Retirement and Living Overseas

Retirement and Living Overseas

Since I arrived in Australia in 1987, I witnessed Australia change and grow to the economically matured country, that with time has joint a special circle of “developed countries” and “developed economies”. Which is a great thing for Australian residents as it creates internal stability, education available to everyone, stable medical care, political stability, social assistance, and many other benefits. Yes, we can argue it is not the best, it is not perfect but let’s be honest, people in many other countries wish to be in your shoes and have this level of stability.

But there is a price to pay for those privileges’, and that is very high cost of living. Fortunately, Australia is not in top 10 most expensive countries to live in (at least not yet) with Bermuda and Switzerland the most expensive two, but at number 12 it is pretty close to the top of the list. Living in Australia is more expensive than in US, UK, Japan, NZ, Finland, France, Germany which surprised me when I was doing my research for this video.

No wonder that so many Aussies at some point decide to relocate to another country, that can offer a comfortable lifestyle at lower costs. And that very often takes place when people are approaching retirement.

That might seem like a great idea, and it could be, it could provide you with a more affordable lifestyle than in Australia, as long as you plan it all well in advance.

Before you go anywhere, first you need to make some solid decisions about:

• your savings
• your superannuation or retirement income stream  –
  You should ask yourself the following questions:
  Do I leave money in Australia or take it with me? What about taxes? Will I pay tax to Australian government as well as the other country I want to relocate to? If yes, how can I avoid it? What about my income, how should it be structured? What about my Estate Planning? which country has right to my estate? How can I protect the estate for my kids that are in Australia? or maybe your kids are in the other country, what happens then?
• your Age Pension if you want to be receiving this entitlement while living overseas.

As you can see, there are lots of things you need to consider and pre-plan before you rush off to your perfect retirement destination.

Did you know that currently there are more than 90,000 Australian retirees that permanently live overseas and the number keeps growing year after year?

Obviously Covid epidemic and lockdowns have put stop to this trend, but this is just a temporary disturbance. Once this epidemic has been contained and we are allowed to travel internationally, this trend will only strengthen. And I can see this even in my own work. I receive lots of inquiries from people wanting to use that covid time to get ready, to plan, to do their research and set themselves financially, so once the boarders are open, they can follow their dreams of living in their paradise. And this is why I am preparing this video.

What is the most popular destination for retirees?

• New Zealand – with mild climate and subtropical north and snowy mountains in the south
• Italy – with amazing food, historic sites, magnificent culture – I lived in Italy before coming to Australia, so I can vouch for that.
• Greece – outstanding weather, superb food, amazing history, just like Italy and quite affordable living
• Spain – quality of life and culture, healthcare, safety, social life, all year-round sunshine
• Panama in South America – close to US, if this is your goal, with reasonably low cost of living, while still providing a good quality lifestyle
• Portugal – climate is considered to be the best in Europe and outstanding quality of life, but still at a reasonable price
• Malaysia – one of the lowest populated countries in Asia, so still plenty of unspoiled countryside to explore with rain forests and tropical islands with many gorgeous beaches to enjoy.
• Thailand – Thai people are happy people, that is very inviting, nobody can say no to Thai food, quality of life and services at low prices. I am told that you can have your best life even on a modest income
• and other countries such as: Vietnam, Bali, or Cambodia.

What are the main reasons to retire abroad?

• family – either returning to your country of birth, or following your children who moved overseas
• travel either to warmer countries or to experience a new culture
• everyday living expenses – as mentioned before, you can have a very similar lifestyle overseas at lower cost, which could be very appealing to many retirees, as you can stretch your dollar so much further,
• cost of home – yes, Australian housing is very, very expensive, and for some retirees who have most of their stuck in the home, it makes sense to sell the property, pocket the money, go overseas, buy a small apartment or condo and have money left over for good living, travel, enjoyable activities.

So you have made up your mind, you are packing your things and moving overseas. You have decided on the country of your destination, but what about your Age Pension eligibility? Will you receive any Age Pension if permanently living overseas? The answer is…it depends. I think this is the most common term I use in my videos, “it depends” because those situations are never black and white, and the answer depends on so many factors:

• It depends whether you left Australia and started living overseas before reaching your Age Pension age
• It depends which country you decided to relocate to and if Australia has the International Social Security Agreement with that country
• It depends on your overall length of living in Australia prior to you reaching the Age Pension age.

Those will be additional requirements you need to meet on the top of the usual eligibility rules that apply to everyone in terms of your age and residency requirements, if you are unsure what those are, read my article: “Age Pension explained“. Then you have to meet the conditions of Income and Assets Tests, again, if not certain how those work, just read: “The truth about Assets Test” and “Age Pension Income Test madness“.

Assuming that you are eligible for Age Pension, and you start receiving your payments, let’s see what happens when you leave Australia, but you are not sure yet, if this is for good or just for a prolonged overseas stay or travel:

• for the first 6 weeks you are receiving your full Age Pension entitlement (I don’t mean full Age Pension payment, I only mean the payment that under Income and Assets Tests your are entitled to be receiving from Social Security).
• If you stay overseas longer than those 6 weeks, you will no longer receive the energy supplement.

• If you stay overseas longer than 26 weeks, your Age Pension payment will then be proportioned in accordance with how long you were an Australian permanent resident between the ages of 16 and Age Pension age. If you were an Australian resident for 35 years or more, then your payment continues unchanged, if less than your payment will be proportionally rated. 

What is proportional rate of the Age Pension payments:

Let’s look at the example of Natasha, who is single and lived in Australia for 29 years, wants to stay with her family in Prague, but is still uncertain if this is a permanent stay or just for a prolonged visit and travel. Under Income and Assets test Natasha is eligible for the full Age Pension payment. 

Because Natasha was a resident for less than 35 years her Age Pension payment will be proportionate based on years of her residency. As she was a resident of Australia for the period of 29 years, her Age Pension entitlement will reduce from the full payment of $22,575.80 down to $18,705.60.

Also at that point, your payments will no longer be made fortnightly, but rather monthly. Centrelink office will pay your Australian Pension to your Australian bank account, unless you are permanently moving to a country that has an International Social Security agreement with Australia, which is a separate topic that I might explain more in another video, but I would need your participation to let me know that this is actually a topic of interest. If there is lots of people interested, then I will keep on creating more videos on Retirement Overseas with all its benefits and pitfalls, especially in relation to the financial side of preparation. So please write below the video YES, if you would like for me to keep on preparing more videos on this topic.

As I said before, organising your finance to move overseas either permanently or for a prolonged period of time, requires lots of planning for your backup cash, savings, investments, superannuation, pension funds, Age Pension, tax, Estate Planning, healthcare, insurance and lots more. 

Please do not disregard the planning stage, as it might cost you a fortune in a long run. And that preparation should be half of the fun. If this is your ideal way to retire, if you have decided on this exciting path of retirement, if you really want to make it work for yourself, or for you and your partner, speak to a specialist how to pre-plan your financial position, how to pre-plan your income streams, how to best benefit from Age Pension.

Good luck calling the International Services of Centrelink office from whatever country you will be in, and good luck using MyGov website to advice Centrelink of any changes to your personal or financial situation.

Well, you know where I am going with this: YES – speak to a financial planner who specialises in Retirement Planning, Age Pension and can assist you with proper planning for your overseas living, so in one word, just contact me and I can help you set up your perfect plan for your dream retirement in your paradise, whatever that is for you. 

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement

Here is the article you might be interested in:

• Retirement Income and Age Pension. Your Questions Answered.
• Can I access super at 60 and continue working?