How an Overseas Adventure Can Help You Afford Retirement in the U.S.
A discussion this past week with a friend I’ve known now for nearly half a century and who still doesn’t understand why I moved to Europe in 2018, ultimately led to this confrontational query: “What do you do when you retire—where you gonna live then? You can’t afford to stay overseas forever.”
I understand his angst, even if his assumptions are wrong and even if it was directed at my situation instead of his (he’s unemployed and has no retirement savings). What to do about retirement in America—and, specifically, how to afford it—is almost a national sport. I’ve cited this statistic before, but it perfectly frames our topic today:
Running out of money in retirement—i.e. affording your retirement lifestyle—is the No. 1 fear among Americans, according to multiple studies.
I have a potential solution to mitigate this fear. But first…
You’re never actually going to run out of money. Ever. Social Security is a never-ending stream of cash you cannot outlive. Now, the quality of life you can afford on that stream…that’s a different story.
It’s why I and my colleague Steve Garfink, a Social Security guru, routinely urge people to hold off on claiming Social Security benefits until later in retirement. Our rationale is financially simple: Claim at 62 and your Social Security check is about 25% lighter than had you waited to claim at full retirement age. Wait until 70, and your check is about one-third greater than full retirement age…and about 80% larger than had you claimed at 62.
Be that as it may, Social Security stats show that 57% of us claim our benefits before full retirement age, and most of those happen at 62. Reasons for claiming early vary, but the most common tends to be “I need the money to live.”
But what if you had a solution to bridge the gap between 62 and your full retirement age, currently between 66 and 67 years old? What if you could afford your life while letting your Social Security benefits mature, so that you could claim much larger benefits at a future date—benefits that would help you feel more secure financially later?
There is a solution: live abroad temporarily.
Depending on where you settle, you can cut your monthly living expenses by half or more. Your daily expenses will be cheaper. Your taxes will be cheaper. Your healthcare costs will be cheaper.
Moreover, you might use your time overseas to build a freelance business of some sort—the possibilities are limited only by your creativity—and earn extra income.
I realize this isn’t a plan that pops into the head of many people because it means leaving the U.S. I also realize, however, that the Social Security Administration is now sending more than 700,000 checks abroad every month, indicating that living overseas in retirement is increasingly a route many Americans are taking, either for the adventure of it all or to live a richer life on a smaller nest egg.
Maybe some are even overseas temporarily, just to stretch for a larger Social Security check when they return to the U.S.
If you’re uncertain about this notion, then approach the idea of living abroad temporarily as an extended vacation. Approach it as a sabbatical, or a gap year, or a university year-abroad program, though it will be for a few years instead of just one. You have a begin date, an end date, and a stated purpose.
The point is, this isn’t a permanent change of address (though, frankly, you might determine you love living overseas so much it does become permanent). This is a strategic, financial move to help you transition to a financially secure retirement after a working career ends with an underwhelming nest egg. It’s a few years in an inexpensive foreign locale while your Social Security check grows larger.
Where to move, of course, is the big question. It’s also a highly subjective question without a one-size answer.
I could tell you, for instance, that Prague is the quintessential (and affordable) example of Old Europe that Americans tend to seek out on holiday. But if you’re not a Europhile, or if you dislike cold winters and the likelihood of snow, then my suggestion is pointless. Likewise, if humid and hot aren’t your preferred daily forecast, then me telling you about Costa Rican beach towns will not serve you well.
Instead, I will tell you that my colleagues at International Living compile an annual list of the best countries for expat retirees based on various criteria. That’s a good starting point.
At the end of the day, retirement should be about happiness. A sense of financial security is a part of that. And while there are many ways to achieve that, one of the best is holding off as long as possible on claiming Social Security because of the benefits that doing so will afford later in life. And to accomplish that…well, maybe it means following me overseas for a couple years.
Written by Jeff D. Opdyke