When thinking of retiring abroad, people imagine days filled with walks by the coastline, fishing and plenty of other outdoor activities, but settling down in an exotic foreign country is not for everyone. Eurostat figures from 2011 show that only 5.1% of people over the age of 65 in the EU moved from one country to another.There are many hurdles and barriers to be investigated and taken care of, before you sail. For some, retiring abroad can be the best thing they ever did. For others, it might be a complete disaster.
Everything is cheaper
The food is delicious, the beer is cheap and everything just seems so much better value. But many things that don’t matter while on holiday can heavily impact your budget when living there. Hidden expenses add up and this is particularly true of low-cost countries where local items are relatively cheap but imported items are usually not. There are numerous decisions to make when you decide to move abroad: do you rent or buy, do you bring your own furniture or start from scratch? Most of us would like to think we make decisions based on cold hard facts but, more often than not, our decisions are swayed by the way a choice is presented. Beware of the framing effect.
Mundane tasks that you tend to ignore on vacation can become essential when you live there. Are services like electricity, water, telephone and internet reliable? Simple things such as getting your visa, opening a bank account or bringing your pets over can become a headache
When weighing whether to relocate, there may be a tendency to look for information that supports your decision. Confirmation bias can be the result when you stumble on all the retiring abroad literature all at once.
Research suggests that the meaning of happiness changes depending on your focus. If you’re focused on the future, which many young people are, happiness is about excitement and experiencing new things. But if your focus is the present, which is usually the case as people get older, you may associate happiness with being calm and content, surrounding yourself with what’s familiar. In other words, those who retire abroad for the adventure may overlook the fact that their choice may mean leaving their family and other loved ones behind – friends, children and grandchildren.
Can your finances handle the uncertainty?
Many countries that are cheap to live in suffer from political and economic instability. And, so the risk of currency devaluation is never too far. At times, that might mean you get more bang for your buck but don’t get trapped by the money illusion.
Exchange rate fluctuations can also mean that if you have a house or other assets, they can lose value very quickly. Think back to the pain of Britons living in Spain when the pound fell dramatically against the euro amid the most recent financial crisis. So do keep enough money aside for an emergency fund.
Health care and wellbeing
Healthcare is important to consider when thinking of retiring abroad. Even if you don’t need medical help right now, chances are you will one day. How much will local healthcare cost, and will it meet the desired standard? Some countries offer universal healthcare at a reduced cost, such as France, Spain and Italy, while other places like South Africa and USA have an insurance system.
A third of Britons living in France are over the age of 60 and rapidly approaching retirement age. This inevitably places pressure on the French health system. Spending your golden years in a country where there are more people of working age compared to the number of elderly, in other words a country which has a low old-age dependency ratio, could mean access to a less pressurised health system.
Retiring abroad can have a huge effect on your tax situation and if your home country does not have agreements with your chosen destination, in a worst-case scenario you could be taxed twice on the same income. But in most circumstances, your tax liability simply follows you to your new country.
Lack of local knowledge and language
Mundane tasks that you tend to ignore on vacation can become essential when you live there. Are services like electricity, water, telephone and internet reliable? Bureaucracy and legalities can be a tiresome shock to the system. Simple things such as getting your visa, opening a bank account or bringing your pets over can become a headache.
An inability to speak the local language can seriously hamper your social life too – being an outsider can be a lonely experience. Many people find it difficult to forge relationships with locals and end up isolated and retreating to a community of other foreigners or “expat bubble”.