Retirement should be a time we all look forward to. But as it moves closer, the reality of how much money you need to maintain the lifestyle you desire can be daunting. For many, the rising cost of living in Australia is tempting them to pack their bags for locations like Thailand and Spain, where even the most modest of retirement funds can provide a luxurious lifestyle. But is it really that simple?
According to ABS data, the number of Australians moving abroad to retire has grown by 47% since 2005. The most popular destinations include New Zealand, Italy, Greece and Spain.
In recent years, I have seen more clients interested in splitting their time in retirement between Australia and overseas countries, with most interested in spending half the year in Australia and the other half in Europe or Asia. This is often for a number of reasons, it may seem financially beneficial, they may have friends and family based overseas, or they want to use their new home as a travel hub for short trips around Europe or Asia.
With the rise of short-term letting sites like AirBnB, moving overseas for 3-6 months a year can seem much more accessible for retirees. For many, renting out their own home, especially if it is located in a major city or holiday destination, can bring in a significant amount of money that can potentially cover their overseas rent and trip expenses.
But before you pack your bags for an overseas retirement, it is important that you take time to sit down with an expert to ensure you don’t lose out from your move. Here are our key recommendations for what you should consider before deciding to make the move overseas:
Plan for all the costs
This means truly understanding the costs of relocating overseas, whether it be for three months, six months, or permanently and ensure you have the funds to cover yourself for the next 30 years. Take into account potential trips back to Australia, as these may be frequent, especially if you are leaving friends and family behind.
Get to know the local medical system
Take the time to research and understand the medical system in your new country. Understand the costs of private health insurance and what public health services will be available to you as a resident. It is important to also consider the implications of living abroad to your Medicare benefits back home, if you are permanently living abroad you may forfeit your rights to them.
Understand the implications for your superannuation
Another major consideration is your superannuation. While living in Australia, superannuation is tax free, however, depending on the country you choose, you may be required to pay tax if you move overseas. If you have a self-managed superannuation fund, not residing in Australia may result in significant tax penalties.
Understand the impact on government entitlements
Depending on the length of time you spend overseas and the country you reside in, you could be cut off from the pension or other government entitlements. This may be a significant part your retirement fund, so you need to consider the financial impact.
Once you have evaluated your situation and made sure that you aren’t missing out by making the move overseas, you can sit back and enjoy the retirement you have always dreamed of.