The downside to retiring in paradise

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Kathy McCoy and her husband, Bob Stover, retired to Arizona from their home in California six years ago.

It’s not an uncommon move for US retirees, to relocate somewhere calmer and warmer in retirement. But, since they’ve moved, McCoy and Stover discovered a few things they didn’t anticipate. First, their city in Arizona is a “snowbird” destination, meaning that many people spend winters there but live elsewhere during other seasons.

The couple wasn’t prepared for the area’s summer weather.

“About half of our community is only here three to four months a year,” McCoy, 71, said. “The more affluent ‘snowbirds’ who spend winters in their second homes tend to look down on those of us who are full-timers.” Many community events are geared toward those temporary residents, as well, and little is offered during the “off” season.

The couple also wasn’t prepared for the area’s summer weather. “We expected heat,” McCoy said. “But we didn’t realise how humid it also gets with monsoon season in the summer. A 117-degree day (47 Celsius] with high humidity is not unusual.”

If they had to do it over again, McCoy and Stover might have chosen to stay in California, they said.


 For quick tips on what to consider if you want to retire abroad, watch the video above.

In the US, three out of five Americans hope to spend their retirement in another city or state, according to a survey from Bankrate. In the UK, more than six million adults plan to retire abroad, with Spain and France being top destinations, according to research from MGM Advantage, a retirement income specialist.

Before you join them, sunglasses in hand, here’s what you should know:

What it will take: Thoroughly research your retirement destination to make sure it meets all your needs. Ensure it doesn’t disrupt your financial situation via increased costs of living, such as higher healthcare, or through different tax rules that might impact your retirement savings. And you’ll have to give some thought to where family and friends are located and whether you’re ready to start over in a new city.

Spending a week somewhere every winter does not make you an expert.

“If you’re the sort of person who can join the local Y, take a class, make friends and start to do the things you’ve always wanted to do, that’s great,” said Gabrielle Redford, executive editor of integrated content at AARP. “But if you really place a lot of value in your friends and being close to your family, then that’s something you should consider. People get lonely.”

Make sure your dreams of a warm retirement don't become nightmares. (Credit: Alamy)

Make sure your dreams of a warm retirement don’t become nightmares. (Credit: Alamy)

How long you need to prepare: Make time to visit your chosen retirement destination extensively throughout the year, including the quiet months. You’ll also need time to seek advice on residency, tax and inheritance rules if you’re crossing borders — as well as to look into healthcare. Give yourself at least six to 12 months to do the research. And, consider what you would do if you change your mind. Could you afford to move back if things don’t work out?

Do it now: Get to know the place. Spending a week somewhere every winter does not make you an expert. You need to understand all the factors that might impact you, so you don’t end up moving to a location that turns out to be dangerous, expensive, unsuitable or with little support as you age. So, consider renting a place for several weeks at different times of the year. And, visit in the summer months to make sure you can take the heat.

“You need to be there during the not-so-popular times,” said Jason Balm, a financial planner with Rehmann Financial in Florida in the US. “That means a couple of times during the rest of the year and for a minimum of two to three weeks to really tell if the environment or the locale you’re considering is ideal for you.”

When you’re considered a resident of most countries in the world, you have to file taxes there.

Think about family. Are you leaving friends and relatives behind to feel the sun on your face? You may find that you spend more than anticipated visiting them, even if you try to budget for it. And beyond the money, having a support network nearby becomes more valuable later in life. “Everybody needs an advocate as they age,” said James Bryan, a financial planner with Cahill Financial Advisors in Minnesota in the US. “If you’re widowed or divorced or alone and the children are living back home and you’ve relocated to a warmer state, it can get really tough.”

Figure out the tax situation. If your residency is changing, it may affect how you’re taxed. Canada, for instance, has many residents that spend half the year in warmer parts of the US. “One of the issues there is when you’re considered a resident of most countries in the world, you have to file taxes there,” said Julia Chung, a financial and estate planner with JYC Financial in Langley, British Columbia, in Canada. “We have a lot of Canadian residents that are just finding out they’re supposed to file a tax return with the US every year. It’s a huge problem up here.”

If you’re a US citizen residing elsewhere, you will still owe taxes to the US on income, including Social Security. And if you’re in the US but changing states, your new state may tax retirement benefits differently from your old one. Then there are estate and inheritance taxes and property taxes, which may change, depending on where you move. So seek expert advice.

Try your favourite locale at different times of the year first. (Credit: Alamy)

Try your favourite locale at different times of the year first. (Credit: Alamy)

See a money professional. If you’re getting a pension of any sort, make sure you can still receive it wherever you’re going. One of Canada’s government pensions, for instance, doesn’t transfer if you move to certain countries. In the UK, if you qualify for a state pension, you can be paid in another country — but you can only be paid in one country per year. A financial advisor can help you run the numbers to make sure you can afford the cost of living in your new home, and that you aren’t overlooking anything important.

If you’re crossing borders, the healthcare you have in your current country may not transfer.

Check into healthcare. If you’re crossing borders, the healthcare you have in your current country may not transfer. (Medicare in the US, for instance, does not.) “People are often surprised that they must pay contributions for healthcare cover or take out private cover — something that they did not include in their budget planning,” said Daphne Foulkes, a financial advisor and partner with the Spectrum IFA Group in France.

Have a back-up plan in case you're not happy. (Credit: iStock)

Have a back-up plan in case you’re not happy. (Credit: iStock)

Then there are your day-to-day health needs. Where will you get your prescriptions? Who will your doctor be? Is there a major medical facility nearby? “Some of these beach towns are terrific, but do they have a hospital?” Redford said. “As we get older, we all develop health issues. You need to be close to medical facilities that can give you the care that you need, whatever that care might be.”

Do it smarter: Consider making a part-time move. You don’t necessarily have to sell your house and move forever. “If I had to choose the perfect recommendation, it’s to leave for four months and rent,” Bryan said. “And then come back.”

It’s the best of both worlds—you still get to store the snow shovel and enjoy some warm weather, but for the rest of the year you’re close to your family, friends and regular doctors. You can even try a different warm climate every year. Just don’t forget to wear sunscreen.

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