Retiring abroad is a trend that's not going away anytime soon. More than a half a million people are currently living outside the United States and collecting some form of Social Security benefits, according to December 2016 data from the Social Security Administration (SSA). What's more, more than a third of Americans say a move outside the U.S. is something they’d consider. Between the ever-rising cost of living and the difficulty of amassing sufficient retirement savings, it's small wonder that many Americans are looking ahead to retiring somewhere cheaper – and, perhaps, warmer.
That's why we're always interested in International Living's Best Places to Retire annual list. The 2017 study is based on 24 countries measured against each other on 10 factors: buying & renting, benefits & discounts, visas & residence, cost of living, fitting in, entertainment & amenities, healthcare, healthy lifestyle, infrastructure and climate.
Also considered on the publication's 100-point scale is safety: International Living says that "we only recommend locations that we can vouch for as being safe for expat retirees." We checked the list against the U.S. State Department Travel Warnings and mention any key findings below. The world being what it is, street crime is a problem in all the countries, as it is in the United States. But some have other issues you should know about.
Here are this year's picks – along with a step-by-step scenario for settling in foreign lands.
After reaching third place last year in the rankings, Mexico jumped to number one, just edging ahead of Panama. More than a million Americans live in Mexico, enjoying its lower cost of living, sunny days and proximity to the States. The weaker peso and strong dollar have made the cost of living even more appealing this year. Besides rock-bottom rent prices (Mexico’s housing market remains largely depressed from the The Great Recession) and high-quality, reasonably priced healthcare, seniors age 60 and over also enjoy money-saving discounts with the INAPAM Card, which helps savings stretch even further.
Mexico does still have issues relating to crime in certain states. Click here for the U.S. State Department's Travel Warning, dated April 15, 2016.
Mexico requires most immigrants to live in the country for up to five years before applying for dual citizenship, but the wait is as little as two years if you are a direct descendant of someone born in Mexico or in any Latin or Iberian country. Having Social Security or savings will qualify most American would-be expats for residency.
For more, read How Much Money Do You Need to Retire in Mexico?
Panama dipped down to second place this year (it claimed the top spot in 2016), but it’s still a great bargain for retirees. Pensioner discounts allow those living on Social Security to enjoy lower prices while not sacrificing the proximity to the States. Panama ranked 100 of 100, the highest of any country for "benefits & discounts." (See Retiring in Panama: The Pros & Cons for details). What's more, having the Panama Canal brings a high level of infrastructure and a broad international mix of people to the country that makes it especially easy for expats to fit in and feel comfortable. About 25,000 Americans do so now.
Panama also may have the world’s most enticing deal for American retirees. To qualify for Panama’s Pensionado Visa Program, you need only to prove that you have a minimum lifetime income of $1,000 a month, or $1,250 for a couple. There isn’t even a minimum age. Once you have your pensionado identity card, you can flash it to get a 50% discount on entertainment, 30% off on public transportation, 25% off airline tickets and more. The government even waives import taxes on the belongings you bring into the country. (For more, see 6 Reasons Why Americans Retire in Panama.)
Notably, the Pensionado program does not get you on a path to Panamanian citizenship. Panama has other visa programs that do, but they are aimed at entrepreneurs and investors.
Most people know that Ecuador’s located on the equator, but they don’t realize that the location makes its weather incredibly stable year round. A range of altitudes – from the Amazon Basin to the Andes Mountains – provides climate variety. Ecuador is home to a variety of man-made environments, too: modern cities, quiet villages, swank beach resorts. The Galapagos Islands are 600 miles from the coast, while whitewater rivers plunge through the interior.
The country’s westernmost city and largest coastal resort is Salinas, with oceanfront living, open-air markets and abundant restaurants. A couple can retire well on about $1,500 a month. Health care is affordable, and expats can choose from several local clinics, or travel to Guayaquil – about a two-hour drive – for a modern hospital.
Somewhere between 5,000-10,0000 American expats live in Ecuador. (Read more in Retire in Ecuador with $200,000 of Savings?)
4. Costa Rica
Costa Rica is a popular vacation spot for many Americans, but many are finding enough reasons to stay year-round. thanks to its numerous beach towns, rainforests, volcanoes, friendly ticos (the locals) and low cost of living. For the active set, there are also lots of adventure activities, including whitewater rafting, canopy tours and nighttime rainforest hikes, to name a few. Cheap rentals (less $1,000 a month) means retirees can enjoy their lifestyle without sacrificing the basics.The country sits within the tropical zone so residents enjoy a tropical climate year-round. Parks and protected areas – which cover about 25% of Costa Rica’s land area – help protect the country’s extensive biodiversity.
It's easy for most retirees to get residency permits and the healthcare rates second to best in the IL survey – 96 of 100. What Does It Cost to Retire in Costa Rica? will give you the details. Costa Rica ranks as one of the safest countries in Latin America, too.
Couples can live more than comfortably in Colombia on less than $2,000 a month. What's more, it's in the eastern time zone and Florida is just three hours away by plane. (For more, see 4 Reasons Why Americans Retire in Colombia). Colombia’s place on this list might surprise people worried about its history of drug cartel violence, but its decreasing crime rates mean it’s a generally safe destination for vacationers and retirees. Despite this (and recognizing the improvement), the U.S. State Department still issued a Travel Warning for Colombia on April 5, 2016, replacing an earlier one from the previous year.
As the only Asian country on the list, Malaysia offers high-quality food, four UNESCO World Heritage sites and a frugal cost of living. It's also one of the few places in Southeast Asia where you can buy property freehold (Hong Kong and Singapore are the other two, says International Living). And it rates top of the survey (97) for healthcare. Retire in Malaysia with $200,000 of Savings? will give you more reasons. The U.S. State Department has security information, but no Travel warning for Malaysia. Containing about 8,000 Americans, Malaysia is also home to lots of British and Australian citizens, so English-speakers won't feel isolated.
The 18th-century city of George Town is a top pick for retirees, with attractions that include a dozen museums, jungle parks with secluded beaches and amusement parks. Expats get together regularly for club activities, healthcare is first rate and public transportation is modern and efficient. A 900-square-foot apartment in an “expensive” part of George Town will cost about $480 per month; to hire someone to help keep the apartment clean, under $4 an hour.
Other Malaysian possibilities for retirees: Kuala Lumpur, the bustling capital, and Johor Bahru, a city that, according to Lonely Planet, has been replanted and repaved and is being “rebranded.”
Spain claimed ninth place last year, but has increased its rankings this year. Travel within Europe is inexpensive, and if you live within a smaller city, your dollars will go far. How Much Money Do You Need to Retire in Spain? will tell you how far and The Top 5 Retirement Cities in Spain will tell you where. At 98, Spain topped the list for infrastructure and rated 90 for both entertainment and healthy lifestyle. As for security, the State Department notes that "all European countries remain potentially vulnerable to attacks from transnational terrorist organizations," but has no particular warning for Spain.
Spain has eased its dual citizenship requirements for descendants of any of the 300,000 Sephardic Jews who were expelled from that country during the Inquisition.
A low cost of living, beautiful beaches and relative closeness to the U.S. make Nicaragua a choice for retirees who can’t afford to stay in America (see 6 Countries Where You Can Live Off Social Security). Only Cambodia (99) rated better for cost of living than Nicaragua (97). In recent years the country has become more comfortable and modern, though there are still problems with crime and security, as well as an "authoritarian" government that "limits freedom of expression and peaceful assembly," according to the U.S. State Department.
If you want to be close to Spain but spend even less money, Portugal is a perfect pick, and relatively undiscovered Around 2,000-3,000 U.S. expats call it home. The other occupant of the Iberian Peninsula offers potential retirees a comfortable lifestyle, complete with sandy beaches and mountains (only a few hours apart!) and ample amounts of seafood. Low real estate prices make it easy for a couple here to afford a middle-class lifestyle, even living on a budget. At 82, Portugal has the lowest cost of living of the European countries in the International Living list (Spain is 78 and Malta, 77). How Much Money Do You Need to Retire in Portugal? will give you the details, as will the Top 4 Retirement Cities in Portugal. Portugal shares Spain's citizenship privilege to Sephardic Jews' descendents.
The European island chain of Malta, located in the Mediterranean between Sicily and North Africa, is a hidden treasure. Retirees can expect 300 days of sun per year and 7,000 years of history to explore, plus lots of beach activity. It's a quick flight to Paris and a three-hour ferry to Sicily. Healthcare is excellent and cheap, and Malta rated the highest of the group (92) for ease of fitting in. One reason: English is one of the country's two official languages, along with Maltese. Malta belongs to the EU and shares the same security issues as Spain and Portugal.
Some More Popular Places to Retire
In addition to International Living's list, there are lots of sources advising retirees where they should go if they decide to relocate abroad. But where are retirees actually flocking, based on where they collect their Social Security checks? The answers just might surprise you. Here, in order of popularity, are the five countries that are seeing the biggest influx of Social Security recipients who prefer retirement on foreign shores.
We've already discussed Mexico's advantages. As for the others: While life in capitals like Tokyo or London can be quite pricey, housing and other fundamental aspects of the cost-of-living in smaller towns and in the countryside is often lower than in the U.S.– especially when you factor in the universal healthcare many of these countries offer. Familiarity also explains the popularity of some countries: Large numbers of U.S. military personnel are stationed in several of these lands, and many often have a desire to "stay on" after their active service has ended.
How to Plan Your Retirement Abroad
1. Check Visa and Residency Requirements
Immigration and residency laws vary from country to country. You can review the Department of State’s country specific information to find out if you’ll need a visa to enter and reside in the country to which you’re hoping to move. Other useful information is listed on the website as well, including passport validity, recommended and required vaccinations, and currency restrictions for entry and exit.
2. Research Safety and Political Stability
The U.S. State Department website provides up-to-date information about how safe and stable various countries are. At times, there will be travel warnings and alerts about specific locations – or, rarely, the U.S. may restrict citizens from traveling to or within certain countries. The information is updated regularly, as needed.
As a foreign national, you may encounter travel restrictions in certain countries. Remember that while in a foreign country, you are subject to its laws.
3. Determine Rules of Foreign Ownership
Many countries have rules and regulations as to who is permitted to own property, and how the property can be used (some countries restrict foreign ownership altogether). Before you decide on moving to a country, investigate its restrictions in detail and make sure they work with your finances and plans. Your best information source is a local real estate agent. You can find such agents through the International Consortium of Real Estate Associations (ICREA).
Even if a country does not restrict who buys real estate, it may control what happens when non-citizens sell property. Foreigners are permitted to buy property in Malaysia, for example, but if the property is sold, the proceeds have to be kept in a Malaysian bank account.
Also, be sure that your property rights are protected. In the U.S., homebuyers generally receive a clear title to property when they buy it. Rules may be less clear in other countries. Be sure you hire a qualified real estate agent and local attorney to ensure that you know what you've bought, and that all paperwork is handled according to local requirements.
4. Visit Before Moving, Rent Before Buying
Living in a country is very different from being a tourist. Try to stay in neighborhoods and areas you are considering to see what it's like to live as a local. And visit in more than one season. In fact, try to visit once during the least-pleasant weather your prospective home endures – hot, dry desert winds; monsoon rains; dreary winter days when there's no sun for weeks. You won't always be able to escape once you're actually living there. Also, see whether there is a local American or international association or club you can join to learn more about living in that country or region.
Once you move, start the transition by renting first to make sure the locale is compatible with your vision for retirement. If it works out, let the house-hunting begin.
5. Consider an All-Cash Purchase
Locating a U.S.-based bank or other lender that will fund a mortgage for overseas property is exceedingly difficult. Some local banks abroad do make loans to foreigners, but you could be asked for a massive down payment.
Try to find a property you can afford to buy outright, for cash. You'll have more negotiating power, a less complicated transaction and, in many cases, you may end up with a better deal.
6. Organize Your Assets (and Taxes)
You may be retiring abroad, but your assets don’t have to move with you. Stocks, bonds, annuities, IRAs and the like can remain in the U.S. where the economy and political situation are known factors.
Unless you renounce your U.S. citizenship (thereby giving up Social Security), you will be subject to the same income tax requirements as if you lived back home. You will still have to file an income tax return with the IRS, and will have to declare any money withdrawn from your retirement accounts. Be sure to consult with a tax attorney or tax advisor before you move, and plan on keeping in touch while abroad to make sure you are in compliance with tax laws at home and abroad. If you decide to move your assets abroad, work with your accountant or attorney to find out if and how they will be taxed.
To cover day-to-day expenses, you can open a local bank account to accept regular transfers from your U.S. account and pay bills. For more information, see Should You Open A Foreign Savings Account?
Online banking and brokerage accounts make it easier than ever to manage money while abroad, but be aware there are restrictions on transfers to certain countries. If your Social Security check is mailed abroad, keep in mind that the local bank may hold the check for up to four weeks before it’s cleared.
Major credit cards (Visa, MasterCard and American Express) are accepted in locations around the world and provide another option for covering daily living expenses and purchases. Contact your credit card company about an auto-pay option.
7. Settle Your Healthcare
Most U.S. health insurance policies will not cover you while living abroad. And even though Social Security will follow you as you travel, Medicare coverage does not extend outside of the U.S. Depending on your retirement destination, you may find that healthcare is so affordable that you don’t need insurance. If the country offers subsidized care for citizens, for example, make sure foreign residents have access to the same care and costs. If not, find out what coverage you will have as a visitor and plan accordingly. Depending on where you plan to live, you may find American or international companies that sell health insurance to Americans living abroad.
In some countries, the healthcare may be affordable but not up to the standards you are used to. If that’s the case, your plan could include adding X amount of dollars to your annual budget for health-related travel and care – either back to the U.S. or to a larger city abroad than where you're living. (See Where Can Americans Go For Cheaper Healthcare?)
If you are currently under the care of a physician at home, ask if he or she can recommended a colleague in your new destination. Having this connection can make it much easier to deal with existing medical conditions and ensure you receive the appropriate care.
8. Get a Driver’s License
Depending on where you go, your new country may not recognize your U.S. driver’s license. Many countries will accept an International Driver’s Permit (IDP) issued by the American Automobile Association or the National Automobile Club. These permits, which usually have to be accompanied by a regular driver’s license, typically expire in a year. If you plan on driving abroad, you need to get a local driver’s license as soon as you can.
9. Think About Working During Retirement
For some, retirement doesn’t mean not working. Many retirees enjoy volunteer opportunities and part-time jobs. Others are more entrepreneurial, interested in starting a business abroad.
If you plan on working, check ahead of time to make sure the country has no restrictions that could prevent you from either finding a job or starting your own business.
10. Plan to Stay Connected
Many people – whether or not they’re retired – find the most difficult part of living abroad is missing friends and family. Have a plan in place to keep in touch with the people you care about. Modern technology – smart phones and online video-conferencing software (such as Skype) makes it easy to stay in touch virtually – but having a strong, reliable connection is crucial. Having a connection where you live is preferable, but if that’s not an option, nowadays you can access the Internet in most public libraries and cafés.
You also need an emergency plan: Leave your contract information and a copy of your passport with family, and carry contact information for your family back home with you when you travel. Also, know how to reach the closest U.S. embassy or consulate and give that information to your friends and family.
Citizen or Resident?
Almost any country that you would want to live in welcomes American retirees, as long as they can prove that they have a certain minimum income from some combination of Social Security, a pension and investment income. It varies, and, reasonably enough, countries with a higher cost of living require a higher income.
Generally, there’s a three-stage process, from tourist to resident to citizen, though the wait time and red tape differ in every country. The U.S. State Department keeps track of the specifics regarding short-term visits. The website of each nation’s U.S. consulate is the best source for facts on residency and citizenship requirements.
Here’s how it works for most countries:
- An American with just a passport typically can stay in a foreign country for up to 90 days. Some expats residing in Canada or Mexico stay on for years, taking a bus across the border and back again every three months to restart the clock.
- Long-term stays generally require a residency visa, which may need to be renewed yearly for several years before permanent residency can be applied for and awarded.
- A citizenship application, in most countries, requires a longer period of residency, varying from as little as two years to as long as 10 years. Some have fast-track programs that cut the wait for people who make a substantial investment in the country.
All of the above is relatively straightforward in most countries for retirees, assuming they don’t want to take a job and can prove they have a steady income. “Relatively” meaning that some countries make it tougher than others, with onerous requirements and plenty of paperwork.
And that raises the question whether you want to be a permanent resident or a citizen of your adopted country. The benefits and drawbacks vary for each country. Note that citizenship in any European country gains you certain rights as a citizen of a European Union member nation. (See also: Developed Countries For Easy Residency/Citizenship.)
The more common choice for a retiree expat is between permanent residency and dual citizenship. Remember that neither dual citizenship nor residency gets you out of filing a U.S. tax return every year. It is both unusual and burdensome, but Americans have to pay income taxes wherever they live, and they owe it no matter where their income was earned. You may also have to file an income tax return in your country of residence, although most deduct the amount American residents pay to the U.S. (See How To Pay Taxes If You're Overseas.)
In case you’re wondering, you can relinquish your U.S. citizenship – and with them, your U.S. tax bill – but that step is irrevocable and uncommon. In 2014, a whopping 3,415 people did so, and that is an all-time record. According to Forbes.com, some were very wealthy Americans who found they could no longer hide assets in foreign bank accounts. Since a new U.S. law requires those deposits to be reported to the IRS, the banks either do so, or flatly refuse to do business with Americans. For the rest, the sheer aggravation of filing in two countries every year was a likely factor in their renunciation of U.S. citizenship.