What to know before retiring abroad

Many people dream of retiring to Europe or South America. Popular destinations like Argentina, Belize, Costa Rica, and France (especially, thanks to a weaker euro) might offer lower costs, warmer weather—good health care, too. But a vacation to one of these attractive locales isn’t the same as the reality of relocating.

Retiring abroad isn’t always easier, or less expensive, than staying in the U.S. (Tweet This)

Many people share the common misconception that life abroad will be as stimulating and fun as being on vacation, says Oakland,California-based financial advisor Cathy Curtis. “A vacation mindset is different from a day-to-day living mindset. It’s important to analyze a location as a place to live long term instead of a place to visit for a couple of weeks.”

Before packing your passport for a permanent move, financial advisors suggest preretirees focus on a few key factors:

Evaluate the quality and costs of health care. Even if you choose to live in a country with relatively good and lower-cost health care, services and expenses for medical, dental and vision can vary between cities and regions.

“Make sure quality remains on par with what’s available in the U.S. even for more complex procedures. And if it doesn’t, budget for the possibility that you may need to travel back home for certain medical procedures,” said Bill Hunter, director of personal retirement solutions group at Bank of America Merrill Lynch. Also, keep in mind, Medicare does not cover health services outside the U.S. Unless you can buy into a country’s national health plan, if it has one, you may have to buy a private insurance policy.

Read More How to avoid high health care costs in retirement

Don’t count on a big tax break. If you are a U.S. citizen, the IRS will tax you on your income no matter where you live. Plus, “many countries require that people relocating have a documented steady source of income,” said Curtis, a member of the CNBC Digital Financial Advisors Council. The U.S. also has laws to collect income tax from retirees who move their assets to a foreign country. You may want to consider moving to a country that has a tax treaty with the U.S., such as Canada or Mexico, so you won’t get taxed twice.

Read More Where should you put your retirement money now?

Be realistic about the total cost of living. The house that you have your eye on in Costa Rica might be cheaper than what you would pay for a similar home in the U.S. But when you add up relocation costs, groceries, heat, electricity, mobile phone service and other monthly bills, your expenses may require you to spend more than now. Tally up transportation costs, too, within the country and also to get back to the U.S. to visit family and friends. A key consideration will be whether your resources will last through retirement.

“Know what you can afford. Analyze your income resources. Find out what a typical budget would be in the countries you are thinking about,” Curtis said. “Financial planning for living abroad is no different than financial planning for living in the U.S.”

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