Don't Let These Expenses Spoil Your Retirement Abroad

By Claire Millard on 6 July 2016 0 comments

The relatively low cost of living in countries like Mexico, Thailand, and Spain makes them popular destinations for retirement. Your fixed retirement income goes further here, affording the possibility of a little luxury, as well as adventure in your later years.

Standard of living, climate, and culture are all massive draws, but retiring abroad can also come with unexpected bills. Take, for example, medical costs, taxes, inheritance restrictions, and house buying fees which are completely different to home. While the everyday cost of living might be favorable, these "one off' costs can stack up.

Here are some specific (and perhaps unexpected) bills to watch out for.

Assets and Visas

In order to get a visa as a retiree, you will need to demonstrate that you have the income or assets to support your lifestyle. Because it is assumed you will not work (you're retired, after all), the visa type may prohibit you from taking on employment to supplement your income — making your pension or other assets absolutely crucial.

The amount required to get a visa varies from location to location. For example, to retire to Thailand you must prove you have a monthly income of around $2,000. Although this might seem low to those of us living in Western Europe or North America, this income is double that of the average Thai.

If retirement in Mexico floats your boat, you will need to prove you can afford it. A temporary visa which lasts for up to four years requires you to have an income of just over $1,500 a month, or just over $25,000 in the bank. A permanent visa, on the other hand, means you need over four times that in the bank, or a monthly income of over $2,500.

Exchange Rate Woes

Wherever you're headed, if you draw income or pension in one currency, and are planning on spending in another, then you need to understand and make allowances for exchange rate fluctuations. If not, you might find yourself with a hefty bill to pay.

For example, if you are planning on buying a house in your new retirement location, and will have a mortgage outstanding on it in a local currency, your payment might change significantly because of the exchange rate. Add in the potential fluctuations in mortgage payments due to interest rate changes, and you might struggle to predict exactly what your housing bills will look like on an ongoing basis.

If you own property in your home country, one option is to mortgage that property, and use the cash to buy outright in your adopted country. This means that the mortgage you will be paying is in the same currency that you draw income in, removing one source of worry.

The Cost of Good Health

For something that is truly priceless, keeping in great health can be pretty costly. Because a trip to the hospital can be relatively cheap in many popular retirement destinations, many expat retirees prefer to pay out of pocket for their health care as they need it.

Paying for health care is a personal decision, and depends largely on your ease of access to funds, and your attitude to risk. Be warned, though, that in some countries such as Thailand, hospitals have been known to turn away people who cannot prove their ability to pay, either with ready cash or valid insurance. Carry a credit card on you if you choose not to invest in an insurance policy here!

Home Sweet Home

Buying a new home is seldom stress free — and doing it abroad is likely to create some unexpected bills and charges. Make sure you're very clear on the costs involved.

Across Europe, for example, house buying comes with a whole range of fees which vary from country to country, and quickly mount up. Throw in the additional costs of having documents checked by a notary, or translated by an official translator, and buying somewhere to live can be especially pricey.

It is well worth keeping up with the local news in the country you move to, as your liabilities don't necessarily end once the purchase is complete. Homebuyers in Spain have been pursued for tax the authorities deemed payable on property bought up to a decade ago, because of the high numbers of overseas buyers taking advantage of the massive slump in prices. You might not be able to change unexpected bills like these, but at least you can be forewarned.

Part of what makes life overseas exciting is the opportunity to gather new experiences along the way. However, some of these differences can make life that little bit more challenging, too. Many of the costs associated with retiring abroad are unavoidable — but by being aware in advance, you can better manage the bills as they come in.

There's no substitute for your own research. If you're thinking of building a life abroad for your retirement years, then get your finances prepared, so you can enjoy peace of mind.

Are you planning to retire abroad? What do you think — does the lower cost of living outweigh the risk of financial surprises?

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