If you’re aiming to retire abroad, you may be wondering how exchange rates and inflation will affect your future lifestyle. As with all things financial, having a good plan in place is paramount, which is why we have created this list of tips and tricks on how to plan an overseas retirement without compromising your quality of life.
The Exchange Rate and its Fluctuations
Even if you are the type of person who has never cared about the exchange rate, this all changes once you move abroad. The value of your money will ultimately be influenced by which country’s currency is stronger or weaker, especially at the start of your retirement.
A good plan is to have two bank accounts, one in each respective country. From there, you can stay vigilant about which currency is doing better and place your money in the applicable bank account. However, you will need to be aware of international banking fees.
Your Income Source
Of course, exchange rates have a lot to do with where your money is coming from. Whether it’s your pension, your savings, or a flow of income from a business, always make sure you can access that money and place it where it will best serve you in terms of interest.
Another wise option is to split your capital into various income investments, such as property, shares, or business ventures. In some instances, it may be best to invest in the country you’ll be retiring in. In others, it may be better to invest in your home country, depending on the economy of each.
Testing the Waters
If you’re still undecided about which country you should retire in one day, cruises can provide a great way to visit potential destinations without committing just yet.
Get to know the country you’re eyeing out for retirement by learning about the culture, people, language, and potential income opportunities. It’s best to start doing this years before your retirement, so you’ll feel more prepared when that day finally arrives.
The Tax Implications of Retiring Abroad
Tax works differently in each country. It’ll take some time, but it’s wise to research the tax laws of the country where you plan on retiring. Some countries even have tax treaties with other nations.
For instance, if you decide to retire in Panama, you can expect certain tax exemptions because of the tax treaty that exists between Panama and the US. However, be prepared for any other tax obligations by learning about them and even consulting a tax attorney or financial planner to make sense of them.
The Current (and Future) Cost of Living
It’s simple enough to do some calculations about how you will pay for your first year of retirement. It’s nothing more than a few equations that factor in the current exchange rate, the amount you need to maintain your desired lifestyle, and your income in the foreseeable future.
But what about five or 10 years after you retire? Keep in mind that inflation will fluctuate, costs will rise, and so will the exchange rate between the two countries. Develop a financial nest egg that will serve as a cushion for tough, unpredictable times.
Final Thoughts
Spending your remaining years in another country is a great way to enjoy the hard work you put into building your wealth. However, do so wisely by following a strategic plan that preserves the lifestyle you want to enjoy. A fair amount of research into the financial ins and outs of each country will serve you well when your retirement day finally comes around.
