope you learned about some new resources that can help you plan for and execute your own big move.

It’s time for me to head out on my own scouting trip to the Algarve region of Portugal.  See you next time!