Should you relocate in retirement?
You may consider making an international move during your retirement—especially if it will save you money.
But before you decide whether it’s best to make a move, you will want to weigh the pros and cons.
Saving money is great, but it’s not the only important factor supporting your quality of life in retirement.
Other things to consider include having the right services, amenities, and community nearby.
An informed decision is a good decision. Tune into the latest podcast episode and we’ll discuss all your potential options.
Hey there. Welcome back. Today’s episode inspiration came from an interview I had a few months ago with the Globe and Mail. The topic in question I was asked was, should a retiree move to save money? And included in that conversation was: is an international move cheaper for a person in retirement as well? So meaning if they moved out of the country to save money in retirement.
I think that this is becoming a popular topic, especially since inflation rises, costs, and possibly a limited retirement budget for some. Let me share a scenario with you. In this scenario, retirement income is fixed, and looks like it might be tight, possibly you know, by the end of your eighties, investment income is gonna be depleted. So you decided that to save money, you’re going to relocate to a location where houses are cheaper.
Okay, let me be honest. This is a true story. This is a situation, I met the person a few years after, but in getting to know them and sharing their story this is truly their scenario. And they took early retirement from a stressful job and decided that with this less retirement income, they were going to move across the country where, at that time, housing was half the price—and in a smaller town. They were going to assume a quiet life and hope that it would bring a cheaper cost of living.
Fast forward a year after the move, this person is unhappy, not fitting in the community, and spending all the savings they made off downsizing. So they had sold their home across, on the other side of the country, and had made extra money, a couple hundred thousand dollars. So they had all this equity, and they kept that in cash to help. So they came out ahead.
That’s the right financial thing to do, but by paying for travel and visits back cross-country to their hometown often, they were depleting it and they were spending their savings like it was on fire because they were trying to fill an emotional void in a sense of community and connection. They were coming back home all the time. Now, health issues came up and the expense to drive to a medical facility was starting to add up.
So they had to actually drive 40 minutes into the city and after certain treatments actually spent the night because then they had the follow-up appointment the next morning with a different specialist, so they had to stay in hotels. I know, keep your receipts. It’s a tax deduction at tax time, but you still have to pay upfront. And to be honest, the medical expense receipts on your income tax return is not going to give you the exact out-of-pocket cash. You get some money back, but it’s not quite the same.
So because of the health issues and spending the night having to travel to the city, it was starting to really deplete those savings super fast. Unhappiness, health, and loss of community made for a return back to this person’s hometown.
There was a massive loss of money in moving back home, and the house took a long time to sell in, you know, in their retirement. The small town they moved to, it took a while for the house to sell, they moved back and they bought into the market to repurchase a house in their original hometown, and prices had gone up. In this case, moving to save money did not happen.
Now that is a cautionary tale. That was a kind of a Debbie Downer story, Zena, I know. But it’s a cautionary tale that with the right planning and thinking in advance rather than kind of a spur of the moment without testing the waters and, and doing a few things.
That’s what can happen. And so I do want that to stay in your brain because there are good news stories and moving across the country and or internationally does save money for some. But this is kind of that in the back of your head, why? I’m going to give you some suggestions. So there are good reasons to move, but it’s gonna take some planning and evaluation of the pros and cons. So here are a few things to keep in mind.
Number one: Crunch numbers on the actual savings. The cost of the move and the effect on the monthly or annual savings you’ll have will be important to know. And thinking of all the little things in there that maybe you don’t think of, and that’s why it takes time to add to that, do some research.
The second thing, but maybe the most important thing—I don’t know, but this one is huge. Building a sense of community where you’re going. You know what this is tied for number one most important. This and crunching the numbers is super important. Having a sense of: Do you have friends and family there? Social connections are one of the most important things to bring us happiness as we age. Rent or visit, stay, you know, visit years before you decide to retire to build up that connection. Test the waters out first, and build a sense of community.
Okay. Number three, how are the amenities? What services are available, like doctors, medical, shopping, whatever’s important to you, and you foresee the things that you’re gonna need. Are they available? What is the cost of living there?
So the fourth thing, what is the cost of living with the property taxes, the utilities, doing some research, the taxes, everyday expenses, groceries, and of course the house is the actual physical buying of the house a lot cheaper?
So I’ll use the example that I know because my parents, they live on Vancouver Island and I visit there lots. There are certain things that are cheaper and then there are certain things that are more expensive, and it’s just being aware of how that affects your budgeting and cash flow and the costs.
And I brought up the island because gas is super expensive. They have to bring it over to the island and certain groceries are also expensive. But then I see his property tax bill and I am super jealous of that. It is a lot cheaper. So those kinds of things bring it even. But knowing those answers is gonna be important.
Here’s another one. The last one I’m going to share with you. This one is probably not gonna be applicable to very many people, but for some, we still need to put it on the checklist and think about it: estate laws are different in each province, never mind each country. So would this affect your estate tax plan? In thinking of moving from different provinces, we have different prorated rates, and so depending on your esstate planning, because I’m going to assume that everyone out there has done a comprehensive financial plan. As part of this, they have already had the estate planning conversation about what taxes they might owe. You name it. Also think about, okay, now research where you’re going to live.
I recommend you spend some time in a location before you finalize a move. Be certain it is the right choice. Saving money, but also having connections and friendships will be vital. Use the true story I shared as a reminder before you actually commit: Research, research, research.
So, yes relocating in retirement to save money has become more popular because of the run-up in home values right now, selling the house that has increased a couple hundred thousand dollars could make a huge difference to some of you out there and help fund your savings. So cashing in and moving to a cheaper house and location makes sense. Just do your homework.
Okay, let’s talk about relocating internationally to cut those retirement expenses. The same questions I just brought up apply, but now your research is times a hundred million to Googleplex. That’s what my kids say. Googleplex, you are going to have to research and find out your numbers and answers from tax experts.
So you’re going to have to dig deeper. You’re going to want to talk to people that are familiar with the country in question that you wanna move to. What are the tax laws? So that research is more intense also in that thinking, so going through those five steps that I mentioned earlier, you know, crunch numbers, building a sense of community amenities, cost of living, estate laws, you’re gonna go through that same list for international.
But you’re going to have to do a more comprehensive plan. And in addition to that, part of the questions will be, are you going to be a full resident? Where are you going to keep your citizenship? And so you will want to know the effects and consequences of each of those questions and whether or not you’re gonna remain a resident of Canada. And that’s important because can you still hold investment accounts in Canada if you’re not a resident?
And you know, I’m not a tax expert, so I’m not going to jump in, but yeah, you can’t have certain accounts if you’re not actually a resident. And so you will want to make sure access to your money investments, your funds. And so exploring all those answers is gonna be super important. And finding an expert that has experience with the country that you’re wanting to move to so they can answer all those questions.
A lot of research, and hopefully you’re planning this far in advance. You’re visiting the place. You’re building a life and community and testing it out before you jump all in.
Here’s my personal opinion. my 2 cents. It might not be as cheap as you think internationally, so this is completely a personal perspective. I don’t know of everywhere around the world. I’ve been to just a few places, but I am going to ask you if you’re considering moving internationally to save money: Are your expectations of what was cheap outdated?
Because I had sticker shock. After COVID, prices have increased across the globe. My parents live in Mexico for eight months of the year, sometimes longer. They have residency in Mexico and the cost has jumped enormously and so I’ve been visiting them for many years. What I’ve noticed is that since COVID and since these inflationary times the price has gone up.
It’s still cheaper than Canada, don’t get me wrong. But once you factor in the flight’s home for visits, once you also look at the cost of housing. So in the little fishing village that they’re in, the houses to buy are around the same price as the housing prices here in Saskatchewan. That just blows my mind.
Now the difference is, is that you know, you’re a block from the beach, there’s a small cooling off pool. You have a casita for visitors, which is just really a bed and a bathroom. And you probably can afford to bring in a housekeeper once a week because it’s super cheap. I know that it’s still cheaper, but being aware and visiting quite a bit and you’re going to start to realize that things are not as cheap as we thought they were three years ago, four years ago, five years ago.
So I also put in, right before I hit record, I was Googling the cheapest, safest place to retire internationally, and a few popped up. Spain was in there, Portugal, Panama, Costa Rica. Now Panama and Costa Rica I’m not too familiar with, but Spain and Portugal, their prices have jumped as well. And so what one would think has been a great deal, you know, five years ago your money could go a lot farther.
And so, again, take a lot of research to look at the price. Good news is CPP and OAS you can definitely, CPP will be paid to you no matter where you live. And check out the government website for old age security. And so that’s gonna circle back to when you’re thinking of internationally. You’re going to have to look at the tax laws in your residency and whether or not you can hold your investments in Canada.
So that’s it for today. I just really wanted to give you those five steps. Those are your starting points to start investigating, and I also want to share that true story and give you a sense of, okay, we hear the good news stories, but there’s also the bad news stories that we need to think about so that we can cover all those and check off our boxes and make sure we’ve talked about it.
If you have any questions, send me a note, [email protected]. Until then, take care.