Your State pension could go further if you retire overseas

Your pension could go further should you retire overseas — if you do it right, writes Louise McBride

YOU can rent an apartment for around €230 a month and eat your fill for less than €5 when you retire — should you decide to see out your days in Cambodia. Choose Ecuador as your retirement destination and you could buy an ocean-view apartment for less than €100,000 — or rent a two-bed apartment for around €450 a month. You could get by very comfortably on about €920 a month in Peru — with that covering the rent of a two- or three-bedroom apartment, electricity, cable and internet, and other day-to-day living expenses.

These are the findings of the latest research by US magazine International Living into the best places in the world to retire. That research examined a number of things which an individual would bear in mind if retiring abroad — including the cost of living, of housing, healthcare, benefits and discounts for retirees, climate, and the ease of fitting in.

Cambodia is the cheapest place in the world to retire, according to International Living’s annual global retirement index for 2016. Nicaragua is the second cheapest, followed by Peru, Guatemala, Ecuador, Malaysia, Thailand and Vietnam.

Ecuador is the cheapest place in the world to buy or rent property, according to the index.

Colombia and Malaysia come out tops for affordable healthcare, while Panama gets the highest score for retiree benefits — because of its Pensionado visa, which offers discounts on hospital bills, transport, and entertainment.

The lure of retiring to countries where your money can go further can be particularly strong for the many Irish people who are largely dependent on the State pension. At a maximum of €233 a week, the State pension is not enough for many people to get by on in Ireland.

Most of the Irish people who retire overseas choose countries closer to home — rather than far-flung and unfamiliar destinations like Peru, Panama, Ecuador and Nicaragua.

“The typical countries which the Irish retire to are Spain, Portugal and France — and then to a lesser extent, Italy,” says Declan Lawlor, consultant with the Retirement Planning Council of Ireland.

Portugal has the cheapest cost of living of the Mediterranean countries, followed by Malta, Spain, Italy and France, according to International Living’s index. Spain and Portugal are the cheapest Mediterranean countries to buy or rent property, the index found.

Patrick Murphy, managing director of Retirement & Life Planning, which runs retirement courses across the country, usually spends between three and four months a year in Portugal. Murphy bought a place in Portugal a few years ago — and he plans to retire there.

“The golden rule when living abroad is to follow the locals and to eat, drink and shop where they do,” says Murphy. “You will find your euro goes a lot further than it will back home should you do so. However, if you move in the golf set only, Spain and Portugal can be as expensive as Ireland.”

Retiring overseas is a huge decision — and not one which should be taken lightly.

“It’s easy to come back from a holiday in the likes of Spain and be tempted to retire there,” says Lawlor. “However, you’ll have a number of issues to deal with. You’ll be separated from your family, you could have language issue, and developing a social life in a country you have little or no connection with could be difficult.”

There are also daunting financial decisions to make. Here are five of them.

Rent or buy?

Decide whether or not you wish to retire overseas full time — or for between four and six months a year. Once you have done so, work out whether it makes financial sense for you to buy a property outright — or instead to rent.

Buying a property is a big commitment so before doing so, have a trial run in the country you are considering retiring to — that is, live there for between four and six months and see if you like it and are happy there. Do your homework before you buy. “You need to know the region — and to have spent time there,” advises Tom McGrath, a consultant with Spanish Legal Services. McGrath has over 20 years’ experience advising Irish people who ran into problems with overseas properties and investments — particularly in Spain.

Understand the responsibilities that come with owning an overseas property.

“If buying an apartment in Spain for example, you have to pay community charges — and there are certain responsibilities you have to take on,” says McGrath. “They have become very tough on [property] taxes in Spain. If taxes are not paid, penalties can apply — and if those penalties are big enough, you could lose your property. Take a Spanish accountant’s advice before you buy.”

Be sure, too, to get independent legal advice and to consider security. “If you are moving abroad and it’s just you and your partner, move somewhere you feel safe and which has a good infrastructure — so that you can get around easily,” says Lawlor.

Up sticks in Ireland?

If you spend less than six months a year abroad, you can continue to be tax resident in Ireland. Otherwise, you will typically need to apply for residency in the country you are moving to.

“Ask yourself do you intend to sever all links with Ireland — or will it be important to have a base in Ireland when you return to see family, and so on,” advises Murphy. “Many people sell their houses and buy a small apartment to have as a base when they come back to visit. Similarly, can you afford to keep a car in Ireland for your trips back to visit? Hiring a car can be very expensive. A lot of retirees leave a car with a child and let them have the use of it while they are away.”

Top up your State pension?

You can still claim and get paid the Irish State contributory pension if you retire overseas — as long as you qualify for it. Should you retire very young, consider making voluntary social insurance contributions so that you don’t lose your entitlement to the contributory pension. You need to have social insurance contributions paid over a number of years and a certain yearly average to qualify for the contributory pension — so time out of the workforce could mean you don’t get the full pension.

The non-contributory State pension — which is means-tested — is not normally paid if you live outside the Republic of Ireland.

Know exactly how you will access your State contributory pension when you move abroad.

This pension can be paid into your bank account in Ireland or an account you have in the country you choose to live in — though it will depend on the country. You can’t get your State pension paid into a foreign account in certain countries such as China, India, Malaysia, Mexico, South America, and Vietnam. Even if you have to stick with your Irish bank account, it should be relatively easy to access it from abroad — though it will usually cost you less to withdraw money out of your account within the eurozone than in other jurisdictions.

Buy private health insurance locally?

Consider buying private health insurance should you decide to retire overseas full-time — particularly if the public health system in the country you’re moving to is poor or if the cost of hospital treatment is prohibitively expensive.

“It’s not necessarily going to be a utopian scenario with healthcare in the country you are planning to visit,” says Lawlor.

Outside Europe, Florida is a popular spot for the Irish to retire to. However, medical bills can be high in the US — so buying private health insurance in that country is “imperative” if you’re planning to move there, according to Murphy.

Make a foreign will?

“It is usually necessary to make a will in the country you intend to live in,” says Murphy. “Make sure you have the legal aspects of your life both in Ireland and abroad taken care of professionally. Making a will in Portugal can be quite expensive.”