Common mistakes to avoid when retiring abroad

Working during retirement without the right visa or residence permit

Does your visa or residence permit actually allow you to work? Many expat retirees make this mistake: they start working to supplement their income, try something new, or launch a project, without first checking whether they're legally allowed to. Your right to work depends entirely on your residence permit.

For example, Thailand's retirement visa (Non-Immigrant O-A) does not permit employment. Holders of a long-stay O-X visa may work, but only on a voluntary basis and only in roles approved by the government. The Malaysia My Second Home program (MM2H), on the other hand, allows part-time work for those aged 50 and over.

If you take up employment in your host country without a valid work permit, you are considered an undocumented worker. Depending on local legislation, your employer could face penalties including fines or even imprisonment. You yourself risk serious sanctions and potential deportation. Penalties can be even harsher if the authorities in your home country discover that you knowingly combined work and retirement while in breach of the rules.

Assuming that work abroad will automatically count toward your pension

This is a common misconception: you worked abroad and assume those contribution periods were automatically credited in your home country. In reality, it all depends on the bilateral agreements signed between your host country and the country that will pay your pension. The situation gets even more complicated for those with international careers. To avoid unpleasant surprises, verify all details of your work history and keep your employment contracts and other supporting documents. Keep in mind that if you worked in a country that has no agreement with your home country, those contribution periods may be lost entirely.

Failing to notify the authorities when you leave

The relevant authorities in your home country need to be informed of your plans to move abroad, as well as your actual departure date. They need to know your new country of residence and your address, particularly so they can continue paying your pension. Yet many retirees move abroad without notifying the relevant agencies, such as their health insurance provider or bank.

Continuing to receive benefits tied to residency

This mistake is closely connected to the first and can have serious consequences. Certain social benefits are tied to physical presence in the country that provides them. Benefits designed to support elderly people in financial difficulty, for instance, are very often conditional on residency. You cannot receive these payments if you retire abroad. Collecting them while living as an expat constitutes fraud. Authorities regularly identify cases of expat retirees improperly receiving social benefits.

Failing to send a proof of life to your home country

When you retire abroad, it becomes harder for the authorities to verify that you are still alive. That is why you are required to send your home country a certificate of life (also known as a certificate of existence). This official document can sometimes be completed online, depending on the procedures set up by the country paying your pension. If you fail to send it, your pension payments will be suspended.

Failing to report the death of an expat retiree

If you are a family member of a retiree who has died abroad, the law requires you to notify the relevant authorities of the death. However, this is an area where recurring fraud occurs. Deaths of retirees abroad go unreported, and family members continue to collect the deceased's pension. Again, the penalties for doing so can be severe.

Not declaring assets acquired abroad to your home country's authorities

Some expat retirees wrongly assume they no longer need to report anything to their home country, believing that since it pays their pension, it has no business in their financial affairs. In reality, your home country still needs to be kept informed. Assets acquired abroad, for example, must be included in your tax return. As an expat retiree, you are required to declare your assets as well as any income from foreign sources. Depending on your tax residency, you may be taxed under the provisions of the tax treaty between your home and host countries. This is why it is so important to move to a country that has a double taxation agreement with your home country, to avoid being taxed twice on the same income.

Failing to declare foreign bank accounts

Holding multiple bank accounts is perfectly legal. What is not permitted is hiding the existence of foreign bank accounts from the authorities. This is a mistake commonly made by expat retirees, as well as working adults and students who open accounts abroad without informing their home country. Failure to declare can result in a fine. Tax authorities may impose additional penalties if they discover you have concealed one or more foreign accounts over an extended period. Each undeclared account may be subject to additional taxation.

Keeping bank products tied to domestic residency

Just as with certain benefits, some bank accounts are reserved for people residing in a specific country. Once you move abroad, you become a non-resident and must inform your bank of this change in status. Your account itself will remain valid, but certain products will need to be closed, including savings accounts reserved for low-income residents. You can, however, keep your stocks, bonds, and life insurance policies. Take the time to go through all the features of your non-resident account carefully and keep only the services you genuinely need.

Moving to a country with no tax treaty with your home country

Relocating to a country that has no treaty with your home country is strongly inadvisable. This covers both double taxation agreements and social security agreements. The first protects you from being taxed twice on the same income. The second sets out the rules that ensure your pension is paid correctly. Before choosing your destination, always check that it has the relevant agreements in place with your home country.

Best practices for retirees living abroad

To avoid mistakes and unwanted surprises, here are some key recommendations to keep in mind:

• Draw up a checklist of everything you need to handle before leaving: health insurance, taxes, banking, visas, documents requiring official translation, and so on. Notify the relevant authorities of your plans to move abroad.
• Moving abroad with pets: check that travel is possible and under what conditions, including required vaccinations, permits to obtain, and any other applicable rules.
• Give your pension fund your new address abroad and updated bank account details.
• For life insurance and other investments, work with an international tax specialist. More and more banks now have dedicated services for expats and can help you make the right financial decisions.