Want to Retire on Less Than $1,200 a Month? Try Living Abroad

If you are not willing to get over the health care hump, which can be one of the biggest hurdles to a lower budget, then you need to stick to a major population center.

You can still cut costs and have an adventure by living overseas … but you’ll need to be somewhere like Panama City or Quito, Ecuador, or Montevideo [Uruguay].

In other words, if you want first-world health care, you are not going to be able to retire on $800 a month. But with $1,200 a month, there are many good options, and you don’t have to be so remote.

Why are so many people interested in living abroad today?

There are so many factors behind this. First, there’s a big and growing population looking for the best possible way to retire.

The Baby Boomers are a huge force. They want the best retirement options and look carefully to identify them.

Also, they see threats to Social Security, have questions about the costs of Obamacare, and face high-cost assisted living and retirement communities. Decent housing is very expensive in the United States, as is health care.

Look at all the other cost factors. Maybe you’ve lost equity in your home or your retirement portfolio has been hit or isn’t what you expected. Then there are the worries over Social Security on top these concerns.

People are better traveled, healthier, better educated and more interested in living overseas than ever before. Some Baby Boomers may be fed up with the U.S. government and worried about their financial future, so they decide to try something else. They are asking themselves, why not opt out and have some fun?

As people, especially from areas like the Midwest, ask this question, a very interesting migration is taking place.

What do you say to some of your clients about their relationship with their financial advisors as they move overseas?

We encourage them to keep this relationship.

Of course, when some people move overseas, they choose to break all their ties and cash out their portfolio, business assets, etc.

Much more common, however, is a compromise approach. They move overseas part time, say to Belize, and spend half the year in Florida with their grandkids. They might keep some of their money overseas in a foreign bank account.

With financial matters, there needs to be diversification. There’s no 100% guarantee with anything.

To deal with that …  we recommend that investors not take all their assets with them. The key to success is diversification: keep some presence and assets in the United States, which for some investors means maintaining their relationship with a financial advisor. There’s generally no reason to walk away from that.

I also recommend working with that advisor to diversify what you have, so you have some holdings in foreign markets and currencies and are not 100% at the mercy of U.S. markets, politics, etc.

It’s also important to maintain a relationship with an accountant or tax consultant in both places. When you move to a new country, your U.S. tax burden may be reduced. It depends on lots of factors, but discussing this with two tax experts is helpful.

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Check out Top 10 Best Foreign Countries for Retirement: 2013 on ThinkAdvisor.