Living abroad may be less expensive than you think
Tommy Sikes is a certified financial planner who works with clients looking to relocate to Italy or France for their retirement. He seeks out cheap homes, and shared with CNBC you can buy property in small towns for as little as $50,000.
“Some of them are fixer-uppers, but that’s the price of a new truck here in the United States,” he said.
But before you pack up and catch the next flight to Europe, there are a few things you should think about.
The U.S. Department of State Bureau of Consular Affairs (DOS/CA) provides a list of steps to take when retiring abroad. These include checking visa and residency requirements, familiarizing yourself with local laws and researching medical care and costs. For instance, Medicare doesn’t cover health care when you’re overseas.
Sikes also tells his clients there are three additional things to consider before buying a foreign property.
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The first thing you should do is to take an inventory of your finances, according to Sikes. This involves tallying up all of your assets and income, so you know how much of your retirement income will come from sources such as pensions, retirement accounts and Social Security. You can consult the Social Security Administration’s Office of International Operations website to learn how you can receive your Social Security benefits while abroad.
Consider enlisting the help of a financial planner to determine when you might be able to make the move and how much money you’ll need. Your financial planner can also help you optimize your investments to build your nest egg — and then make it last through your retirement.
You’ll also want to consider consulting a tax professional to help you navigate how retirement income and retirement accounts are treated in your adopted country. According to the DOS/CA, Americans who retire abroad are not exempt from paying U.S. taxes and must file annually.
The good news is that the U.S. has tax treaties with many countries, including France and Italy, which should address the issue of double taxation. A good starting point to familiarize yourself with the rules is to visit the IRS webpage for U.S. citizens and resident aliens abroad.
Prepare for the buying process
The next step is to prepare for the process of buying a property overseas. Some places may place tight restrictions on foreign buyers, while others such as France and Italy have few or none.
“There are zero restrictions on Americans buying property in Italy or France,” Sikes said. “You don’t have to be a citizen. You don’t even have to be a resident. You can literally buy something remotely.”
Still, the process may not be a smooth one. For starters, the documents will be in French or Italian, and you may have to pay in cash since it can be hard for an American citizen to get a mortgage in France or Italy. In such cases, it might be prudent to hire an expert who can help facilitate any transactions.
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Protect yourself nowTest drive the location
Finally, Sikes recommends you “test drive” your desired location by renting there first. You may discover the town you choose lacks the amenities you want or is too far from the nearest health-care provider.
“Always, always, always, the place is more important than the property itself,” Sikes said.
Retiring abroad can be a great move for some people. But you’ll need to take the right steps to ensure a smooth transition.
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