Graying members of the U.S. population are seeking cheaper retirement locations frequently overseas.
Thousands of Americans have found happiness in retirement elsewhere, but a string of commercial enterprises present a simplistic overview of life abroad and may be setting up many retirees for disappointment and failure.
Promoting overseas retirement is big business. U.S. demographics suggest it will be even bigger. There are expensive seminars, publications, daily newsletters, clubs and consultants. That does not even count the many call centers and individual real estate brokers promoting various projects.
Life overseas can be rewarding, as expats here know. Other countries may not be as much of a bargain as expected. Yet thousands, even millions, are what are called expatriates. The Association of American Residents Overseas (http://aaro.org/) puts the figure at 6.3 million counting military. That is one of the two principal organizations that are advocates for overseas Americans. The other is American Citizens Abroad (http://americansabroad.org/). Both are based in Europe but have members all over.
These organizations are non-profits and not trying to sell palm-lined beaches and retirement homes. Many of the members are still at work in businesses overseas, and the issues important to these organizations are technical items like taxation for overseas Americans, citizenship issues, U.S. voting and the lack of Medicare benefits in foreign lands. They lobby Congress.
These seldom are issues mentioned by those fanning the desires of U.S. retirees for a place in the sun.
An example is International Living which made this rhetorical question in an email Wednesday: “Where’s the cheapest place to retire?”
“I’m talking about places where you can enjoy a very high quality of life — even a diplomat’s lifestyle — at a low, reasonable cost,” said publisher Jackie Flynn. The company runs seminars, including a recent one in Costa Rica, and publishes a magazine, emails and even videos. Expats here know that even in Central America prices are rising.
Then there is EscapeArtist.com, which promotes second passports, offshore banking and asset protection.
The most typical sales pitch is for a seaside cottage on a Caribbean or Pacific beach. This is most attractive for expats who never lived on the beach, which happens to be hot and not for everyone. That’s why in Latin America, as well as in Costa Rica, the national capitals and business centers, such as Caracas, Venezuela, are in the cooler hills.
Many retirees are happy at the beach. There is a steady stream of U.S. expats migrating from beaches to cooler highlands all over the world. There also are Americans living comfortably in the beach climate spending their days sport fishing, golfing, gardening and working on their tans.
Beach living points up the principal rule for those who seek to leave their own country for retirement elsewhere. The mandatory process is to check out the new location and rent before buying.
Americans have been conditioned to purchase rapidly a home in a new area. That might be because of decades of rising home prices or the chunk of cash that comes from selling a U.S. home. This may be an impulse that should be resisted particularly now that real estate is not skyrocketing anywhere. Several months each in different locations can be helpful.
Another problem is what can an expat do after spending a month seated on a veranda sipping chardonnay? Most beach communities, unless they are the expensive tourist locations, lack the infrastructure for recreations or even education. Medical case also can be a problem with the nearest hospital being kilometers up the road. And so, perhaps, is the chardonnay.
Another pitch made by glib promoters is that there are hosts of locals who speak English. That may be true, but to really know what is going on in a county, basic knowledge of the local language is a must. And if the retiree seeks a little income on the side, perhaps in a small business, language is even more important.
The good news is that the high school foreign language pours back into the brain in the right environment. For mastery and those devoid of the local tongue there usually are reasonably-priced classes. Some are targeted to older expats.
Those who opt for foreign residency quickly learn that the issues addressed by the expat advocacy organizations are real.
Uncle Sam wants his taxes under the government’s controversial worldwide income laws. That means taxes are due even on foreign earnings if they exceed $95,100 in a year. Most expats will have local earnings well under the threshold and only have to pay U.S. taxes on U.S. income. But then there is the matter of capital gains. Uncle Sam wants his cut even if the property is in Antarctica. Plus, as in Costa Rica, income earned in the country is subject to local taxation even if the wage earner is a so-called perpetual tourist who is not supposed to work anyway.
Then there is the matter of residency. Most foreign governments welcome U.S. expats, but they usually want some form of registration along with money. Countries differ widely on what they require, so close investigation is needed. This process may be several thousands of dollars.
Costa Rican expats know the complexities of obtaining residency here, and that is why A.M. Costa Rica suggests getting good legal advice and help.
Expats also have to pay close attention to the local medical system. Almost all will opt for private insurance and private health care even if the country has an extensive public system, like the one in Costa Rica. That is a budget item, as is air fare to visit the grandkids.
They say that a high percentage of U.S. expats return to the home country within the first five years. There are many reasons, but poor preparation is one. Then there is politics. Both International Living and EscapeArtist.com are stressing the financial instability of the U.S. government. Expats have to make sure they do not burn any bridges when they leave because Uncle Sam has a long memory.