What Are the Pros and Cons of International Retirement?

K. Kinsella

International retirement involves retirees relocating to another nation. There are many advantages to international retirement that include potential cost savings and a better standard of living. Nevertheless, people who retire overseas also have to contend with a number of potential downsides and possible dangers that include political risk and currency risk.

A retired couple.
A retired couple.

Retirees who relocate to foreign nations are often citizens of developed nations who decide move to countries with moderate or warm climates. Some developed nations such as the United Kingdom, Canada and the Scandinavian countries tend to have cold winters and short summers. People from these areas are often enticed to Mediterranean or Central American nations because the summers are longer and the winters are less severe. Additionally, those from a number of other countries such as the United States and Australia also benefit from moving to these locations because the cost of renting or purchasing coastal properties is often much less than in their home nations.

Many retirees relocate to countries with warmer climates.
Many retirees relocate to countries with warmer climates.

The cost of living in North America, Australasia, Western Europe and parts of Asia is much higher than in other parties of the world such as Central America, Eastern Europe or North Africa. People from more affluent countries can enjoy a higher standard of living when they move to areas where costs such as rent, utilities and food are much lower. Many retirees have to live on a fixed income and these individuals often struggle to contend with rising costs in their homelands. International retirement enables some retirees to maintain or even to improve their typical living standards.

Laws in some countries, such as the United States and the United Kingdom, protect investors from losing money when banks become insolvent. Regulators also attempt to detect and prevent fraud and unethical practices in the investment arena that could cause investors to lose money. Nations in the developing world are often less regulated and in many instances, the protections that do exist only protect the interests of citizens rather than foreign retirees. Changes in the law or the political situation can result in retirees having their assets seized and their property rights stripped from them. Therefore, political risk is one of the main downsides to international retirement.

With the exception of many of the European Union countries, most have a domestic currency that is traded on international exchanges. As with any tradable commodity, the value of a particular currency can fluctuate over the course of time. Retirees who rely on pension payments from agencies in their country of origin are exposed to the danger of currency risk. If the currency where they reside rises in value against the currency used in their home nation, then these retirees will have less money to spend even though their actual income payments remain the same. Due to currency fluctuations, it is often very difficult for retirees to budget for the long-term.

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