The New Retirement Plan: Living out of a Suitcase

For some retirees, I’ve Been Everywhere isn’t just a great Johnny Cash song but also an aspirational anthem.

A new survey from International Living found that 83% of people interested in retiring abroad are considering living in more than one country. Only 16.5% said they want to retire permanently in one place. While this approach offers many benefits, like a lower cost of living, better weather or simply adventure, not having a permanent residence complicates financial planning, and advisors should make sure their clients understand the best way to achieve their goals.

“People have a greater sense today than they did, say, a decade ago, about what the possibilities could be,” said Jennifer Stevens, International Living’s executive editor. “As people are becoming increasingly interested in their overseas options, I think it behooves advisors to get educated about where the pitfalls are and what they can do to help their clients keep more of their hard-earned money.” 

Home Is Where … You Pay Taxes?

One of the biggest challenges of a nomadic retirement is residency. Because these retirees keep moving instead of settling down, they still owe American taxes. Retirees from a high-tax state should strongly consider establishing residency in a state with lower taxes before they adopt an itinerant lifestyle, said Andrew Fisher, practice leader for cross-border planning at Cerity Partners. He also flagged several other common pitfalls: 

• It can be difficult for clients to access funds abroad without a foreign bank account, so he recommends finding a debit card that allows withdrawals with minimal fees and restrictions. 
• Retirees should know the tax residency rules where they’re staying, so they don’t unwittingly trigger tax liability by remaining in one place too long. 

“If a client unintentionally becomes a tax resident of another country, they may find that their US retirement distributions, investment income or even Roth IRA withdrawals are treated very differently than they expected,” said Francheska Ruiz, a CFP at Tobias Financial. “That’s why one of the first conversations I have isn’t just where they want to retire, but how they plan to live throughout the year.”

Still Got Gas in the Tank. Fisher noted that people who choose this lifestyle have often retired younger. “Maybe they didn’t really get to travel a lot during their working years, so it’s kind of making up for lost ground. Sometimes there’re also people who know they want to experience something different, but they actually don’t know exactly where,” he said. “They’re looking at almost an extended vacation where they just get to go on an adventure and experience lots of different places, and maybe see if one eventually fits.”