"There's no place like home." Writer John Howard Payne coined that expression in his 1822 song "Home, Sweet Home." Judy Garland memorably avowed the sentiment as Dorothy Gale in The Wizard of Oz (1939).
Now, a growing number of American retirees are claiming the incomparable place they call home is not the United States but countries like Belize, Ecuador, Panama and Malaysia.
Seeking sunny climes and an affordable cost of living, hundreds of thousands, if not millions, of retirees have relocated to such exotic locales to spend their golden years basking amid rainforests, caves and volcanoes, according to Kathleen Peddicord, publisher of a website Live and Invest Overseas.
"It's definitely a trend and expanding quickly now," says Peddicord, who has covered the overseas retirement beat for 30 years and lives in Panama City, Panama.
While there is no official figure on the number of people retiring outside the U.S., the Social Security Administration now sends benefits to approximately 500,000 foreign addresses and bank accounts. But that's only part of the story, because many if not the majority of expats have their benefits direct-deposited to bank accounts in America.
"Most people living overseas continue to manage their retirement income through a U.S. bank account," says Peddicord, citing anecdotal evidence.
One factor accelerating the pace of expat retirement and making it a more realistic option is the Internet, affording a super-easy way to keep in close touch with family and friends back in the States.
Changing economics, however, is perhaps the underlying, main reason to retire overseas. Americans are unsure of Social Security's future, and fewer are retiring with pensions and substantial equity in their homes. In short, retirement nest eggs aren't what they had envisioned, so the plan of retiring to Scottsdale or Palm Beach is more-or-less kaput.
In contrast, by moving to any of a number of foreign countries, folks get a comfortable retirement and even an adventure. The notion usually stems from budget panic, then blossoms into a fun idea.
"It used to be considered quirky and crazy," Peddicord says. "But when people open their minds, they quickly see that this can make the difference between counting down, 'How many more years do I have left? Do I have enough money?' and 'Hey, if move to Cuenca, Ecuador, the money I have will last many, many, many more years compared to living in the U.S.'."
Whoa! Fantasy is one thing, reality's another. Retiring to a foreign country shouldn't be an impetuous act. Moreover, the process is complicated. There are three broad aspects to consider—financial, legal, accounting.
And, of course, the availability and quality of health care is a paramount concern. Tax liability can be a big issue; likewise, the extent to which English is spoken in the new country. Easy access to the U.S. to visit grandkids and for major health care is a requisite for many retirees. Oh, and there's the psychological angle: how well one deals with change and the facility to create new social connections.
But, certainly, if a couple cannot realize their retirement dream of scooping up beachfront property in, say, tony Newport Beach, Calif., they may be able to afford it in Mexico or Panama.
"They can have their place in the sun. They get to spend their remaining years in a home that looks out over the ocean. They're close to the U.S. Retiring to another country can be an attractive alternative," says Rich Hogan, managing director of investments at Merrill Lynch in San Francisco, who has several clients that have retired overseas.
If clients already own a second home in the country to which they want to retire, that obviously makes the move easier: They know what they're getting into. If not, Hogan recommends a test run. Rent a place for a few months or so—during the worst-weather season. Then decide: Like it or lump it.
Getting Ready
Once the big decision to relocate is made, key to making the process as painless as possible is to take care of most nitty-gritty prior to moving.
Investment portfolios can be left in the U.S. and handled by the existing financial advisor, who'll help coordinate the relocation process, then communicate with the client ongoing via email and/or Skype.
"Everything is virtual now, so it's not necessary in this day and age to have an advisor in the new country. It could be a want, but it's definitely not a need," says Cary Carbonaro, managing director of United Capital, based in Huntington, N.Y., and Orlando, Fla. Expat retirement is becoming a popular idea with her clients, she says.
For a start, keeping the client's existing advisor can minimize disruption.
"This is someone that understands your goals and objectives. And you won't have to sell all your assets and pay a bunch of taxes [by changing to a local advisor]," Hogan says.
He paints this scenario to lock in reliable cash-flow: "You'll probably be drawing down from your portfolio, so we're going to change the allocation to ensure that money is there when you need it and set the amount to make sure it gets wired at the first of every month. We recommend having a banking relationship in the country of domicile as well as one in the U.S. so that funds can be wired and cash accessed locally, as needed. Failure is not an option when you're living on a fixed income in a foreign country," Hogan says.
