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Leaving the United States to retire abroad

What you need to know if you're considering retirement abroad

by Alliance America
April 27, 2023


Americans of retirement age, worried about the depletion of fragile nest eggs during their golden years, are increasingly looking to escape the nation’s rising cost of living and the impact of inflation.

For many, the solution is living abroad.

In the past two decades, the number of Americans spending their retirement living in a different country has grown rapidly, according to government statistics. The State Department estimates that more than 5 million out of 45 million American retirees are now spending their golden years in a foreign land, and the number of expatriates has risen steadily. While exile from rising prices is one motivation, other factors, such as the increasing globalization of the economy, contribute to the exodus.

For many retirees, retiring abroad is a dream, and cutting expenses is part of that idealized vision and a key motivator. Plus, the prospect of spending retirement in a warm climate, surrounded by beautiful scenery and a new culture, is certainly appealing. While the thought of living in a foreign country can be exciting, it’s also a daunting prospect, and there are several factors that retirees must consider before taking the plunge and moving abroad for their retirement.

The cost of living, affordable access to health care, language barriers, cultural differences, establishing social connections, the impact of U.S. and foreign taxes and legal considerations in a newly adopted country are all critical factors that must be taken into account. Couples must do their research and seek professional advice to ensure that they are fully prepared to make the move and enjoy a happy and fulfilling retirement abroad.

Consider the case of John and Mary, who sold their home in Minnesota and bought a small apartment in a seaside town in Portugal. They quickly made friends with their neighbors and began to enjoy their new life. Better yet, they did some research and discovered that one of the biggest advantages of retiring to Portugal was the cost of living. A recent analysis by found that the cost of living for one person in Portugal averages $1,073 compared to $2,213 in the United States, a savings of 52%. In other words, you could live in Portugal for 1.9 months compared to the cost of living just one month in the U.S.

For John and Mary, another advantage of retiring to Portugal was the climate. Portugal has a warm, sunny climate year-round, a far cry from the blustery winters of the northern Midwest. It was a dream come true for the couple, who love being able to spend as much time as possible outdoors in short sleeves, enjoying the nation’s southern coastal cliffs and sparkling sea. However, if you're used to living in a cold climate, you may not be prepared for the heat and humidity of a subtropical country. Conversely, if you're used to living in a warm climate, you may find the cold winters in some popular-to-live countries (Canada, for example) to be too much to bear.

John and Mary also researched and compared the costs of housing, food, transportation and health care to have a comprehensive understanding of the expenses they would face. Some countries have a lower cost of living than others, but it is also essential to consider the exchange rate and how it may affect your finances. Also, in some cases, a lower cost of living can also mean a lower quality of life, so it's important to strike a balance between affordability and quality.

A key consideration: health care

Related to the cost of living is another key consideration – health care. The cost of health care varies greatly from country to country. The cost of health care in the United States is among the highest in the world. In many other countries, the cost of health care is much lower. However, it is important to note that the quality of health care can also vary from country to country.

John and Mary wanted to make sure that they would have access to good, affordable health care in their retirement. They researched the health care system in Portugal and found that it was excellent and premiums were just a few hundred dollars a month with low deductibles and co-pays.

This is important because if you are a U.S. citizen or permanent resident who is living permanently abroad, Medicare will not usually cover health care that you receive outside of the United States. This means that Americans who retire abroad will need to find other ways to pay for their health care. Experts suggest that if you are planning to retire overseas, you should talk to a Social Security representative or a Medicare representative to discuss your options for health insurance.

Indeed, health care systems vary from country to country, and it's essential to understand how health care works in your chosen country. Plus, it’s important to consider your own unique health needs and the availability and quality of health care, as well as the cost of insurance and medical treatments. Another consideration is finding a doctor who is qualified to treat you, especially if you have a chronic condition.

Language and cultural changes can be challenging

There were some other challenges to retiring to Portugal. One of the biggest challenges was the language barrier. John and Mary did not speak Portuguese when they first moved to Portugal. This made it difficult to communicate with the locals and to get around.

Another challenge was culture shock. Portugal has a very different culture than the United States. John and Mary had to adjust to a new way of life. For example, Portuguese people often greet each other with a kiss on each cheek, while Americans typically shake hands. Portuguese people are generally more formal and polite than Americans. Also, unlike in America, it is considered rude to eat or drink on public transportation in Portugal. The language and cultural differences can be a difficult adjustment, so it’s essential to consider the language spoken in the country you plan to retire, and whether you are willing and able to learn it. Research the customs and traditions of your chosen country to ensure that you feel comfortable living there.

Experts agree that social connections and relationships with others are critical for a happy and fulfilling retirement. Consider whether you will be able to make friends and establish social connections in your new home country. It's important to have a network of people to socialize with, especially when you are far from friends and family back home. Research the expat community in the country you plan to retire to and consider joining local clubs or organizations to make new friends.

There are residency, taxes and other legal matters to consider

Carrying cardboard boxes during a move

Legal considerations are another matter. John and Mary needed to obtain visas to live in Portugal. They researched the visa requirements and found that they were relatively easy to obtain. Legal considerations must be taken into account when retiring abroad. It is important to understand the legal requirements for obtaining a visa or permanent residency in your chosen country. Each country has its own set of immigration laws and requirements. Researching the specific visa and residency requirements for the desired destination is essential, as some countries may have restrictions on property ownership or length of stay.

It's also essential to consider the tax implications of retiring abroad and whether you will still be required to file taxes in your home country. As they say, there’s no escaping death and taxes. That remains true for Americans retiring abroad. The United States taxes on the basis of citizenship, which is better known as citizenship-based taxation, according to an report.

“This means it taxes American citizens on their worldwide income regardless where they live,” says. “An American citizen living in London or Toronto or Tokyo or Johannesburg, generally must file U.S. tax returns and pay U.S. tax, even if he or she does not live in or travel to the U.S. Taxation is not based on any physical presence test. The source of the income makes no difference either: Income exclusively earned and additionally taxed abroad is also subject to U.S. reporting. Moreover, Americans abroad are commonly taxed twice, for example on some types of investment income and certain retirement-savings vehicles.”

The bottom line is that retiring abroad does not exempt U.S. citizens from their tax obligations. They are still required to file taxes with the IRS, and depending on the chosen country, they may also be subject to local taxes. A wise choice is to seek legal and financial advice to ensure that you understand all the requirements before making the move.

Do your research before deciding the move abroad

Retiring abroad can be a great way to spend your golden years. However, it's important to do your research and consider all of the factors involved before making the move. By doing your research, you can make sure that you're making the best decision for you and your spouse. Read books and articles about retiring abroad, and talk to people who have already made the move.

Here are some general tips for retiring abroad:

  • Visit the country you're considering. Once you've narrowed down your list of countries, visit the one you're most interested in. This will give you a chance to experience the culture and see if it's a good fit for you.
  • Learn the language. If you don't already speak the language of the country you're considering, start learning it as soon as possible. This will make your life much easier when you're living there.
  • Make friends. One of the best ways to adjust to life in a new country is to make friends with the locals. This will help you feel more connected to your new community.
  • Be patient. Adjusting to life in a new country takes time. Be patient with yourself and don't expect to feel at home right away.
  • Enjoy your new life. Retiring abroad is a big decision, but it can also be a very rewarding one. Make sure to enjoy your new life and all that it has to offer.

Here are some the key advantages and disadvantages of living abroad.

Advantages of living abroad

  • Lower cost of living. Many countries offer a lower cost of living compared to the United States, which can help retirees stretch their savings further. Some popular destinations include Mexico, Costa Rica and Southeast Asian countries like Thailand and Vietnam.
  • Climate and environment. Retiring abroad can offer a more pleasant climate, particularly for those who prefer warmer weather. This can be beneficial for overall health and well-being.
  • Cultural experiences. Living in a different country provides the opportunity to learn about new cultures, languages and traditions, which can lead to personal growth and an enriched retirement experience.

Disadvantages of living abroad

  • Distance from family and friends. Retiring abroad means being far away from loved ones, which can be emotionally challenging for some. It is important to consider the impact this distance may have on personal relationships and support networks. It is common to feel homesick after moving to a new country. This can be especially difficult if you have strong ties to your home country, such as family and friends.
  • Legal and bureaucratic hurdles. Navigating the legal systems and bureaucracies of a foreign country can be time-consuming and challenging, particularly when dealing with issues related to property ownership, residency and taxes.
  • Uncertainty and instability. Retiring in a foreign country can be risky due to political, economic or environmental instability. It is essential to research and understand the risks associated with the chosen destination.


While retirement abroad offers numerous advantages, it also comes with its own set of challenges and considerations. Before making the decision to retire overseas, it is crucial to weigh the pros and cons carefully and to thoroughly research the destination to ensure a smooth transition and a fulfilling retirement experience.

Alliance America can help

Alliance America is an insurance and financial services company dedicated to the art of personal financial planning. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.

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