Many current and soon-to-be retirees still struggling from the Great Financial Crisis have decided to pack their bags and spend their golden years overseas, according to a new survey.
Travel Market Report, an online business publication, reports as many as 3.3 million American Baby Boomers are planning to retire abroad.
According to the Social Security Administration’s annual statistical supplement about 350,000 American retirees receive Social Security benefits outside of the United States. The hot spots they have chosen most often include Canada, Japan, Mexico, Germany and the United Kingdom.
Sally Balch Hurme, author of Get the Most Out of Retirement: Checklist for Happiness, Health, Purpose, and Financial Security discussed with FOX Business what you need to know about retiring abroad.
Boomer: How do I find out about health care in another country? Will my Medicare benefit cover me outside of the U.S.?
Hurme: Your Medicare coverage will not be available outside of the United States. Medicare supplement (Medigap) plans other than Plans A and B will cover 80 percent of medically necessary emergencies that you need within the first 60 days you are abroad, with an annual $250 deductible and a lifetime cap of $50,000. Also, if you discontinue your Medicare coverage you may not be able to pick it back up, or you will have to pay significant increases in your premiums based on how many months you did not have coverage. Private insurance is available for international coverage, but be sure you understand any exclusions from coverage. Compare terms and prices among all available “expat” plans to get the coverage you need and can afford.
Depending on where you locate, if you become a legal resident you may be able to join the public health system or any private health system. Find out the options and requirements at the embassy before you leave. The embassy should have information about availability of care for chronic conditions, such as diabetes, as well as treatments for cancer, strokes, heart attacks and dementia.
Boomer: Is it hard to establish residency, and what is the cost of living like in other countries?
Hurme: Each country has its own requirements or restrictions on foreigners who wish to establish residency. It may depend on why you want to come to the country (to work, study, or retire) and how long you plan to stay. Some may welcome foreigners with special “retiree” visas; others may have restrictions on working or purchasing property. Some countries may require a health examination or criminal background check. You may need a written statement from a financial institution showing that you have a regular source of retirement or investment income. Countries typically require a minimum of $2,000 per person per month, although the amount could be higher or lower, depending on the country. Panama, for example, requires retirees to have an income of $1,000 to receive its Pensionado (Retired) visa. England requires those over the age of 60 who want to live there to have £25,000 annually to obtain an Independent Means Visa.
Other countries have different requirements. If you plan to stay more than 90 days in Germany, you should obtain a residence permit before you leave the United States. Germany requires a bank statement covering the last three months plus proof of medical insurance and a copy of the rental agreement where you will be living to obtain a temporary residence permit. This permit must be renewed annually. Later on during your stay you would apply for a settlement permit, which requires you to demonstrate basic knowledge of the German language, political system, and society, plus other requirements. Check with the embassy for the specifics.
Boomer: Will I need to pay taxes? If so to which country?
Hurme: You will need to pay federal and state income taxes in the United States on U.S.-based income, even while living abroad. You may get credit for the taxes you pay in the other country, but it is complicated. In addition to income taxes, find out what other taxes you may have to pay in the new country, such as property, sales, utilities, or municipal taxes. Be sure to get expert tax advice from a CPA or Enrolled Agent who specializes in international taxation issues.