How To Retire Overseas

Retire Overseas Q&A

July 6, 2011, Panama City, Panama: Answers to frequently asked live, retire, and invest overseas questions.

Dear Live and Invest Overseas Reader,

The mail is piling up...

Reader Comment:

Kathleen, I just finished reading your letter on opening a bank account offshore.

I moved to Barcelona in April 2011 and had no problem opening an account at one of the largest banks in Spain for a small amount of money, nothing near the US$100,000 you reference in your article. I'm not sure what problems opening a bank account in a foreign country you're reporting.

I did get a lot of bad advice from Fidelity regarding wiring money and from my bank in the United States, too. Dealing with people who claim they know what is going on but don't have a clue is frustrating. There is one thing that you should understand before wiring money: Your money in the United States is federally insured. As soon as your money leaves the U.S. bank, there are no guarantees that you will ever see your money again. Your powers are limited.

Second, Fidelity or any other investment company cannot by law wire your money to an offshore bank. Some people at Fidelity will tell you that they can.

Will your Offshore conference in Panama have more teeth than your recent article?

My Reply:

I'm glad you had no problem opening your bank account in Spain. However, you're speaking, I'd bet, of a local personal checking account, not a private or an investment bank account, which is what I was talking about in my recent report.

Opening even a personal checking account in most countries isn't simple for an American these days...or, in many cases, for any non-resident. Especially in Latin America. However, opening a private banking account (this would be something similar to your investment account at Fidelity) is much more complicated. Many banks simply don't want U.S. clients anymore.

As for Fidelity (or any brokerage company) not being allowed by law to wire money from your account to an offshore bank, that is simply incorrect.

What Fidelity won't let you do is to wire funds overseas using fax instructions (I used to have an account with them). You have to go into a Fidelity office (or send the written instructions to them in the mail).

Schwab, on the other hand, does allow you to use fax instructions for an international wire, which is one reason we recommend them over other options.

Finally, yes, the three-day Offshore Summit we're holding in Panama City in September will have more "teeth" than the single free e-mail dispatch you're referencing.

Reader Comment:

Hello, I just wanted to let whomever reads this know that I consider anyone who moves out of their home country just because things get bad a terrible coward! Instead of running away to hide, stay and become the change you want to see!

My Reply:

The United States was founded and continues to be populated by people leaving their home countries in search of someplace better, people who found their former geographic situations intolerable for some reason.

The reality today is that many U.S. retirees, for example, are finding they can't afford to retire in the place where they've been living. Entrepreneurs are identifying more business-friendly locations. And Americans who value their privacy are actively in search of places where it will be respected.

I wouldn't say that taking control of your life and your financial future is cowardice. It strikes me more as common sense.

Reader Comment:

Kathleen, I just joined your newsletter and am very interested in information about retiring to Bogota,Colombia. I retired from the U.S. Army on a medical, and I am getting Social Security disability. The two total US$2,300 a month. I know that other countries are cheaper than Colombia, but the young lady who I will be making this move with is Colombian, and she wants to live in Bogota.

I have some questions, though. Can I live there without being married?

Can I rent a decent house, maybe three bedrooms, two bathrooms, and survive with my income?

I will be going to visit in August and staying for three weeks. What should I do in advance of that trip to prepare?

My Reply:

First, yes, you could live comfortably in Bogota on the budget you reference. However, before you commit to that city, try to convince your young lady friend to take a look at Medellin. I'd say it's a much preferable destination. It's also a more affordable place to live.

Getting residency could be complicated if you're not planning to marry your lady friend. (I'm not making any suggestion...only an observation.) I'd recommend that you discuss your options with an attorney in the country. We recommend the firm Gutiérrez Márquez Asesores S.A. in Medellin. You can contact them as follows: Calle 7 Sur No. 42-70, Office #1601, Medellin; tel. (57)4444-5044; website: www.gutierrezmarquez.com.

In advance of your scouting visit, you might speak with an attorney from the firm I've referenced regarding your residency options and contact a local fiduciary agency regarding opening an account. For this, I recommend Alianza Valores. When you get in touch and explain your personal circumstances, they'll tell you what documents you'll need to produce for the account.

Reader Comment:

Kathleen, I believe you may have missed the point of one of the recent reader messages you published. Social Securityhas a claw-back provision of benefits that are taken before the "Full Retirement Age" (between 65 and 67, depending on your year of birth).

While I respect your concern for risk associated with the Social Security system, I personally believe you do your readers a disservice in steering them to draw early benefits. First, for better or for worse, the U.S. political system is driven by powerful lobbies. Few are more powerful than the AARP. This was vividly demonstrated a couple of weeks ago when AARP declared their willingness to consider some modifications to the program in order to shore up the long-term viability.

Republicans and Democrats welcomed this change of position as a sign that progress could be made to correct the actuarial shortfall. Even if nothing is done, the "disaster" scenario leaves Social Security paying 75% of benefits in the 2030s. There are so many ways to fix this shortfall that barely move the needle. Sure, there's a risk something radical will happen to Social Security. I just believe it is a relatively small risk compared to investment risks, exchange rate risks, etc.

Second, Social Security is or will be the single biggest source of income for most Boomers (I do work and research in this area), for better or for worse. For most of these folks, the decision of when to start drawing benefits will be the biggest financial decision of the rest of their lives. The factors that should go into this decision are many and complex. However, for Boomers born between 1943 and 1954, for example, the benefit increase between retiring at 62 and at 70 is 76% (in constant dollars), adjusted thereafter for inflation. (Varies slightly for those born before and after, though not much.)

That's a big raise for someone for whom this is their primary income. For a healthy Boomer with a family history of longevity, I would recommend finding a way (like living in a lower-cost country!) to get by without tapping those benefits until age 70. I would rather have that struggle than the struggle of being 85, healthy as a horse, and constantly worried because my income is so insufficient that I live on the edge. That seems to me like a tough way to end one's years. Of course, if you reach age 62 and absolutely need the income, the question answers itself...

I point this out because I believe you exercise considerable influence over your readership, me being a case in point.

I have followed you and Lief since I saw an ad for your previous business on the home page of The New York Times website (more than 10 years ago).

Over the years you (and Lief) have been exceedingly open about sharing information about your investments in real estate as well as your expenses. Based on this information, it would not appear that Social Security benefits will be a major source of your retirement income. Indeed, for those for whom that is the case, an early withdrawal strategy may be optimal, since it essentially is banked for investments that will likely be part of the legacy.

While this profile may be more characteristic of your readers, it is unfortunately not characteristic of most of those moving into retirement. Yet these folks of more modest financial assets are, in my view, outstanding candidates to benefit from living overseas if they can muster the required sense of adventure.

I do not believe you want these folks coming up to you in 10 or 15 years saying, "Kathleen, love your work, hang on every word. The only thing I would change is that I wish I had put off drawing Social Security; I could sure use the security of that increased check now..."

Thanks for all your terrific letters and articles over the years. I have probably read every one! And bought and read your book. You keep my dream alive vicariously until we can wind up various family obligations in the United States. Until then...

Kathleen Peddicord

P.S. One big benefit of joining us for the Retire Overseas Conference taking place in Orlando in October will be the opportunity to have all your own live and retire overseas questions answered in full and in person. For this, our biggest event of the year, we've invited all our top correspondents and contacts from around the world...more than three-dozen speakers in total.

Key presenters for this event will be on the phone for ourSneak Preview Retire Overseas Teleconference. This will be your glimpse behind the curtain as we plan this important event.

Our Retire Overseas Sneak Preview Teleconference is free. However, you do need to register to participate.

You can do that here now.

Once you've registered, we'll be in touch with all the details.

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