Suzan Haskins and her husband Dan Prescher became experts on living abroad by doing it themselves. They gave up life in the U.S. in their mid-40s; they’d had it with cold winters and working in corporate America. In 2001, they moved to Quito, Ecuador, to write for International Living Magazine and InternationalLiving.com. Since then, they’ve lived in seven locations in four countries, and earlier this year they wrote a book called The International Living Guide to Retiring Overseas on a Budget(Wiley, March 2014). The couple currently lives in Cotacachi, Ecuador.
I spoke recently with the couple about the perils and pitfalls of retirement abroad.
REP.:What got you interested in living abroad in the first place?
Suzan Haskins: We were living in Omaha, Neb., at the time, and both working in corporate environments. We were tired of the cold weather and the corporate rat race, and paying $500 a month to heat our home and keep the lights on. We kept thinking there had to be a better lifestyle out there. We’d both been reading International Living magazine and kept daydreaming about it. Since we are journalists with transportable careers, we decided to act on our impulse.
SH:We typically see people moving overseas who have monthly incomes, from Social Security, pensions, etc. of about $1,500 to $4,000. A few may also have some savings or an investment portfolio that they’re saving for a rainy day. The point is that in the vast majority of the overseas locations where retirees are moving, you can live comfortably on about $2,000 a month, including rent.
REP.:Is there evidence that retirement abroad is becoming a major trend as boomers hit their 60s?
Dan Prescher:Retiring overseas is certainly one that’s gaining popularity. Thanks to the Internet, it’s easy to research your options and connect with other expats in overseas communities before you leave home. You’ll have a good idea of what to expect and a built-in support and friend network before you even step off the plane.
REP.:Many people contemplating a move like this will find it intimidating from the standpoint of expenses. What’s the best way to get started estimating a budget for living abroad?
SH: Research, research, research. Of course, we think our book is a great place to start as we’ve interviewed dozens of expat retirees in various countries about their actual expenses. Know what your realistic income will be and what the average cost of living is in the place you are considering. It will be far more expensive to live in Paris than it will to live in a small village in Ecuador, for example. Importantly, have a cushion for the first couple of months when you’ll have initial expenses such as legal fees for your visa, rental deposits, buying some household items and supplies, and so on.
REP.:What are the most important things financial advisors need to study up on in order to help clients make a retirement plan involving living abroad? Is there a checklist of must-know topics?
DP:Overseas clients will need dynamic online interfaces to check their portfolios and communicate with advisors, especially if they are in a far off time zone. If the client doesn’t have a pension or only receives a limited Social Security benefit, they will need access to a certain amount of cash each month, whether that’s via an ATM card or through a wire to an overseas bank. But overall, there’s not that much difference for the advisor between the client living in the U.S. or overseas, although I understand that some brokerages will no longer open accounts for clients who live overseas. I’d say the burden is on the client more than the advisor.
“We’ve done the math, and we know that if we were to return to the states on our projected retirement income, we’d have to make many sacrifices. We’re living the good life here, and we see no need to upset the apple cart.”
REP.:Should expat retirees keep banking in the U.S. or move their assets abroad? How does the Foreign Account Tax Compliance Act (FATCA) figure into the decision?
SH:Most expats choose to have a bank account in the U.S. and one in their overseas community. They’ll need the U.S. account to pay their credit cards and for any other U.S. bills they may have,such as life insurance. They may need a local account to prove they have a certain income to live on. (To qualify for a resident visa, many countries require proof of income, often as low as $750 to $1,000.)
As for FATCA, there are lots of rumors flying around about this, and most people have no knowledge of what it entails. But as long as you comply with your responsibilities and file the required paperwork, you shouldn’t have any problem. You have some reporting requirements, as do the international banks, which is why it’s getting harder for Americans to open overseas accounts. International banks aren’t interested in the onerous paperwork, especially on a small deposit.
REP.:Healthcare can be a major issue for expat retirees, both getting it and paying for it. How should retirees plan for that?
DP: Most of the countries we write about have two tiers of insurance coverage—a public system and a private one. The public systems are fraught with the usual challenges, such as long wait times, and you aren’t assured of seeing the same doctor all the time. Private insurance provides an additional layer of security, and it’s generally one-fifth to one-third less expensive than in the U.S.
The private coverage is very comparable to private insurance in the states in terms of deductibles and coverage. Another option offshore is a hospital-based policy. For example, in Nicaragua you can join the plan of a hospital, and get all your care there. You pay a monthly fee and then all your care—office visits, hospitalization and surgical procedures, prescriptions—is vastly discounted. In most of the rest of the world, health care is one-fifththe cost of what it is in the U.S., and quality is excellent.
Since we move around quite a bit, we’ve opted for an international health insurance policy that is cost-effective for our needs right now. It covers us anywhere in the world we might travel or decide to live. We’re nomads and we enjoy trying out new places. If we were to settle down in one country, though, we’d opt for a locally-based private policy that would probably cost 30 to 40 percent of what we’re now paying.
REP.:You two are experts on retirement abroad, but neither of you is retired yet. Do you think you’ll continue living abroad after you quit working?
DP: We’ve done the math, and we know that if we were to return to the states on our projected retirement income, we’d have to make many sacrifices. We’re living the good life here, and we see no need to upset the apple cart. We own a condo with a breathtaking mountain view. The weather is really ideal year-round, with an average temperature of 75 degrees, so our utilities run about $30 a month. We eat well and dine out as often as we like, and our monthly expenses are about $1,500.
If you read our book, you can see exactly how we spend our money. And you’ll learn about many countries where you can live well on a limited budget and never have to shovel snow or turn on the air conditioner again. It’s a healthier, less-stressful lifestyle.