About 15% of American workers want to retire abroad, according to Dutch life insurance company Aegon’s latest “Retirement Readiness Survey.”
Some retirees are already doing it: As of 2021, around 444,000 retired workers collected Social Security benefits while living in a foreign country, according to the Social Security Administration’s latest data.
“One of the main draws to retiring abroad is the opportunity to enjoy a higher standard of living,” says Jesse Little, senior director of advice for Wells Fargo wealth and investment management.
“The U.S. dollar is relatively strong compared to many other currencies, which allows U.S. retirees in those countries to stretch their money further,” he adds.
Although leaving the U.S. doesn’t guarantee a lower cost of living, Little warns, there are several international cities where you can live on just a few thousand dollars per month.
For American expats looking to stretch their retirement dollars, here are 10 cities across the globe where the average cost of living is less than $2,000 per month.
This list was compiled using data from livingcost.org, a cost-of-living database that compares the average cost of living in over 9,000 cities around the world.
Before you set your sights on retirement oversees, however, there are a number of factors to keep in mind.
The U.S. taxes its citizens on worldwide income, Little says. This means a tax return must be filed in the U.S. each year, even if you move your assets to accounts in a different country. You may also have to pay taxes to the foreign country you’re residing in.
“Even if a person is not working while abroad, there is still potential tax exposure for withdrawals from retirement accounts, taxable pensions and Social Security income over certain income thresholds,” Little says.
It’s important to research the visa requirements for each country you’re considering for retirement.
If you only plan to spend a portion of each year abroad, many countries offer three- to six-month tourist visas, which are generally inexpensive and easy to get, Little says.
However, establishing permanent residency abroad is typically more expensive and a more involved process, he warns.
“It is generally more difficult and expensive to obtain long-term visas for European countries than in countries that want to attract retirees, like Mexico and Panama,” he says.
Additionally, many countries require you to live there for a certain amount of time before you are able to gain permanent residency.
The U.S. State Department website is a good resource for information on foreign visa options.
“A person considering retirement abroad should not assume that the real estate market or homebuying standards are the same as in the U.S.,” Little warns.
Some countries have restrictions on where foreigners can purchase property, while others allow foreigners to obtain residency if they purchase real estate within the country that is valued above a certain threshold.
Securing financing to buy a home abroad could also be challenging, since U.S. banks typically don’t provide mortgages for foreign properties, Little says.
For that reason, it may make sense to rent, at least at the beginning. Renting can could also give you an idea of what it would be like to live in a certain place before you commit to buying property.
If you do retire and purchase property abroad, you may also need new estate planning documents. “U.S. estate planning documents — like wills, trust, powers of attorney and health-care surrogate appointments — likely don’t have effect overseas,” says Little.