4 Painful Truths About Retiring Abroad That I Learned the Hard Way
I didn’t mean to retire in Switzerland. Instead, retiring abroad was a happy accident. After spending more than four decades in corporate jobs, I found myself out of work for the first time. One of my sons was living in Switzerland and the other had settled in Scotland. In addition, my marriage had ended several years earlier, so, there really wasn’t a strong incentive for me to stay in the U.S.
For the first time in many decades, the world was my oyster. So, without really thinking through the consequences, I packed my bags and set off for Switzerland. By the way, when I say that I “packed my bags,” I mean this literally. I somehow managed to fit all of my worldly possessions into 8 suitcases. Talk about your ultimate exercise in downsizing!
So, there I was, standing in the arrivals area at Zurich Airport, my life collected in pink, red and blue suitcases all around me. I had no idea that my life was about to change forever.
Of course, if you have been following me on Sixty and Me for a while, you already know how this story ends. After many twists and turns, I learned to love my life in Switzerland. While, I still love the United States and miss my friends terribly, I am happy with the life that I have built here.
That said, while my experience with retiring abroad ended happily, I also experienced several challenges – and even a few painful truths – along the way.
By sharing the negative site of retiring abroad, I don’t mean to dissuade you from setting up camp in a new country. On the contrary, I want to prepare you for the inevitable challenges that you will face so that you can find success and happiness in your new home.
So, all that said, here are a few if the challenges I faced and what I learned from them.
Retiring Abroad Will Not Save You from the U.S. Tax Man
The United States is still one of the only countries in the world to tax its citizens no matter which country they live in. If you plan on working in retirement or starting your own company, like I did, this can have serious consequences.
For example, you may decide to move to a country, in part, due to its favorable tax rates. When April comes around, you may find that you still owe taxes in the U.S., even if you also paid taxes locally.
I’m not a tax expert, obviously, but, there are several mechanisms in place to help even the playing field. For example, the foreign earned income exclusion may allow you to exclude some of the money that you pay tax on. In addition, there may be taxation treaties in place. But, if your business is successful, you may end up making more than the exclusion amount. Please check with an accountant who is used to dealing with expats for an explanation of which rules apply to your situation.
This actually brings me to a larger point about taxes. Even if your income is relatively low, you will still need to file a tax return and declare your foreign bank accounts. Depending on your situation, this can be a time consuming and expensive process.
Not All Foreign Banks Like U.S. Citizens
This particular challenge seemed so unfair to me. About a year after arriving in Switzerland, my son received a call from his bank. They said that, since he was a U.S. citizen, they could no longer work with him.
At first, my son thought that it was a joke. How could a bank possibly choose not to work with someone simply because of they are a U.S. citizen? After doing a little digging, he found out that he wasn’t alone; several banks have initiated policies discriminating against Americans in recent years. The reasons for this are complicated, but, in essence, it has to do with the reporting requirements that the U.S. government requires of banks who service its citizens.
The bottom line is that you should definitely do some checking as to how the banks view U.S. citizens before making a final decision regarding where to land.
Every Country is Expensive in its Own Way
From a tax perspective, you couldn’t pick a better place to live than my part of Switzerland. That said, like most places, Switzerland is expensive in its own ways.
For example, a McDonalds Big Mac will set you back about $6.50 in Switzerland. That’s a whopping 30% more than in the U.S. In fact, Switzerland has the most expensive Big Macs in the world.
Ok, maybe it’s not surprising that food is expensive in Switzerland. I mean, everything is expensive here, right?
The truth is that, having talked with dozens of people who have retired abroad, every country is expensive in its own way. This doesn’t mean that some countries aren’t more expensive than others. It just means that it’s easy to imagine that a country has a “low cost of living” or a “high cost of living” without really looking at the numbers.
Let’s take Bali for example. Bali is considered a relatively cheap place to retire. For the most part, this is true. That said, this beautiful island, where I have spent over four months in the last two years, is also expensive in unique ways.
For example, air-conditioning can run well over a hundred dollars a month. In addition, as an expat, there is an unwritten rule that you should help to support the local community. I know one lady who is paying for the school and medical bills of her cleaner. Another woman employs two locals part-time in cleaning and cooking roles.
These services might seem optional, but, the more you get into the swing of things in Bali, the more they start to feel like requirements for being a part of the community.
The best thing that you can do to discover all of these hidden costs is to talk with people who have already moved to your target location. Force them to move beyond the rainbows and sprinkles and tell you what life there is really like. Your future happiness depends on it.
Making Friends is Hard… So, is Learning a New Language
I’m a friendly person. I have over 500 “friends” on Facebook. I’m also the kind of person who says hi to the person next to me when I travel by bus, train or plane. Heck, I even have a video show that is seen by thousands of people every two days. Despite all of these factors, I still found it tough to make friends after moving to Switzerland.
One of the major decisions that you will need to make when retiring abroad is whether to live in an expat friendly neighborhood or more as a local. The former may make it easier to make friends, but, you won’t get as many of the cultural benefits of living in a different country. In addition, neighborhoods designed for expats tend to be expensive.
If you do decide to live as a local, you will need to go out of your way to find new friends. This is especially true if, like me, you are flying solo these days.
In my case, I finally found my groove with meetup.com. I set up several groups. One of these groups simply met for drinks once a month. Another attracted people who wanted to go on regular train trips.
The bottom line is that making friends takes effort when you retire abroad.
Likewise, don’t let anyone tell you that learning a language is easy. Oh, it’s simple enough to learn how to order a coffee in a loud voice. But, being able to have a proper conversation about the things that really matter in life takes years.
My son speaks 9 languages (including Chinese and Russian), but, he told me that it took him two years of continuous practice to be truly comfortable with speaking conversational German. So, my advice to you is to start early and stick with it!
As I mentioned at the beginning of this article, I hope that my honesty hasn’t discouraged you in any way. Retiring abroad can be one of the most fulfilling experiences of your life. But, don’t expect it to be all sandy beaches and chilled white wine.
What are your greatest fears about retiring abroad? What are your greatest hopes and dreams? What advice would you give to someone who is considering retiring abroad? Please join the conversation.