6 Ways Living Abroad as a US Citizen Can Hurt Your Savings Before Retirement
Written by
Vance Cariaga
Edited by
Daria Uhlig
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Living abroad is on the bucket list for millions of Americans, whether they want to experience a different culture or advance their careers. The expat life has numerous benefits — which is why many American expats decide to remain overseas in retirement. But it also comes with many challenges.
Among the latter is the fact that you could come up against expenses that can drain your savings in a hurry. For U.S. citizens living overseas, it’s useful to familiarize yourself with the different ways living abroad can hurt your savings before you retire. Here are six things to keep an eye on.
Moving Expenses
Unless an employer pays for your move to a new country, you’ll face steep costs shipping items overseas or across borders. Once the items arrive, you’ll need to hire a company to move them into your new home. It will require only one move if you already have a place lined up. But if you first need to find a place to live, then you’ll have to pay for temporary storage — and that can get expensive in crowded foreign cities where space is at a premium.
Living Expenses
Although many foreign destinations have much lower costs of living than the U.S., some don’t. If you find yourself living in pricey overseas cities such as Hong Kong, Zurich, Tokyo, London or Seoul, your living expenses will take a big chunk out of your savings.
International Transfer Fees
Digital money transfers are a lot faster and easier than the wire transfers of yesteryear, but as the Expatica website pointed out, these services “often come with high transfer fees and unfavorable exchange rates.” That’s a problem for expat Americans who need to frequently move money between their new country and the U.S. Spending a lot of money on transfers hampers your ability to save for retirement.
Identity Theft
This is a problem everywhere, including in the U.S., but it’s an especially big problem for expats. “Many expats maintain financial accounts in multiple countries, giving criminals more possible points of entry,” according to American Express. Identity theft can get very expensive if the criminals access your bank accounts and steal your money along with your identity.
Visa Runs
The term “visa run” refers to having to travel out of the country every so often so you can receive a new visa upon arrival. If you are required to do this often, the traveling costs alone can hurt your savings.
Taxes
Taxes on savings accounts, pensions and investments are handled differently overseas than they are in the U.S. For example, if you live in the U.K., you must pay taxes on foreign pension payments, Expatica noted. This could lead to double taxation for American expats participating in a non-qualified foreign pension plan.
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