Anyone thinking of leaving the familiarity of home behind to retire to a foreign country will be given a thousand reasons not to go. Their financial advisors should tell them to do what they want to do, but plan exhaustively first, according to the growing number of financial advisors in the United States who have retired clients scattered all over the world.
Just as there are a myriad of reasons why someone would chose to retire to Mexico, Canada, Europe, Australia or the Far East, there are many reasons that financial advisors end up with far-flung clients. Some advisors become foreign tax and investment experts first, and then actively seek out travel-minded retirees. Others stumble into the niche by accident when a valued client decides to leave the United States upon retirement.
Financial questions become more complicated when two sets of tax codes, inheritance laws or health care regulations have to be taken into consideration, but the resources available to financial advisors are growing as the number of expatriate clients increases.
"Friends and family will make excellent arguments for retirees to stay home. The days leading up to the departure, the retiree will be able to think of a hundred reasons to stay, and not to go. Go anyway," is the advice clients receive from George Middleton of Limoges Investment Management PC of Vancouver, Wash.
Middleton is slowly developing a clientele of expatriate retirees. To help them make decisions, he is making an exploratory trip to Panama in October to study the laws, cost of living, investment opportunities, real estate values and business opportunities there, to supplement his growing background in foreign retirement destinations. Right now he still recommends Mexico as a cost-effective destination; countries such as Argentina also represent a good financial value, although further removed geographically from the United States.
"Advising people who want to retire to another country is a niche I am developing," notes Middleton. "I tell them to look for a stable government and then look at the financial advantages. Some place like Argentina, a person was able to buy real estate at 20 cents on a dollar until recently. Now it is 40 cents on a dollar and going up. The opportunity is definitely still there, but it is closing."
Other Central and South American countries also are fertile ground for retirees, depending upon the person's reason for moving, whether investments will be kept in the United States and whether U.S. citizenship will be maintained. Most people retiring outside the United States do so to maintain a higher standard of living with less income than would be required in the United States.
"Mexico is one of the world's last, great ground-floor retirement opportunities," Middleton advises. "There, you can afford a maid, a gardener, a cook, plus you can still buy breathtaking beachfront property for as little as $40,000."
In other places, such as Panama, the local government is actively seeking U.S. retirees by offering protection on investments, tax exemptions on homes and other incentives. A nice home can be built for $40 a square foot and unskilled labor costs less than $7 per day, Middleton says.
But each country is different; each has different risks, and the number of factors to be considered before retirement grows exponentially when more than one set of laws has to be considered, warns Brian Wruk of Transition Financial Advisors in Gilbert, Ariz. Wruk specializes in United States residents retiring to Canada, and vice versa.