Can all seniors afford a sunny retirement abroad?

  • sunny retirement
Published on 2024-05-27 at 14:00 by Asaël Häzaq
Picture yourself with your feet in the water, lounging by the pool of your small house or spacious villa abroad. On one hand, a summer lemonade, and on the other, your favorite magazine. The weather is perfect for basking in the sun. There's not a cloud in the sky or in your mind; you've worked hard enough to enjoy your retirement abroad. But is this golden retirement dream accessible to everyone?

Leaving everything behind for a sunny retirement

Swiss retirees dream of Portugal, South Africa, Thailand, and Spain. Germans envision living in Spain or Italy. Americans pack their bags for Portugal, Spain, France, or Costa Rica. The French take a one-way ticket to Morocco, Mauritius, Thailand, Portugal, or Spain.

These retirees all share a common goal: choosing a sunny country with a lower cost of living than their home country. For these seniors, the calculations are clear: they prefer a serene retirement abroad rather than endure the stress of life in their home country. This desire can be particularly strong if the expatriation project has been thwarted or postponed multiple times due to work, children, or living costs, making it challenging to plan a life abroad.

Who can actually enjoy a sunny retirement abroad?

We'd love to reassure you with the well-known saying, "where there's a will, there's a way." The reality is that you can want to but still not be able to. Many seniors aspiring to a peaceful retirement under the palm trees find themselves in this situation.

Do you need to be wealthy to retire abroad? If so, where does wealth begin? It will undoubtedly be more straightforward to relocate overseas with well-filled bank accounts. However, the dream of a serene retirement abroad remains accessible to those with smaller budgets, provided there is good planning.

It's impossible to ignore money. While global inflation no longer sees the peaks of 2021-2022, its effects are still significant. Many countries, including those popular with foreign retirees (France, Spain, Portugal), face an unprecedented housing crisis. The sun will be shining, but finances might not keep up.

Who can receive their pension abroad?

The United States, Switzerland, Germany, the United Kingdom, Australia, France, and Japan are among the countries that allow pension payments abroad. But make sure you can actually receive your pension in your chosen country. Contact your pension fund to verify the viability of your expatriation project and follow the necessary procedures.

Each state may impose its conditions. For example, the Japanese National Pension System requires you to report your change of address and financial institution in writing. The UK reminds that you won't be able to receive your pension in several countries if you make multiple moves. Other states often apply the same conditions. You must also have reached the legal retirement age to receive your full pension, as highlighted by the Australian government, which notes that leaving the country could affect pension payments.

What if you worked in your host country?

If you have worked in the host country, your home country, and/or other countries, you may be able to count these periods towards your retirement. However, this depends on the country where you worked. European countries have adopted regulations to facilitate the counting of work periods. Switzerland, Norway, Iceland, and Liechtenstein are part of this agreement. If eligible, you could receive a pension from each country where you worked and contributed.

Another scenario: if you worked in a country with a bilateral social security agreement with your home country, each country will pay its share of the pension. But be careful: if you are a European citizen and worked in multiple non-EU countries, your home country might only count the non-European state where you contributed the most. Other professional activities may not be considered. However, you can claim your rights directly with the concerned state.

If you worked in a country that has no social security agreement with your home country, be cautious about the risk of not having all your work periods considered (by your home country). These are general guidelines, and every situation is unique. So make sure to check directly with your pension fund and simulate your retirement calculations.

Retiring abroad: A postcard-perfect setting in danger

The sun might be a bit "too much." European countries, regularly cited among the top destinations for foreign retirees, are also those where climate change is advancing. Spain has experienced unprecedented droughts and heat waves since 2021. Water shortages are common. Temperatures exceed 30°C even in winter (January 2024). More than half the country could become a desert. In the most affected cities, locals are raising concerns about "massive arrivals" of expatriates.

A similar scenario is observed in Greece, France, Thailand, and South Africa, with increasing extreme weather events: floods, droughts, and fires. The postcard-perfect setting is somewhat marred. Although extreme events don't occur daily, the backdrop is now well-established. Water shortages, extreme heat, and droughts are no longer sporadic. Consider these factors before imagining your dream retirement abroad.

Earning more abroad without working

We don't want to dampen your spirits. On the contrary, you can still retire abroad serenely with good preparation. Expat retirees are often mistakenly seen as privileged. In reality, they are not necessarily wealthier. Many leave because their pension is too low to live decently in their home country.

These departures, driven by the quest for better purchasing power (and sunshine), require greater vigilance. Have you chosen your host country well? Will you have the desired lifestyle with your pension in your host country? What will you do in case of a setback? Unlike working expatriates, you won't be earning money anymore (unless permitted by your residence visa, within its strict limits).

If you're adventurous, you can be a great traveler once in your host country. But to prepare for your project, it's important to start well in advance. Ideally, you should have saved for several years to anticipate your move. Don't rely solely on your purchasing power boosted by the lower cost of living in the host country. A change in circumstances could significantly limit your budget.

Managing your budget for a dream retirement abroad

Emphasizing money is essential because a setback can happen quickly. When Thailand required foreign retirees to have private health insurance with a basic coverage of $100,000 in 2022, many expatriates were upset. The latest announcements about Thailand's tax reform (January 2024) mention certain categories of foreign retirees exempt from tax payments, but doubts remain. Reforms in the host country are unforeseen events that can heavily impact your budget.

Be cautious about healthcare costs, too. Many retirees move abroad, underestimating the impact of healthcare costs on their budget. Even if you're in excellent health, consider the long term (whether you plan to stay permanently in the host country or not). You might need eye, dental, or knee exams. How much does basic care cost in your host country? What is the level of reimbursement for medical care? How much will your private insurance cost? If you have a chronic illness, your vigilance should be higher.

To establish your budget, evaluate your current expenses and estimate those in the host country. Consider joining forums or groups of foreign retirees. You can also consult an expatriation coach. Do not hesitate to seek help, especially if you're moving alone. Even a well-prepared move remains a leap into the unknown, especially if you choose a country very far from yours. By the way, do you speak the language of the host country? Do you have acquaintances there? Joining expatriate groups before your trip will help you settle in and better enjoy your sunny retirement abroad.