Retirement choices: the challenges of living overseas

When you are looking at retirement choices for your golden years, about ninety percent of the articles you will find will be financial advice. Of course, without the finances – the rest of the decision-making process falls apart! So, you will find a mountain of information available to you about:

• how much money you need
• the types of retirement plans and savings you have available in each country
• how much money you can draw down and the age limitations
• when you can start taking your full retirement

But, that’s not really where Gray & Co. focuses.

We are more interested in helping you address other retirement choices:

• where will you live?
• can you afford to keep two homes if you want to be a snowbird?
• if it’s too good to be true… yeah, sorry, it’s probably too good to be true!
• when should you plan on actually quitting your job or taking retirement?
• how much should you plan to gift to your children or grandchildren?
• what considerations should you have for healthcare?
• putting in place your estate plan,
• And possibly the most important question of all: what hobbies and friends will occupy your time to make sure you enjoy life once you retire?

Where will you live in retirement?

Over the past 20 years, living in Panama, I have watched dozens of foreigners all excited to move to Panama, pour themselves into building a home, only to sell up and move to Ecuador (or the next place on the list). Others have over-stretched themselves and moved back to their home countries to live with family.

On the other hand, I’ve also seen clients suffer the loss of a loved one (of a spouse or family member) and chosen to continue living in Panama, happy with the choice. The same way that I have clients that purchased a second home in Panama more than 10 years ago and, like snowbirds, still continue to return to Panama every November, travelling north in April, like the flocks of migrating birds.

Living in Panama, the same as living in Florida (or any other southern state in the US) is not for everyone. Some will find that the humidity is too much. Others will fail to acclimate to the culture. And then there are the concerns of services, help and amenities. These are all things to take into account when you are considering where you want to explore retiring to.

Retirement choices: can you afford to keep two homes?

One of the options, which I alluded to above, is the decision to have two homes: keeping your home (or a smaller version of it) where your friends and family are and then having a second home for the winter. This works great for some – at least if you can afford it.

But you need to consider more than just the cost of purchasing the home!

For starters, consider that there might come a time when you are no longer willing to continue to organise everything that having two homes entails. How will you organise downsizing? What will be your exit strategy at that time? One of the most important considerations in this is making sure that your holiday home has a great resale value! This is something to dig deep into at the time of purchase, as much as you can with respect to the location and amenities. Will someone else want it as their second home or primary residence?

On a more practical level, you need to consider the financial and energy costs of having two homes. If your home (either one) is empty for six months, each time you come back to it, there will be work to be done. In the yard or interiors. There will be a period of getting it back in shape. Do you have the time, money and energy for this?

There is also the financial costs that will be doubled:

• insurance
• utilities & maintenance fees
• gardening (possibly)
• medical coverage
• transport between the properties – how far will you have to travel? Will you drive or fly? What needs to come with you? Do you have pets?
• security – who will take care of it for the months that you are away?

These are all very practical questions to consider when choosing what you want.

Those too good to be true offers: thieves of the golden years

I’ve seen it time and time again over the past 20 years. In financial offers as well as in properties in Panama. Just too good to be true.

And almost every time – when it sounded and looked too good to be true – well, it’s because it was too good to be true! There are so many scams out there.

Things that make me suspicious:

• you have to decide now;
• we’ll take care of the paperwork later;
• you won’t need a lawyer or other professional adviser to take a look at this — or “just use our lawyer”;
• hurry up, because you won’t get another chance like this.

Unfortunately, pension funds are cash that you have on hand that is “readily available” and they would love to get their hands on your golden years’ savings!

Gifting to your children and grandchildren

Part of the challenge of financial planning and retirement choices is whether or not to gift to your children and grandchildren when you are in retirement. Particularly if what you are gifting to them is funds from your retirement savings and not simply capital you have accumulated.

Depending on the applicable laws, estate taxes might apply. Panama does not have estate taxes – but that doesn’t mean that your home country doesn’t. What laws will apply to your estate?

Most countries allow you, in this case, to gift to your children or grandchildren a certain amount every year without gift taxes. This allows you to reduce the amount of your estate over time, and have a smaller estate at the time of your demise.

However, it also puts you at risk, should you give away too much, and then find you needed those funds for retirement, a new home or a medical emergency. If you gave them funds from your liquid assets, would you find yourself having to see your home in order to have cash later on in life?

And if you decide to give them funds – what criteria will you apply? Will you put them into a Roth IRA for them? Pay university tuition fees? What are you comfortable with? And these are decisions for you to make from the heart, as well as with logic and rational judgment.

Retirement choices – your healthcare

When you choose to move to Panama, you need to make special provision for healthcare. Here in Panama, it’s actually cost-effective to get home help, rather than a retirement home. I have seen clients get a night-nurse as well as a full-time housekeeper and be able to have their loved one at home (with ramps for wheelchairs and that type of house modifications) that you perhaps could not do in a “first world country”. Nonetheless, have you taken all of this into account?

By the same token, I have also seen clients sell everything in Panama and move “home” again when physical disabilities have set in because the healthcare was better “at home”.

Considerations for living internationally – your insurance premiums will be higher. This is in part because you are already in your golden years! If you were under 40, the cost would be lower!

Will you medicare or whatever the national health insurance that you have “at home” cover you internationally or will you need to get private insurance? Take into account:

• premiums
• deductibles
• co-payments
• vision & hearing
• prescriptions

Another surprising detail – can you get the medications that you are used to taking in the country where you are planning to live? What will they cost?

Estate planning: do it sooner rather than later

Another common mistake that I have seen couples (or families) make when moving is to fail to update their estate plans.

In one case, where the husband managed the finances, he failed to make any provision for her to have access to certain savings and funds should anything happen to him. When he got dementia, his wife then came to us because she was limited to living on the money transfers he had organised for them to have to cover living costs. She was unable to access his international accounts without going through a court-ordered process of guardianship! This could have easily been avoided with a power of attorney and living will.

When you are retiring, consider all the aspects of your estate plan:

• where are the assets located and what laws will govern those assets?
• do you need more than one last will and testament?
• what living will or other powers of attorney are needed?
• what burial plans do you have?
• who should have access to the information or know where the information is should something happen to you?

These are really difficult retirement choices and life decisions, which most people don’t want to deal with. But the reality is – they can be avoided by having those difficult conversations that I force clients to have.

If that’s not reason enough to do your estate planning – consider this: in Panama, lawyers will charge up to 30-40% of the value of the estate in legal fees for doing the intestate probate!

And if you fail to plan for estate taxes, the consequences for your loved ones could be devastating.

Finally some sunshine: hobbies and what to do when you’re retired!

These are your golden years – they are supposed to be great! But – what are you going to do when you no longer have the structure and schedule of work?

Most of us have no idea of how much structure a job or owning a business brings to our life. You have to be somewhere, at a set time… and speak to other people. You get out of our house. Then, you have a network of business associates or people that we regularly interact with through this!

And when you retire – that just disappears. For some, their importance and personal identity disappear with the job.

How do you recover from that?

I’m going to start by suggesting you have a good look at how you will schedule your days in retirement.

Your retirement choices include:

Will you travel? Stay at home? Start new adventures? Get out and meet people?

Here are some suggestions for any of those options:

I hope this has given you a lot to think about when considering your retirement. This is what I do – help you consider deeply the ramifications of your choices so that you can make great retirement choices and get the most out of your best years!

For legal advice from Panama lawyers, contact us!

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