Thanks to improving living standards around the world, and geo-arbitrage, more and more are looking at retiring overseas. In this guide, I explore the pros and cons, detail how to get started and share some useful advice.
Quality of life
Maintaining a high quality of life as far as possible into retirement should obviously be a major concern for all of us. What constitutes a high quality of life differs from one person to another, however, and defining what it means for you should be the first thing you do. Is it warm weather? Proximity to the ocean? A vibrant nightlife? If what constitutes a high quality of life for you is rain, wind, hill walking, whiskey and you currently live in Scotland, expatriation may not be your best option. Most people desire something they cannot get at home, however, and retiring overseas represents a real opportunity to change that. Think of a beach loving Belgian moving to the Australian Gold Coast, for example, or a Hong Kong ski enthusiast moving to Whistler. You get the picture.
What is geo arbitrage, I hear you say? It is a very simple concept: you earn money in a high income country then spend it in a low cost country. This artificially increases your purchasing power. Let me give you an example: John plans to retire on a 40000 USD a year pension. John currently lives in Seattle where according to his calculations, he will be unable to maintain his current lifestyle on that amount. He may even be forced to move out of the city or downsize significantly. I think it is fair to say that under those circumstances, it does not make a lot of sense for John to retire in Seattle. If John was to instead retire in a place like the island of Penang (Malaysia) with the same pension, he would be able to afford an oceanfront condo, three restaurant meals per day and many activities every month. Given those circumstances, what do you think John should do?
From my own experience, I have never been happier than since I moved to a location with a large community of like minded individuals. In the small town in Canada where I grew up, I stopped fitting in once I started expanding my worldview and living “unconventionally”. When I moved to Asia, I discovered a strong community of perpetual travellers based there and for the first time in a long while I really began to feel at home. For you it may be fishing or golf or whatever really, being surrounded by people who share your passions and lifestyle is incredible and will definitely have an impact on your quality of life.
Retiring overseas is a great way to experience new cultures and open doors that were previously closed. For example, if you are a spicy food fanatic, moving to a place like Thailand could allow you not only to eat spicy food everyday but also items that may be banned in your home country (some exotic meats for example). Exotic food is not the only cultural element you will encounter in your new country, the way of life will be different, people will view things differently and will interact with each other differently. Depending on your personality and beliefs, this may be a pro or a con.
Do you want to spend your retirement doing almost exactly the same things you did when you were working, except for the work itself? Retiring overseas gives you the chance to truly disconnect from your current life and routine and to reinvent yourself. Moving overseas also allows you to decide who you want to stay in contact with and who you simply do not want to see again. Having that additional control over your life will make you feel great, trust me on this.
Not everyone wants to continue doing business into their retirement. Some, however, may find running a small business or investing in the markets a great way to spend their free time and make some extra money to supplement their pension income. If that is your plan, moving overseas can represent a great way for you to protect your pension income, save on taxes and use geo-arbitrage to lower your overhead costs.
While modern air travel has made our world considerably smaller, Earth is still a vast place and getting from point A to point B may still involve a multitude of connections and dozens of hours in the sky. Few expats enjoy having to fly 10-25 hours to visit their family and friends every few months. For some, it may even be a deal breaker. Before you move to another country, you have to decide whether you are comfortable being geographically far away from your home country and whether the cost of travelling back and forth and the time spent on the planes is worth it for you. That is not to mention the timezone difference, especially an issue for phone calls.
While an increasing number of countries have excellent health care, most do not. Whether you are healthy or not, having access to an excellent health care system is crucial and could even mean the difference between life and death should you fall ill. You also have to consider the price of private health insurance as your current policy will probably not cover you in your new country. For those on a very limited budget, this may be a deal breaker as a good insurance policy will cost you at least a few hundred USD / EUR per month (usually the older you are, the more expensive it will be).
While a change in culture can be great fun, it can also be an absolute nightmare. I have met several expats who have moved to less developed parts of the world and who struggle to even maintain the peace with the locals as the cultural gap is too wide. If your plan is to move to a remote island, the Thai countryside, an Indian village or such kind of places, I strongly recommend going as a tourist first to “test the waters” and see for yourself whether you would be comfortable living there long-term. Do not rely on online testimonials and stories, many retirees will sing the praises of their new country even if in reality they hate it. The reason is that they cannot bring themselves to accept that they made a mistake and that they probably are too “invested” in their new lives to go back.
Cost of living
We have all heard of how cheap places like Thailand and the Philippines are but what a lot of people fail to understand is that those countries are only cheap if you live like a local. If what you want to do is eat western/East Asian food on a daily basis, go out to nice pubs/lounges every week, workout in a world-class gym and shop in brand name stores, those places will be just as expensive and maybe even more expensive than your home country.
What should you do before retiring overseas
Learn the local language
Learning a new language is not easy, especially for someone of retirement age, but it can be a very rewarding experience. Speaking the local language will definitely improve your quality of life in your new country.
Buying an health insurance policy and a repatriation policy before moving abroad is very important, for some countries it can even be mandatory. I have written a guide about health insurance, click here to read it.
Prepare your banking strategy
Having a solid banking strategy in place is a very important step to take before expatriation. I have written a guide about global banking that I recommend you read.
Get the appropriate visa
Once you have completed the first three steps, you should apply for a long term visa for your chosen country. Make sure you apply plenty of time in advance in case your application is declined and need to re-apply or if the embassy asks you for more documentation. In most cases, you will need to include in your application an up-to-date background check from your national police so I recommend getting that document as soon as possible as it can take quite a lot of time in some countries.
Set up your own VPN / VPS
Setting up a private VPN server before your move is important as it will allow you to continue using the same websites and services you are used to. For example, if you move from the UK to Malaysia, setting up a private UK VPN will allow you to continue watching the BBC, Channel4 etc. I’ve written a blog post about VPNs that you can read here.
Set up mail and call forwarding
Buying a mail and call forwarding package is important for a multitude of reasons. It will make you appear as if you still lived in your home country and that can be very important when it comes to banking, insurance etc. It will also allow you to keep the same physical address even if you move often. When you travel to a new country, you will often have to write down your home address on the immigration declaration form and trust me, having an address in the same country as your passport will save you a lot of questioning at some borders. Call forwarding is important as it will allow anyone in your home country to call you wherever you are and always on the same local number. Many providers also forward SMS messages, that will allow you to continue using two-way authentication. I have written a guide on the subject, you can read it here.
Get in touch with local expat communities
With the internet, it can be easy to find expat communities in your country of choice. Not only will joining such communities allow you to make new “like-minded” friends but it will also allow you to learn from the experience of others and avoid making their mistakes.
Makes plans in case you die abroad
Last but not least, you should make plans in case you die abroad. This is not a pleasant one for obvious reasons but it is absolutely crucial that you do not skip this part as it will save a ton of trouble for your family, not to mention money. I have written a guide that covers this in details, you can read it here.