Travel in Retirement: Perpetual Globetrotting
These days, options for retired living seem endless, from resort-like communities on land to permanent cruises at sea. Now another option is emerging: a perpetual travel lifestyle in which retirees live in a new country for several months before hopping to the next.
While this lifestyle isn’t ideal for every retiree, such travelers embrace the opportunity to live among locals and immerse themselves in a new culture.
Before deciding to permanently trade in your home base for life abroad, consider these planning and logistic issues:
Choosing the Right Destinations
The decision of where to go should be based partly on what you hope to achieve while you’re there. For instance, retirees who wish to learn the local language, history and customs might consider communities with colleges for continuing education, says Sue Smith, CFP, Northern Trust senior financial consultant.
You should also take into account the visa requirements of each country you plan to visit. “Every country is different in terms of length of time you can stay there,” says Michael Byrne, CPA, CFP, senior financial planner at Northern Trust.
Individual currency risk — or the risk of exposure to unanticipated changes in the foreign exchange rate — might be another consideration, although Byrne says holding assets in the local currency potentially could mitigate that risk.
Finally, you might choose cities in which you’ll have easy access to banking. However, finding a bank might not be as easy as it once was, thanks to the looming Foreign Account Tax Compliance Act (FATCA). FATCA may require foreign financial institutions to report U.S. taxpayers’ accounts to the IRS. “Some European banks have shied away from working with U.S. citizens simply because of the increased demands for disclosure,” Byrne says.
Before setting off for life abroad, you’ll need to anticipate your expenses in definite dollar amounts. “Living in the U.S., you know what your mortgage payment and insurance cost each month,” Smith says. “But you need to do your homework before you live somewhere else to have a good understanding of your new expenses.”
For example, because Medicare typically does not cover costs outside of the United States, you’ll need international medical or health insurance coverage, Smith says.
You’ll also want to determine actual costs for expenses such as rent, food, heating and car fuel — all based on the cost of living for your new area, not your home base.
If perpetual travel in retirement is a lifestyle goal, the Goals Driven InvestingTM discussion should drill down to the specifics in order to ensure proper funding will be available, Byrne says.
- Will you sell your home and use those funds to support your perpetual travel lifestyle?
- Will you maintain your home base and have travel as an additional expense?
Retirees living a perpetual travel lifestyle still are responsible for their U.S. taxes, Smith notes, and therefore should work with an accountant to ensure their tax situation is handled properly.
Earning income in another country introduces additional tax complications. “U.S. citizens are taxed on their worldwide income,” Byrne says. “If the foreign country in which you earn income has an income tax system, you may be able to work with your U.S. accountant to see if there are any credits available to offset U.S. taxes on your global income.”
Taking Care on the Home Front
In addition to your accountant and financial advisor, you’ll need a network of people stateside, including someone to collect your mail, someone responsible for the upkeep of your home and someone to take care of any pets.
You’ll also want to consider your family ties at home. “You’ll be leaving your children and grandchildren behind, so you’ll want to think about how often you’ll see them,” Smith says.
But for those willing to sacrifice some of the comforts of home, a retired life of perpetual travel can be well worth the challenges. “For those with a sense of adventure, this lifestyle can broaden their horizons and expose them to all sorts of new life experiences,” Byrne says.