Should you retire overseas?

Does retiring on the cheap on some tropical island or in an exotic foreign city sound good to you? It's doable, at least according to numerous articles, books and conferences that are part of the developing industry that helps Americans retire overseas.

Just how many Americans are living abroad? According to International Living magazine, the U.S. Social Security Administration reports that nearly 614,000 Social Security checks were sent abroad in June, more than double the number delivered overseas in 2002. And that just might understate how many people retire outside the U.S., since many such retirees might continue banking domestically while accessing their accounts online.

With many baby boomers approaching their retirement years with limited financial resources, retiring to locations with considerably lower living costs may sound appealing. Some even claim you can live abroad on the money from your Social Security benefits alone.

So is retiring overseas for you? If you're adventurous and want a change, then maybe so. But keep in mind that the glossy brochures and other pitches produced by the overseas retirement industry are often closer to advertisements for vacations, rather than hard facts on the realities of day-to-day living in some far-flung locale. Whatever the excitement of living in a new place, it's important to understand the difference between vacationing for a limited period of time and living in another country for 365 days per year.

In short, to state the obvious: Do your homework. Make sure the money math really works. Consider the long-term impact on your emotional life. And have an end game in mind.

The day-to-day living costs overseas can indeed be much lower than what it would cost to live in the U.S., if you take into account rent, utilities, food, transportation and medical expenses. But it's also essential to look beyond your monthly budget to other costs that may pop up.

For example, do you want to return home for scheduled visits with family and friends? What about the unexpected travel costs for events such as family emergencies or funerals for friends and relatives? What big-ticket purchases will you need, such as furniture and appliances? Will you be responsible for repairs on your lodging or cars? What demands can year-round weather have (be sure to go beyond considering what the weather's like during typical vacation periods). Look back over the past 10 to 20 years of your life, and think about the unexpected costs that you incurred -- they can offer a clue to possible expenses you might need to consider.

Arranging for medical care and insurance should be near the top of your checklist. Medicare coverage outside the U.S. is very limited, and you'll likely need to arrange for health care and insurance in your host country. Go beyond investigating how local medical services can help with minor illnesses and injuries. Think about what would happen if you or a close family member had a serious illness that required major surgery or a lengthy hospital stay. Would you feel comfortable obtaining such treatment in your new host country? For many people in their retirement years, a serious illness is not a matter of "if," but "when."

Next issue to consider: spending lots of time away from your friends and family. Is that OK with you? And what will you do with your time once you've settled in? Living somewhere new can be thrilling for the first few years, exploring your new home and making all the necessary arrangements. But what happens next?

The retire-overseas industry often focuses on the grand adventures you'll have, but think about what you'll really do with the time you're not spending on these activities. What interests can you pursue? Is working or volunteering important to you? How will you feel when a close family member or friend back home needs help and support? Will you want to be there to help?

Finally, have a plan for the end game. Do you plan to return to the U.S. at some point, or do you want to spend the rest of your life overseas? What happens if you or your spouse or partner need advanced medical care that isn't available in your host country? And what happens when a spouse or partner dies -- would you prefer to stay there or return home to be with close family or friends? What additional costs would you incur by moving back, including the increase in Medicare premiums? And keep in mind that there are limited periods during which you can re-enroll in Medicare.

One strategy that could help address some of the challenges described here is to vacation for a few months, or even a year, in your desired location before choosing to leave the U.S. This can help you decide if you really want to stay for many years.

You might think it sounds boring to have to think of the practical details, including all the things that can go wrong, when you really just want to pack your bags and start your new life. I don't intend to be a killjoy. But you'll do better making a big move if you learn all you can first. And while the retire-overseas industry can provide a lot of helpful information, just recognize that these are businesses that are selling you something, whether it's a magazine subscription, a conference, planning services, or real estate.

I'm the type who enjoys my adventures more when my mind is at ease, knowing I've done my homework, including dealing with the curveballs life can throw. If everything -- and I mean everything -- checks out, then you might just want to give it a try.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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