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Friday, January 16, 2009

Stretching your Nest Egg by Living Abroad

More than 150 years ago a popular phrase urged Americans with unlimited financial prospects, "Go west, young man, and grow up with the country."

Today it's more like, "Go south, old man and you may outlive your money in Mexico -- or Costa Rica."

Retirement abroad used to be the purview of the well-to-do -- a luxurious reward of exotic locations, expanded horizons, prolonged travels and a life without schedules.

These days it's a matter of survival, or at least a rather drastic financial maneuver to make a dwindling nest egg last longer.

"It used to be divided between having an adventure and being able to go someplace affordable," says Rosanne Knorr, author of "The Grown-Up's Guide to Running Away from Home: Making a New Life Abroad."

"But I'm getting more and more questions about where are the most affordable countries you can go," she says.

In Central and South America, the cost of living is one-third to two-thirds what it is in the U.S., says Barry Golson, editor in chief of, who with his wife, Thia, authored the upcoming "Retirement Without Borders."

"You can have a little house with domestic help and gardening help and you get more for your money," he says. "That's useful for people who are facing tougher times here."

But there are trade-offs. You have to be willing to live in a place that likely has different standards, mindsets and policies. And you also may be quite a distance from family, friends and familiar surroundings.

"If you have family at home and have grandchildren, you really have to think twice," says Golson. On the other hand, he says, if you retire to "an exotic location, it may be easier to have them visit you." Especially if your new home doubles as a cheap vacation destination.

The Money Aspect

There are also two big money factors to consider: the exchange rate in the country you move to and the cost of living in the specific locale you're targeting. For example, with a tough exchange rate in France and Italy, retiring to Provence, France, (which includes such cities as Cannes, Nice and Saint-Tropez) or Tuscany, Italy, (Florence, Sienna and Pisa) is out for many people. But, if you have at least $50,000 a year in income, some areas, like Languedoc (just west of Provence) or Umbria (just east of Tuscany), may still be doable, Golson says.

Keep in mind that exchange rates change, so keep your options open, says Knorr. While the strength of the U.S. dollar made it relatively cheap to live in Europe a decade ago, today it's "exorbitant." One good trick is to check out the price of local rentals and homes, says Knorr. "Look at enough of them and you get an idea" of the costs of housing and standard of living, she says.

To consider this kind of move you need details -- and lots of them. Beyond the exchange rate, other important considerations include the standard of living, the access and cost of health care and health insurance, rental and food prices, culture, infrastructure, taxes on foreign retirees, whether you would be allowed to work part-time, the estate laws, plus the attitude toward foreigners in general and Americans in particular.

You want a good quality of life, access to first-rate medical care, and a country that is economically and politically stable.

You also need to learn as much as you can about the local laws and policies. Some countries make it easy for retirees by not taxing money earned overseas and allowing at least part-time employment for foreign residents. And, just in case, you might also want to learn about estate laws.

You can cover a lot of ground on the topic of moving abroad thanks to book stores, libraries and the Internet.

"The Internet is a fabulous tool," says Knorr, who recommends a good Web search to start gathering information.

Moving Abroad? Check Out:

• The CIA World FactBook -- Regularly updated and full of practical information on a wide variety of topics.

• The U.S. Department of State site -- Includes information on special warnings and health issues most countries.

American Citizens Abroad,,, and -- sites where ex-patriots and prospective ex-pats exchange information.

Be an astute consumer when it comes to your research, says Golson, who also suggests the "Retire in ..." series of books. "Beware of (online) outfits that give you good, useful information but the purpose is to sell you real estate," he says. And take the grain-of-salt approach if you communicate with strangers through online sites, too, he says. "You never know what the agenda is for anyone," Golson says. "Judge that the way you would anything else in life."

Nothing Sudden or Permanent

When it comes to real estate, move slow, if you move at all.

"Rent for at least a year," says Knorr. Not only will it give you a chance to "get the lay of the land," she says. But "in most countries outside the U.S., people tend to rent rather than own, anyway."

Golson takes that advice a step further. "Rent, don't buy," he advises. "Not only rent before you buy," he says, "but rent instead of buying. People get off an airplane and have stars in their eyes," he says. "They make a large purchase the way they never would in the U.S." In addition, he says, a good number of the Internet sites that provide relocating information to retirees are focused on selling local real estate.

Local laws may be very different from those at home. Some countries make buying or bequeathing property very easy, while others may decree that at a resident's death, everything reverts to the state, says Barbara Corcoran, author of "Nextville: Amazing Places to Live the Rest of Your Life." So it pays to do your homework. Or you might be able to swap homes with a local, says Corcoran. "It's a very comfortable way to get beyond the tourist image of an area and actually live there," she says.

Don't Forget Health Care

No one plans to get sick or have an accident. But what kind of facilities will your host city or town offer?

"There are certain pockets in certain countries that are well-known for good medical care," says Knorr. Mexico, for instance, "has excellent medical care around the big cities," says Golson. "But there is a certain risk if you're going to live up in the hills."

"A lot of countries have medical facilities where people are trained in the U.S.," says Knorr. Others don't. Locals and embassies can be good sources of information on local care, costs and access, she says.

You also want to look at the cost of medical care for a foreigner in the country.

Medicare won't cover medical costs if you're living outside the U.S. So find out if you'll have to pay for care out-of-pocket. Some countries make low-cost insurance available to foreign residents. Especially in Central America, "various countries welcome retirees, because retirees bring in dollars from the U.S.," says Knorr. In other cases, you may have to purchase an individual policy or set aside money to pay out-of-pocket.

But don't drop your U.S. medical coverage, either. "If you think you will ever come back to the U.S., you have to maintain health care coverage (here) or you will be stuck," says Knorr.