"All that glitters is not gold…. Gilded tombs do worms enfold," Shakespeare cautioned in "The Merchant of Venice."
The Bard might well have been warning of potential problems in retiring to enticing foreign locales like Portugal, Ecuador or Thailand, realms ballyhooed for cost-savings and relaxation in the golden years.
Retiring overseas is a splendid idea, but ever hear of the Financial Crimes Enforcement Network Report 114 (F-Bar)? Retirees abroad who hold a foreign bank account or accounts with an aggregate balance above $10,000 must file an F-Bar. Intentional failure to do so will result in stiff penalties: the greater of $100,000 or 50% of the balance.
That's just one potential problem that could turn a dream retirement into a horrific nightmare. Smart advisors can play an important role in helping to avoid such nasty surprises.
"Financial advisors will need to have more of a hand in their clients' retirement abroad. They must expand their knowledge and skill set to help clients understand all the issues and collaborate with the family physician to meet retirees' needs," says David Vequist, founder of The Center for Medical Tourism Research and a business professor at The University of the Incarnate Word in San Antonio, Texas.
Many retirees who move overseas get a rude awakening when it comes to the critical matter of health care or basic amenities and diversions, like cultural attractions and sports. There's no place like home—and this new home, they find, is distressingly different from the one they left.
To avoid such woes, advisors should try to help clients obtain as much information as possible about their intended retirement destination before relocating.
The first step, of course, is selecting the country. Clients need to prioritize their three or four most important lifestyle "musts" and not compromise on any one of them, says Kathleen Peddicord, publisher of the online Live and Invest Overseas.
"A place might have beautiful beaches, great weather and affordability—but if it's lacking one of your top priorities, keep looking," advises Peddicord, who has lived in Panama for a number of years. "Find the place that matches the lifestyle you want. Compromising on that very short list is how to be sure [foreign retirement] won't work because you'll miss those things too much and be unhappy."
Lack of communication can be a bummer that will make life miserable.
"If you don't speak the language of the country you're in and there aren't a substantial number of people there that speak English, you'll have a tremendous problem just going to the grocery store," says Art Koff, founder of the website RetiredBrains and author of the e-book, "Lifetime Planning Guide: Resources for Boomers & Seniors" (RetiredBrains, 2015).
Health Problems
Beyond language barriers, a major issue, if not the No. 1 issue, is access to quality health care. Internationally, such care varies widely. Brief country-by-country information can be found on the U.S. State Department's website State.gov; for instance, in Panama "medical facilities are limited" beyond Panama City.
Rather than relying on publicly funded health care, FAs should suggest that clients sign up for health insurance from private providers. Unfortunately, this will reduce their expected overseas-retirement cost-savings.
But even in England and Canada, patients of the publically funded system are often forced to wait at least six weeks for a doctor's appointment or an MRI or CT scan, according to Vequist.
Medicare coverage is not available in foreign countries, but many folks relocate abroad partly because health care costs are lower than in the United States. However, international costs are rising faster than those in the U.S., Vequist says.
"Within 10 years, countries around the world are going to have much more expensive health care systems than they do now," he notes. "So, if someone says, 'Yay! I'm getting my health care in Latin America because it's cheaper,' in 10 years they may go, 'Wow! Costs have gone up quite a bit here, but in the States they haven't risen as much.' So health care spending power has been lost."
Prescription drugs are another worry. Some countries, especially in Asia, such as China and India, are rife in pharmaceutical counterfeiting. For example, you may think you're getting Viagra, but those tablets are made of drywall. Moreover, in some countries—like Mexico and Ecuador—pharmaceuticals are available without a physician's prescription. With no doctor or pharmacist input, patients can experience severe, even fatal, side effects from medications that interact negatively.
Even though Medicare is of no use in a foreign country, it is advisable to maintain coverage should a serious condition warrant treatment in the States. Premiums will continue to be deducted from Social Security benefits.
"Giving up your Medicare because you don't want to spend the money is not a good move," Koff stresses.
Safety Concerns
Personal safety in the idealized retirement locale is of course a deep concern. Risk typically rises with crime rate, and a number of countries are also sites of protests and violent political uprisings. Americans retiring to certain areas of, say, Latin America and Central America, or many European countries, may well encounter upheavals.
"It would really suck if you decided to live somewhere, and suddenly there was rioting and shooting in the streets, and people taken hostage—and there weren't indicators ahead of time to tell you not to move there," Vequist says.
Up-to-date travel alerts can be found on the State Department website. Right now, for example, there are warnings of "continued risk of terrorism" in Thailand—among many other countries—and that Mexico and Honduras are dangerous destinations.
"Certain areas of Mexico that 20 or 30 years ago were safe are not today," because of crime, Koff notes. "You would be ill-advised to retire to Acapulco. Years ago it was the place; now it's not a safe place.
Money and Taxes
