On Retirement

Retiring south of the border

Relocation tips for financial advisory clients with a sense of wanderlust

Sep 9, 2012 @ 12:01 am

Traditionally, retirees in search of warm weather, year-round sunshine and lower taxes relocate to places such as Florida and Texas.

But the Great Recession took a heavy toll on many Americans' retirement dreams. In the wake of lost jobs, shrunken 401(k) balances and underwater mortgages, a new wave of retirees may bypass the American Sunbelt altogether.

Increasingly, adventurous retirees are heading further south, to Mexico, Belize, Costa Rica and Panama, in pursuit of warm weather, cheap real estate and affordable medical care. It can be a viable way to stretch their depleted savings and Social Security checks.

Now don't get me wrong. I don't expect all your clients to pack up and head for the border.

But for a growing segment of current and soon-to-be retirees, an expatriate life in sunny Central America or Mexico can be the ticket to the sweet life without the sticker shock. If you have a client with a sense of wanderlust, you can serve as a valuable resource — and a reality check.

Remind them that though their cost of living might plummet and their quality of life could improve, they won't be in Kansas (or Chicago or New York) anymore. Clients who don't thrive on change and aren't comfortable in new situations won't be happy in another country.

FINANCIAL INCENTIVES

But if your clients are up for an adventure, some Latin American countries offer financial incentives to attract transplants, and relocating to a tropical destination could be the ticket to a dream retirement.

Panama's generous pensionado program, for example, offers U.S. retirees who relocate to that country discounts on utilities, airline tickets, medical bills, hotel stays, and even tickets to movies and cultural events. With all its benefits and an active expatriate community, Panama, where the U.S. dollar is the local currency, ranks as among the most affordable and appealing options for retirees.

Mexico, with its inexpensive real estate, good health care system and relatively relaxed visa policy, is another affordable option for retirees. Lake Chapala and San Miguel Allende, vibrant communities popular with Canadian and U.S. retirees, are far from the border towns that have been plagued by drug cartel violence.

English is the official language of Belize, the tiny Central American country formerly known as British Honduras and popular with divers and eco-tourists. Its Qualified Retired Persons program allows anyone 45 or older with at least $2,000 of monthly income from any source to import household goods and cars duty-free, to pay no income taxes in Belize and to retain their U.S. citizenship.

But no matter where American citizens live abroad, they still have to pay U.S. income taxes. For details, see IRS Publication 54, the Tax Guide for U.S. Citizens and Resident Aliens Abroad, at irs.gov.

California lawyer and certified public accountant Don Nelson offers detailed tax information for Americans living and working overseas on TaxMeLess.com — including explanations of the tough new rules on offshore accounts.

Social Security benefits can be wired almost anywhere in the world, but it is easier to have the check deposited directly in a account that can be accessed abroad. For details, see Your Payments While You Are Outside the United States at ssa.gov.

Although Social Security benefits cross borders, Medicare coverage doesn't. Still, it is a good idea for your clients to sign up for Medicare Part A, which covers hospital costs, when they turn 65 so they can use it when they come back to the States.

It is free, and they can enroll online at ssa.gov (click on Medicare).

But if your clients don't plan to spend any time in the United States, they should skip enrolling in Medicare Part B, which covers outpatient services and doctor's visits. It's costing most new enrollees about $100 per month this year (higher-income retirees pay more) and can be used only in this country.

But be aware that if they decide to enroll in Medicare Part B later, they will pay a 10% penalty as part of their monthly premium for every year after age 65 that they delayed enrolling. For those who retire before 65, one option is to live overseas for a while and to move back home for good once they become eligible for Medicare.

VALUABLE TIPS, INFO ONLINE

The Internet offers a host of resources for learning about retiring beyond U.S. borders. International Living magazine (internationalliving.com) is a great place to learn about retiree incentive programs, read firsthand accounts from American expats who took the plunge and get the latest scoop on real estate bargains.

One of my favorite websites is retireearlylifestyle.com, hosted by intrepid world travelers Billy and Akaisha Kaderli. The Kaderlis retired 20 years ago, when they were in their late 30s, and have been sharing their around-the-world adventures with readers ever since.

In their newest e-book, “Your Retirement Dream IS Possible,” for which I wrote the foreword, the Kaderlis offer valuable insights about how to flesh out retirement dreams, assess finances and work toward relocation goals. You don't have to be an aspiring globe-trotter to benefit from their wisdom and experience.

Even an armchair traveler can pick up valuable tips from this e-book, which is available at their website as a PDF download for $14.95. Whether you are planning an extended vacation or a more permanent change in latitude, you will learn to travel light, gathering experiences rather than souvenirs.

Mary Beth Franklin (mbfranklin @arjuna-design.com) welcomes your comments and suggestions for column topics. Twitter: @mbfretirepro

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