Some pros and cons of retiring abroad

By Becca Van Sambeck
Posted on January 10, 2024

Retirement is one of the most exciting phases in a person’s life, and for good reason: Suddenly, for the first time in decades — or maybe even ever — all your time is yours.

It’s an opportunity to try different things, embark on new adventures, or simply relax for once.

But where should you spend your time embracing the luxury of retirement? While plenty of people opt to stay in the same place, others seek more retiree-friendly climates when looking for the best place to retire.

Some even decide to make the most daring move possible and retire abroad. There are many reasons why making your change of scenery an entirely new country may make sense for you. But it’s not a move that will work for everyone.

Consider these pros and cons of retiring abroad.

Pro: The adventure of a new culture

There’s something fun and thrilling about being in a new environment — new sights to see, new foods to try, new people to meet. It can completely reorient your world to experience so many new things.

Plus, learning another language and adapting to unfamiliar cultural customs are great ways to keep your mind sharp and engaged when you don’t have work to focus on.

Con: Culture clash headaches

Of course, for some people, the adventure of living in a new country gets dull fast. Not knowing the language or the culture can leave you feeling alienated and craving the ease and comforts of your homeland.

You’ll need to consider whether you’d really like to embrace an unfamiliar culture or if you’d prefer just passing through on a trip.

Pro: The lower cost of living

In general, you’ll find it’s more affordable to live outside of America these days.

“The U.S. is becoming extremely expensive on an international scale. As an example, the cost of living in NYC is twice as expensive as Florence, Italy, where I live,” said Alex Ingrim, a private wealth manager at Chase Buchanan, who aids other Americans living in Europe with their financial planning. “Porto, a popular retirement destination in Portugal, is almost 65% cheaper to live in than San Francisco,” he added.

Spending your retirement in a place where you can stretch your dollar further is certainly tempting. After all, retirement does mean you have a finite amount of funds, and this lower cost of living will alleviate spending concerns.

You can have a lot more fun in your retirement when you can actually spend on things you enjoy instead of the basics.

“The difference in affordability means that people can retire earlier, travel more, and have more experiences at a younger age than they would traditionally plan for,” Ingrim noted.

Con: Missing typical U.S. amenities

However, that level of affordability comes with a cost, he added. While you’re certainly spending less on your living situation, you’ll likely find yourself in a smaller home without many of the everyday luxuries common in the U.S. — including air conditioning, central heating, private outdoor space and up-to-date appliances.

Local infrastructure may not “be up to American standards,” and it may be difficult for ex-pats to get used to the way local bureaucracies are run.

That means some will miss the convenience of life in America, even if it has a higher price tag. “While the U.S. is expensive, the amenities on offer and the ease of everyday administration are pretty unmatched,” Ingrim said.

Possible con: Tax liabilities

Depending on where you plan to retire, your tax responsibilities may become a massive setback.

No matter where you are in the world, a U.S. citizen or green card holder needs to pay U.S. taxes. But you may find an extra tax burden exists where you live.

“It’s important to consider that you may have a tax liability to another country if you are considered a tax resident there. The typical expectations of Americans around the taxation of Social Security and of Roth IRAs being tax-free may not hold true in your new country. Italy and Spain are good examples of this,” Ingrim said.

That’s why you need to consult with a lawyer and find out beforehand exactly how you’ll be taxed upon a move. It will directly impact the amount of money you’ll actually have.

You may find there isn’t much of a financial reward to moving after all, when you’re coughing up double the taxes.

The bottom line

We all dream of living abroad and starting an entirely new journey, and retirement may provide the perfect opportunity to do just that.

However, you need to determine if it’s truly the right move for you: Will you enjoy the adventure of living within a new culture? Or will the issues associated with beginning anew be too much of a hassle?

You also need to figure out your finances and determine how much money you’ll really be saving when residing abroad — including whether your taxes will become too much of a burden if you move to your dream country.

Before you go, speak with a tax lawyer based where you want to live, as well as other people based in that country, to get a sense of what you can expect when you make the leap.

If it makes sense personally and financially for you to retire abroad, you may find this phase of your life more magical than you ever expected.