Retirement Planning: What to Consider Before Retiring Abroad

Takeaways

• Retiring abroad can offer lower costs and a new adventure, but requires extensive planning.
• Key considerations include managing finances, taxes, investments, real estate, health care, and estate planning across borders.

Sitting on the terrace of a small seaside café, a retired American couple savors fresh fish, local wine, and the slow rhythm of a coastal village. Retirement, they agree, finally feels like living, instead of just surviving.

After lunch, they do some shopping, head back to their place to change clothes, and walk to the beach — but the ocean isn’t in Florida, Hawaii, or Virginia Beach; it’s in Portugal, Mexico, or Costa Rica.

More Americans are trading the familiar comforts of U.S. retirement hotspots for a life abroad, chasing lower costs, better weather, and a fresh adventure. Retiring to another country can be an attractive option. To avoid legal and lifestyle turbulence, however, there are many issues to consider and steps to take before packing up and moving.

Offshoring the Golden Years

Many young Americans say the American Dream is out of reach for them. Americans over age 50 — and especially those over age 65 — are much more likely than adults under 50 to say the American Dream is still possible, but actions speak louder than words: a large number of Americans are now retiring abroad.

According to the Social Security Administration, there were more than 700,000 people receiving benefit payments abroad in 2022, compared with 400,000 in 2000.

With a large portion of retirees relying on Social Security payments, which average less than $2,000 per month, to make ends meet — two-thirds rely on it for more than half their income — retiring abroad may be a survival strategy as much as it is a romantic relocation.

The average U.S. household’s monthly expenses are up to nearly $6,500. In a country like Belize or Ecuador, it’s possible to live comfortably on about $2,000 per month.

Health care is often cheaper overseas as well. Costa Rica, for example, offers quality care at about one-third to one-fourth of what it costs here. And the median U.S. home price is now up to more than $400,000 — more than double the median price in some popular overseas destinations.

Retiring abroad to a country where the weather is warmer, the pace of life is slower, and the U.S. dollar goes further could mean the difference between living at or near poverty here in the United States and living a comfortable retirement somewhere else.

That stark difference explains why more than one in three Americans said in a 2025 survey that they’re open to moving to another country to retire, citing a lower cost of living, cheaper health care, and a more peaceful lifestyle. A 2025 Harris Poll found that four in 10 Americans have at least thought about moving abroad to improve their quality of life.

But living abroad is much different than traveling abroad or even spending a few weeks or months in a foreign country. Nor is it about just stretching dollars.

Much like retirement itself, making the move abroad and making the dream of a lower cost, higher quality retirement in a foreign land come true, requires serious planning around issues like health care, taxes, estate planning, and banking. Some steps should be completed in the U.S. prior to departure. Others can be made in your new country, and certain ones require cross-border coordination between attorneys in the U.S. and abroad.

Bank Accounts

When moving abroad, you may need to open a bank account in the new country to pay local bills. Opening a bank account in a foreign country can be difficult because of the Foreign Account Tax Compliance Act (FATCA). This federal tax law requires banks to disclose data on American clients to the Internal Revenue Service (IRS). A foreign bank may refuse to accept U.S. clients because they don't want to deal with the requirements.

Assuming you can open a local bank account, you will need to consider how much money to put into it and the best way to transfer money into the local currency. If your money remains in a U.S. bank and the exchange rate changes suddenly, the value of your money can change with it, sometimes drastically.

Before You Leave:

• Research whether your U.S. bank has international branches or partnerships.
• Consult with a financial planner to determine the best way to protect your money.
• Explore options for locking in favorable exchange rates to avoid unpleasant surprises.

After You Arrive:

• Open a local account with a reputable bank that accepts U.S. clients.
• Decide how much to keep locally versus in your U.S. accounts.
• Consider using a foreign exchange firm to manage ongoing transfers at competitive rates.

Reporting

To prevent its citizens from hiding money in international bank accounts, the U.S. government imposes strict reporting requirements, and the IRS keeps a close watch on overseas accounts. If you hold significant funds abroad, you must file annual reports, including a FATCA report and an annual Report of Foreign Bank and Financial Accounts (FBAR). Missing filing deadlines can trigger steep penalties, even if your oversight was unintentional.

Before You Leave:

• Understand the thresholds: $10,000 or more across foreign accounts means you must file an FBAR.
• Review FATCA reporting requirements. Married couples with foreign balances over $400,000 at the end of the year or above $600,000 at any time during the year must file.
• Hire a tax professional familiar with international compliance.

After You Arrive:

• Keep detailed records of all accounts and balances.
• File FBAR and FATCA forms annually, along with your regular tax return.
• Don’t ignore correspondence from foreign banks, as they often report your balances directly to the IRS.

Taxes

One aspect of American “exceptionalism” is its tax policy toward overseas residents. The U.S. is one of only a few countries in the world that taxes its citizens on their worldwide income, regardless of where they live.

Depending on your state residency, you may owe state taxes, too. Your host country will likely expect its share as well. Fortunately, U.S. residents who pay taxes to a foreign country on a source of income and are subject to U.S. tax on the same income may be able to take either a credit or an itemized deduction for the foreign taxes paid.

Before You Leave:

• Determine if you will maintain state residency (and state tax obligations).
• Review tax treaties between the U.S. and your destination country.
• Learn about foreign tax credits to avoid double taxation.

After You Arrive:

• File your U.S. return every year.
• File in your host country as required.
• Work with a tax advisor experienced in cross-border taxation to optimize deductions and credits.

Investments

Keeping all of your assets in U.S. dollars may leave you vulnerable to exchange rate swings. The dollar, for example, fell by nearly 11 percent in the first half of 2025. Diversifying into local investments or currencies can help you keep pace with local costs and protect against dollar volatility.

Before You Leave:

• Discuss investment strategy with your financial planner.
• Assess whether local investments fit your long-term financial goals.
• Consider tax implications of holding assets abroad.

After You Arrive:

• Explore safe, legal local investment opportunities.
• Monitor currency fluctuations and adjust holdings as needed.
• Review your portfolio regularly to balance U.S. and foreign exposure.

Real Estate

For those who can afford it, purchasing real estate in a foreign country can provide not only a residence, but also legal residency. Buying property abroad can be more complicated than in your home country, though.

Some countries limit foreign ownership, requiring a pre-existing residency, a residency permit, or a permit to own residential property. In parts of Mexico, foreigners are prohibited from owning coastal property, so it’s often held inside corporations or trusts, which can create tax issues for U.S. citizens. Countries that include Thailand, the Philippines, Indonesia, and India prohibit or severely restrict foreign ownership, while countries like Portugal and Greece have “Golden Visa” programs and may offer visas, residencies, and paths to citizenship to foreign home buyers.

You may also need to file U.S. tax forms like the FBAR, Form 5471, or Form 8858 if buying property abroad — but only if you hold the property through a foreign entity, have foreign bank accounts, or operate it as a foreign branch.

Before You Leave:

• Research ownership restrictions and residency incentives in your destination country.
• Consult both a U.S. attorney and a local property lawyer about purchase structures.
• Understand potential U.S. tax and reporting implications of foreign property ownership.

After You Arrive:

• Engage a local attorney to review local compliance issues such as title ownership and registration requirements prior to purchase.
• Confirm how property passes at death.
• Set up proper property management and insurance if you won’t live there full time.

Health Care

Medicare doesn’t travel with you. Long-term care insurance might not, either.

Outside the U.S., traditional Medicare does not provide coverage for hospital or medical costs, forcing many retirees abroad to buy private insurance or rely on public health systems in their host country. If you ever return stateside, Part A will still cover you, but you could face penalties if you didn’t maintain Part B coverage while away. Long-term care insurance (LTCI) policies may also restrict or reduce benefits when used abroad.

Before You Leave:

• Decide whether to keep paying Medicare Part B premiums when abroad.

• Check your LTCI policy to see if benefits apply internationally and reassess long-term care planning, since local facilities and caregiving support may differ from U.S. options.

• Research insurance options in your destination country and budget for private or supplemental plans.

After You Arrive:

• Enroll in the local health insurance system if available.
• Consider private insurance for international coverage or emergencies.
• Review Medicare status regularly to avoid potential penalties upon return.

Estate Planning

A thorough, well-drafted estate plan in the U.S. may not control what happens to your assets abroad or protect you in an emergency without additional, specialized cross-border estate planning.

U.S.-based wills or trusts and powers of attorney that don’t meet local legal formalities such as notarization, authentication, translation, and compliance with local laws may not be recognized in foreign jurisdictions. There might be logistical challenges for trusted decision-makers such as executors, trustees, and attorneys-in-fact. Some countries also impose forced heirship rules that require a portion of your estate to automatically pass to spouses or children, regardless of your documented intent.

Before You Move:

• Review your existing will or trust with an attorney experienced in international estate planning.
• Research whether your destination country enforces forced heirship or inheritance rules.
• Consider executing an international will under the Washington Convention (not available in every state).

After You Arrive:

• Work with a local attorney to ensure your will is valid under local law. If necessary, create a local will that works alongside your U.S. estate plan to cover assets in-country.
• Verify whether your chosen executors, trustees, and attorneys-in-fact can act abroad or whether a local representative is required (or simply more practical).
• Explore ownership structures that may help mitigate forced heirship rules.

Commonly Overlooked Issues and Hidden Costs

Outside these major categories, expats often underestimate smaller — but often no less important — legal and financial details that can add stress and expense when they’re overlooked. Some of the most common include:

• Travel costs. The costs of visiting family in the U.S. or having to return for medical care or emergencies can quickly accrue, particularly in locations far from major airports.
• Lifestyle adjustments. Moving costs, new appliances that match local standards, language classes, and cultural differences all carry hidden expenses.
• Residency and visas. Renewals, fees, and restrictions can add up. Some countries require proof of income or assets.
• Local bureaucracy. Opening accounts, signing leases, or even getting utilities turned on can be costly and time-consuming without the right documents.
• Driving. A U.S. license does not allow you to drive in every country. Check license conversion and compatibility rules.
• Ongoing compliance. Track renewal dates for visas, insurance, tax filings, etc.

(Legal) Teamwork to Make the (Retirement Abroad) Dream Work

Moving your retirement overseas is about more than finding a place with palm trees, picturesque scenery, and affordable health care. The practical side of this new chapter of your life is also about dealing with legal, financial, and estate planning issues that follow you wherever you go.

Questions about taxes, property ownership, inheritance, and basic health care decisions don’t disappear with the next tide. Anyone who’s seriously thinking seriously about retiring abroad should test-drive the destination, crunch the numbers carefully, and seek out professional advice.