Then she took the next step. She moved to Buenos Aires. She bought a beautiful condo there and now tangos a couple of nights a week. She considers herself retired from her successful career as a financial journalist and book editor. As an expat, however, she still pulls in earnings from contract ghostwriting and editing assignments for book publishers in the U.S.
It’s seamless. She can talk to her clients via Skype. She emails and zaps copy back and forth electronically. Plus, the time zone is the same, so no one really even knows where her office is located.
Nancy has plenty of company these days. I write a lot about people who retire, but are continuing to work part-time as a financial safety net and for the mental and social engagement. They are retirees who have made work a pillar of their retirement.
But Nancy represents a new twist to this theme.
Lots of these “working” retired Americans are heading abroad to live and work. They’ve opted to use this chapter of their lives to put down stakes in a foreign town, where they can get jazzed about a new culture, find romance perhaps, and slow down the pace of their lives. Often, the move is a financial win, too, because it’s cheaper to live in many overseas spots, particularly those in Latin America.
While the exact number of people retired overseas is not easy to pin down, around 350,000 American retirees receive Social Security benefits in countries other than the U.S., according to the Social Security Administration’s annual statistical supplement. (And, of course, that doesn’t count those baby boomer expatriates who aren’t yet eligible for Social Security or have postponed taking it.)
Most of those people live in European countries–German, Italy and the United Kingdom are popular–Canada and Mexico, too. In recent years, though, there have been an increasing number of checks sent to retirees in Central American countries, including Costa Rica and The Dominican Republic.
Those numbers could swell as baby boomers hit their retirement years and go global in search of adventure and slimmer living costs.
My bet is more will be employed as well. The entire concept of you work and then retire is over for most people no matter where you live, according to Kevin Cahill, an economist with The Sloan Center on Aging & Work at Boston College. “Retirement is a process,” he told me. “People are gradually fading out of the workforce. About 60 percent of the career workers take on a part-time job after exiting their main career.”
Here are 13 strategies to use if you’re looking for a working retirement-abroad.
1. Shop for a job that’s in your wheelhouse.You might accept contact assignments from former employers as Nancy does. There are also a range of jobs out there to teach English, work as a translator or a tour-guide for English-speaking tourists, or staff a hotel where English-speaking travelers congregate, according to Betsy Burlingame, founder of ExpatExchange.com, a top web site on living abroad.
2. Consider virtual jobs. Generally speaking, if you have something that you like to do online, you can do it from anywhere in the world with good Internet access. You don’t have to pick a place to live based on whether there’s a job prospect there. I recommend that you tap into what you’ve done all your life and turn it into a business you can do online. Like Nancy, for example, if you have been an editor, or a writer, chances are you can do your work electronically in a snap.
3. Start your own bricks and mortar business. Many expats start small businesses such as art galleries, bistros, B &Bs, retail shops, real estate agencies, and retail shops.
4. Do your homework. International Living, a magazine and website focusing on retirement abroad, offers a guide to the leading countries to open a business. The index factors in such things as visas, setting up bank accounts, expenses, local taxes and language hurdles. In the most recent survey, Panama topped the list, followed by Belize, Ecuador, Columbia, Costa Rica, Nicaragua, and The Dominican Republic.
5. Go for an extended visit. Spend time living for six months or a year where you’re thinking of starting your “working” retirement. Don’t take a lot of dough with you, and don’t jump to buy property straight away. You want to make sure it’s the kind of community that’s favorable to letting you actually do what it is you have in mind. Take the time to meet other like-minded expats and learn from their experience. Find an expat to mentor you if you can.
6. Know the local employment laws. It might be necessary to have a work permit for specific jobs, and verify that there are not local citizens who can do the job. There are some professions, say medical services, that some countries will only allow nationals to do.
7. Be open-eyed about the drawbacks. Your Internet connection might flicker in and out at times, and the electricity might zap off for six hours at a time. Siesta time? Your bank might shutter it doors at odd intervals even.
8. Don’t get tripped up by taxes. The United States government requires US citizens living and working abroad to file an annual US tax return with the IRS. Americans working abroad, however, are eligible for the foreign earned income exclusion, which in 2013 exempts the first $97,600 from tax. I recommend that if you’re going to work overseas and earn even a small salary that you spend the bucks to hire a tax adviser who is an expert in international tax issues. That’s because tax laws for Americans living overseas can be confusing. Both the United States and your country of residence could try to tax your earned income while living abroad.
If you earn much more than the threshold mentioned above, and you pay income taxes to a non-US government, you may be able to take a foreign tax credit. In any event, this can require working with a tax advisor who is mindful of the intricacies of these policies.
9. Report your foreign bank accounts to Uncle Sam. Faithfully filing your 1040 with the IRS is not enough. If you hold a total of more than $10,000 in all your foreign accounts (and living abroad, you well might) you must also file Treasury Form 90.221, known as an FBAR,with the U.S. Treasury by June 30th of each year. (You can read up on it here.) And don’t think you can safely ignore this obscure requirement. The financial penalties for not filing are stiff. Plus, the Foreign Account Tax Compliance Act, which went into effect this year, means foreign banks must report more information on Americans account holders.
10. Be attuned to business cycles. Businesspersons, who cater to tourists, need to be prepared to ride the waves of the seasonal fluctuations in tourism. And uncertainties in the supply chain are not unusual when conducting business abroad. Moreover, you normally don’t have access to credit.
11. Hire a translator. Don’t go it alone. Even if you have a fluency in the language, hiring a bilingual assistant or advisor, who can pilot you through the operating challenges, is strategic. Of course, you want to hire someone who is trustworthy, so take your time. Importantly, to help you negotiate transactions with both employees and suppliers, that person really must have a grip on the business lingo. It can be quite different from your conversational skills. Be careful not to sign a business contract without a legal advisor or terrific translator guiding you.
12. Learn proper etiquette for business relationship. Slow down. Some deals don’t get done until you have had a meal together. Even breathing a word about a financial transaction can’t begin until you have had a lengthy repartee about someone’s family or health. It’s a total relationship, not a wham bam get down to business world in many places.
13. Study up on the currency ins and outs. It can be a trial to conduct business in dual currencies. You might choose to only operate in U.S. dollars, or on a cash basis, for instance, depending on your situation.
My best advice: As Nancy will tell you, before you start to Tango, listen to the music to find the beat first, then learn the steps before you start dancing. You’ll need more than the basic two-step.
Kerry Hannon, Contributor
I cover boomer careers, retirement, aging and personal finance.
Follow me on Twitter, @KerryHannon I’m the author of Great Jobs for Everyone 50+: Finding Work That Keeps You Happy and Healthy … And Pays the Bills (John Wiley & Sons), available at www.kerryhannon.com.