8 Expensive Reasons You’ll Regret Retiring Abroad

Happy senior man and woman choosing apples to buy at market stall.
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Exotic, relaxing and, perhaps most important, seemingly affordable, retiring abroad is an alluring idea. It’s also not a totally uncommon reality. In 2022, there were 443,546 Americans receiving their Social Security benefits while living internationally, according to the Social Security Administration.

Retiring abroad can be wonderful. It can equate to empowering, fresh experiences, tons of new hobbies and unexpected indulgences thanks to the powers of the U.S. dollar over local currency. But it’s not as simple or straightforward as all that. Indeed, there are some expensive reasons to potentially regret retiring abroad.

What are they? 

Deceptively High Cost of Living

Perhaps the country you’re eyeing for retirement abroad has a much lower cost of living than where you are in the U.S. — but is this low cost of living expectation realistic for expats who may not fully understand the local housing market?

“Unfamiliarity with the local real estate market can lead retirees to overpay for properties or rent, unnecessarily boosting their living expenses,” said Nathan Fort, CFP, owner and founder at Vital Retirement Planners.

Visa and Residency Requirements

In most cases, you can’t just jet over from the U.S. to another country and set up residency there. You’ll need to go through a bureaucratic process in order to legally stay there as a retiree. Safely going through this process can be costly. 

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“The legal and administrative nuances related to visas, residence permitting and securing lending can add up, especially if you require legal assistance to navigate the immigration process,” Fort said.

The Smallest Legal Mistake Can Cost You Big

The laws and loopholes of a foreign country can be tricky to understand. Imagine, for instance, if you were relocating from another place to the U.S. You’d have so much to learn, and even the littlest error could amount to huge legal fees.

“Navigating the legal landscape of a foreign country can be daunting and one small step can cost a fortune,” said Taylor Kovar, CFP, CEO at The Money Couple and Kovar Wealth Management. “From obtaining the right visa to understanding property rights, there’s a myriad of regulations that can impact your ability to live comfortably.”

Potentially Higher Healthcare Costs 

One of the biggest considerations to make space for when retiring abroad is healthcare.

“While some countries may offer affordable medical services, the quality and accessibility might not be up to the standards you’re accustomed to,” Kovar said. “Moreover, as an expat, you might not be eligible for local health benefits, leading you to pay out-of-pocket or invest in expensive international health insurance. It’s essential to research the healthcare infrastructure and costs associated with your desired retirement destination to avoid unexpected medical bills.”

High Costs of Traveling Home

Just because you’re retiring in, say, Costa Rica, doesn’t mean you want to never leave that location. You’ll likely want to travel back to the U.S. to see family and friends. This comes at a cost.

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“There’s a monetary as well as an emotional cost of being far from family and friends that might lead to more frequent and potentially expensive trips back home,” Fort said.

Steep Tax Implications

No matter where you live in the world, if you’re an American citizen, you are subject to U.S. income taxes for not just domestic but “worldwide income” — “unless you qualify for certain foreign-earned income exclusions or tax credits,” Fort said. “These exclusions and credits have been very substantial to some retirees — enough to steer them into another country.”

Currency Exchange Rates

So, this one is a bit more complex, but must be factored in: currency exchange rate fluctuations.

“Currency fluctuations can also erode your savings faster than anticipated, adding ‘exchange rate risk’ as another obstacle to your retirement income plan,” Fort said. “Inflation, rising tax rates and market volatility make it challenging enough to maintain spending power in retirement. Currency risk adds another layer of significant complexity to an already complicated scenario.”

There Could Be Cheaper Alternatives in the States

If affordable living is your chief desire, consider that this may be more attainable — in some cases — in the U.S.

“Consider a ‘staycation’-type retirement by exploring lesser known or underrated destinations within the U.S.,” Fort said. “This approach eliminates many of the stresses of living abroad, allowing you to have more emotional bandwidth for savoring your retirement years.”

Make no mistake, retiring abroad can be both an affordable and fulfilling experience, but you really need to know all that you’re getting yourself into before you make the plunge. 

“It’s crucial to have a high level of clarity to be truly confident in the move,” Fort said. “Anticipate the cultural, physical, emotional, legal and financial challenges you are likely to face and create a plan to navigate them.

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